Episode Transcript
[00:00:00] Speaker A: Yo, mic check. What's up, everybody? You're listening to the street pricing podcast, the only show where proven SaaS leaders share their mindset and mistakes in pricing so we can all stop guessing and start growing. Enjoy. Subscribe, and tell a friend. Now, let's break it down with your host and sought after Slayer of bad pricing, Marcos Rivera.
[00:00:24] Speaker B: What's up? And welcome to the Street Pricing podcast. I'm Marcos Rivera, author, entrepreneur, and pricing coach. And today I'm Uber Ultra excited to have this special guest with me. So this person is, I think, one of the most rarest, but most refreshing SaaS executives I met out there. And I am excited because when we get into the details, man, does he give you the details. So today I want to introduce Emmerich Ernu Emrick. Welcome to the show. He is the CEO and founder of Agora Pulse. Man, we are so happy to have you. Are you ready to jump in?
[00:01:01] Speaker C: Totally ready to jump in. Marcos the slayer of bad pricing suits you so well. I love this.
[00:01:09] Speaker B: Thank you, man. Thank you so much. Why don't you start off just real quick, tell us about what you do. What does agorapulse do, and then we'll go from there.
[00:01:16] Speaker C: Yeah, totally. So, Gorapulse is a social media management software. So it's a SaaS. We launched this at the end of 2011. So we've been around for quite a while. We're a bootstrap company, so we never raised money, VC Money, to grow a business. We're now at $23 million AR, 165 people. And we grew this business mostly through an inbound SMB self serve motion, which is important to understand because that has an impact on how you work on pricing and define pricing, because your pricing is public and people subscribe with their credit card, and they don't talk to you, most of them. But we're now transitioning more and more to a way to grow the business that's much more driven by sales team and team of SDR. So we're going through that journey. So we are learning on both sides, which is very interesting. Absolutely.
[00:02:12] Speaker B: One of the other reasons why I'm so excited to have you on here. And since 2011, bootstrapped to 23, that is a phenomenal feat in and of itself. And I know how you grew, man. You grew with your two hands, right?
[00:02:24] Speaker C: Bare hands.
[00:02:25] Speaker B: I've been following you for a long time, and you are so in tune with your business, in tune with your customers, and you're just one of the hardest working folks I know out there. So I want to give you the quick layout, the roadmap for what we're about to do here. It's really modeled after the book street pricing. So we're going to go rewind, which is a look in the past, a pricing story, a struggle, a success, something we want to sink our teeth into, something that maybe led to a big learning for you. Then we'll go to play, which is what's working now in the present. We'll bring you back to today what's working well for you. Let's talk about that. And then we'll do fast forward, which is. Okay, what's next? Where do you want to go from here? What are you thinking about changing? And then at the end, I'm going to ask you, what is your favorite hip hop song? Hold on to that one. Hold on to that one. We'll bring that towards the end. Okay. But first, let's get into the past. I want to talk about a good, meaty pricing story. You have probably several of them. Let me open it up to you.
[00:03:19] Speaker C: Emmerich, the rewind, how long do we know?
So I'm going to try to put my thoughts together and deliver them in a way that's meaningful and clear. So the first one, you probably already shared that one so many times, but I think it's worth sharing again. We started way too low. We started with a pricing that was very low. I think my starting price was $9 a month when we got in the market in 2012, like, it was 929, 49, and 99, something like that. The way I learned it was too low is that one day I saw one of my head of support. My head of support. She was working in front of me, and she had just spent a whole hour to solve some customer's problem. Like, lots of work, digging and technical checking with the developers. Like, a lot of work. She was exhausted, and she fixed it, and she solved that person's problem. And then we were using intercom for support. She checked on intercom, how much are they paying us? And she saw $29. And I saw her face going, 29. All this for $29. And I saw her not motivation going away, but how good she felt went away immediately because she thought, I did this. All this for $29. At that moment, I knew that it was not okay, and I changed the pricing as soon as I could change it. Probably the month after or something, we changed it. And instead of starting at 29 or 49, we started at 99 or whatever. We did a big up in the pricing, especially for bootstrap founders who are kind of not annoyed by their product, but a little bit because we don't have a lot of resources. We have a very small team, and it's not perfect. The UI is not great. The UX is so, so a couple of bucks here. We're missing all these features. So you tend to feel, okay, let's price it low, so at least there's no barrier there. It's not even worth it. But that's the limited belief that we have.
[00:05:23] Speaker B: It's good to know and enrich. Listen, that is something that I think a lot of entrepreneurs out there need to hear, right, as the founder, and this is coming from someone who's built a lot of products in the past, is you always see your own shortcomings, your own mistakes. You know, it's not perfect. You know what that vision is and where it is today. You almost discount yourself in the very beginning. And then you couple that with the need to just not create any friction, not create any slowness and momentum. And so you come out with this really usually a suppressingly low price. And what you may find is you may not see it at first. You may get a couple of wins. You may see some acquisition numbers grow, conversions grow, and you're like, oh, right, this is working. And then it's not until you get smacked in the face with a reality of what your support person did that you realize, like, oh, wait a minute, maybe this isn't the best approach possible. So let's break that up a little bit here, because I bet you felt something when you saw her face, right? You felt like, oh, maybe this isn't the right way. Tell me about that moment.
[00:06:20] Speaker C: No, what I realized is that the work that we put behind this product, whether it's building it or supporting it, is worth much more than I'm charging for. It made me realize that it was not okay. But before that, I was just looking at 29 as a number, and suddenly I realized 29 is not a number. It's what we get from what we do. And what we do is worth more because we do a lot and we do great, and we are passionate, and we work 12 hours a day and all that. It's not worth 29. Frick it. I'm not okay with that. It was a mindset change for sure.
Something else that helped, that was not mindset, but more numbers and data is at one point looked as a churn on those plans. And it's a universal truth. I cross check this with all the SaaS founders I know, the fewer they pay, the more they churn, like, the smaller the customer, the smaller the plan. The 29 a month plan churns more than the 49, the 49 churns more than the 99, the 99 churns more than the 199, and so on and so forth. And that I didn't realize early on. I think it probably is probably something I got like four years after start. I didn't really see any of that in early days. So the early days, my early days of SaaS were 2012. So give me some slack, because in 2012, we knew a lot less than we know today.
[00:07:40] Speaker B: No, but you are a veteran, and that's another key lesson here. If you think about it, the more they pay, the more they stay. And as one of the things that we've seen, I love what you said about that number, that 29 is not just a number, it's really what you get for what you do. But also on the customer side of thing, it also represents value, too. And if it's $9 and they really bad.
[00:08:01] Speaker C: Exactly.
[00:08:02] Speaker B: They associate quality to it. They don't pay a lot of attention to it, becomes less of a major focus. But if they're paying 9919-9499 whatever it is, it gets more attention. The bar is high, though. You got to make sure you deliver at that.
[00:08:14] Speaker C: Right.
[00:08:15] Speaker B: But then sort of the value equation is kind of balanced on both sides. I love that.
[00:08:19] Speaker C: Yeah. One last thing to just go 360 around. This problem is also about who do you want to attract? Your price is going to play an immense role in who you attract. If you're the $9 you're going to attract.
Sorry for if I'm hurting anybody's feeling, but you're going to attract poor businesses or poor users, like people who don't have money and for whom paying $20 is too much or $49 is too much or $9 is what they're ready to pay. Those are usually the worst customers for well built, well operated, professionally maintained SaaS, soft SaaS company, SaaS products. So you want to attract the right companies, the right users, the right customers for you. And the price you're going to put in there is going to be telling that story. And I'm saying this because it's funny. In November, we saw one of our main competitors, proud social, raise their price, like super high. They went like ten x on some of those prices. And initially I was like, wow, this is insane. This is so much. And as I was discussing this with friends who are very familiar with the matter and who know this company pretty well, they told me, yeah, they chose their battles. They chose who they want to sell to. And then, boom, it made sense. Oh, yeah. That's what pricing does. Pricing. Telling a story, sending a message. No, you're too cheap for me. Go use something else. I'm not a good fit for you. You're too small, you don't have enough money.
And I'm okay with that. And it's a hard thing to be okay with to tell potential customers, no, sorry, not for me. Not for you. And when you see yourself at a decent, good human being in the early days, you have a hard time saying no to potential customers.
[00:10:03] Speaker B: It feels bad, right?
[00:10:04] Speaker C: As someone who wants totally does.
[00:10:06] Speaker B: I get it, man. I get it. So my budy Bill Wilson talks a lot about this. He says pricing should attract and repel your customer base. Right?
[00:10:15] Speaker C: Exactly. Lacks like values.
[00:10:17] Speaker B: Exactly like values. And so I think a lot of folks in everyone listening here who's thinking about, man, is my pricing attracting or is it repelling the right customers? Take a deeper look. Make sure that it's saying what you want it to say, because it is a story, it is a message, and I love that piece. Let me double click on something you said. Because when you realized you were too cheap, right, you said, you know what, we're too cheap. Let me change the price. I got to know, what did you do? How did you figure that out?
[00:10:44] Speaker C: Okay, at that moment in time, but then I'll tell another story. But at that moment in time, that pricing changed. We basically double grove overnight, I. E. All the people who would have paid, I forgot it was the 49. We killed the 49 and just kept the 99 at the starting price. So most of the people who paid 49 in the past suddenly paid 99 now. So that pricing change was pure gold. It fueled growth at the best moment in time for us because we were raising secondary at that time. So our company valuation for six months, it felt like we were on a success trajectory that would never end. We were 6% month over month. That's 100% annual growth. So it was amazing. Now, I don't want you who are listening to this or watching this believe that every time you increase your price, you're going to double grow, because that would be a miracle every single time. That would be too easy. We did change prices later on, and it had a negative impact on us. So it is not always having a positive impact, but if you are really low, it's guaranteed to have a positive impact. When you get closer to kind of the psychological price that's the right one, then if you start exceeding that, it may have a negative impact.
[00:12:04] Speaker B: That is a very sage message for everyone here. Just because you hear these stories about, hey, we've doubled price, it worked out wonderfully for us, doesn't always mean it's going to work for you, especially if it's not informed. If you don't have the right value to justify it, you can't just raise just because, right? It doesn't always work that way. It's a gamble.
[00:12:26] Speaker C: We can put out some rules for people. If you're business to business and you're selling 29 a month, you can double tomorrow and you'll double grow. I cannot see any b, two b companies selling 29 a month that will not double growth if they're suddenly selling 69 or 80 or 99 or whatever. Now, if you're b to b and you're 99 per user and you go 149, it may or may not work for you. It depends on the context.
[00:12:50] Speaker B: That's right. There's something interesting here that us pricing nerds talk a lot about, which is the tolerance as you graze the price, there's actually a cliff at the end of that. There's a cliff. And if you reach go too far, you go fall off that cliff, you'll see it in numbers and it's going to hurt and you're going to know it right away. And then the whole unwinding of it just can get pretty messy as well, man. So thank you for just stepping through some real raw moments and talking about what happened and the changes that you've made. You said you had another story for me. Is there one more in there?
[00:13:21] Speaker C: Yeah, that's the one where we increased the price and it didn't work out.
[00:13:26] Speaker B: Wait, so wait, before we move on to play, I got to know just real quick, how did you know? What was the big thing in front of your face where you said, oops, this actually isn't working the way I thought.
[00:13:36] Speaker C: That conversion went down.
So conversion went down in terms of number of customers who subscribed. And Mr. Stayed the same for a while.
So we thought, okay, it's not a win because we didn't increase Mr. But it's not a lose because we didn't decrease Mr. But for some reason, over time, we got less able to attract the same number of customers that we used to, and then Mr. Decreased. So if you've made a pricing change and you attract less fewer customers, consider that a lose and revert, like, don't stay there. That was the learning. So in particular, we just took a plan that was 199, and we increased it to 249. And those additional $49 were too much for the people we were selling that plan to. Really? I mean, I don't have any very interesting explanation as to why. The only thing I know is we did this, like this, like guesswork, let's guesstimate, or whatever you want to name it. And it was not a good idea. And we passed that psychological barrier, that cliff where we're ready to pay 199 for this kind of product, but not more. Let's go to something else. The other learning I really want to share, because this is a big freaking one and never do that. It's when you change too many things at the same time. So when you do pricing, change one item at a time. If you change three items, like, I'm going to change the price per user, make it 59 to 89. But I'm also going to remove those three features and move them to the other plan. And I'm going to also make this price per use, additional user, or additional whatever gigabytes of consumption go up by $10. Let's go roll this out. And suddenly it fails. It doesn't work. Oh, is it the add on price? Is it the base price? Is it the feature that we removed? Shit, I don't know. What was it?
[00:15:33] Speaker B: What was the thing again?
[00:15:34] Speaker C: So now we never do that anymore. Every time we make changes to the pricing, we change one thing at a time. Yeah.
[00:15:40] Speaker B: So you can focus on what that change is doing, the measure behind that.
[00:15:43] Speaker C: And we can revert. Because when you change four things, what are you going to revert? The whole four? Oh, my God. It's way too much, and it's too much of a risk and a bet. So you don't want to do it. So you get stuck with your own mistake for a long time, and it does not feel good.
[00:15:59] Speaker B: Yes. Then you got to drag the other side of it, which is, okay, how do I unwind all this, right. And get back on track? Right. Because especially for a business like yours, lots of transparency, lots of visibility, everything you do, people see.
That is, again, fantastic talk for the learnings. I'm hoping someone listening to this has taken a lot of notes.
[00:16:17] Speaker C: Right.
[00:16:17] Speaker B: But let's move on. Let's bring us back to today, the present day, and play what's working for you really well right now. Let's talk about that.
[00:16:25] Speaker C: Okay. So the first thing that, as I said earlier, we grew self serve SMB, and we are moving more and more into sales driven proposal quotes, like a different world of pricing on the self serve SMB. What worked well for us is last year, in December of 2022, we changed our pricing to make our. So we're social media management software. We price by user and number of social profiles that you manage with us, leaving the add ons and everything else on the site for now. But it's the main driver of price and the main driver of potential expansion and stuff. And we used to give away everything in the kitchen sink in the plan. So for example, in the 99 plan you had two users and ten this and blah blah that. And in 199 you had four users and 25 social profiles and block. So we gave away a lot, in our opinion, too much. So what we did in December, we changed that to okay, with 99, you have one user and ten profiles and those features, 199, you have one user and whatever. We lowered the price a little bit, but it was one user. Every single plan, you didn't have more than one user included, so you needed two or three. You had to buy more. That allowed us to reduce the entry level price and create more expansion.
Out of the self surveys, that worked well. We got more expansion, we got more money. Our ASP went a little down because the entry level price was lower, was a little lower. Yeah, but expansion went better and NR was better. It's still a struggle with SMB and self serve, I'm not going to lie, but overall that was a good choice for us. So for your business, if you're self serve and you're including too much in the kitchen sink in your plan, think about just giving the bare minimum and let them add more as an add on as a future expansion potential. So I think that was a win.
[00:18:20] Speaker B: Fantastic.
[00:18:20] Speaker C: The other win, there's so many wins on the sell side, but let's take two of them. It's having a discount matrix. It's having a way for the account executive to basically discount based on a rule on an Excel spreadsheet where that's fixed before when we did that in June. So we're still very rookies.
[00:18:46] Speaker B: Yeah, that's not too long.
[00:18:48] Speaker C: It's not too long ago. That was like less than six months ago, four months ago and before that, AES would do discount the way they felt that morning, like, okay, let's give 30%, I'll feel joyful today, let's do 50%. So whatever. And creating that level of rules, and this is the maximum you can do. If you go above this, you have to go to your boss. Then if you go above that, you have to go to the VP of sales. And then if you go above this, you got to go to the.
There's, there are constraints that raised Asp. Crazy. You have no idea how much ASP was raised by creating that framework. So that's definitely something we should have done earlier. The other thing that we've done that works really well is that we started with a very not flexible pricing and we started losing deals that we could have won because our pricing was not, we could not adapt to specific situations. So what you need to understand when you're driving sales with a sales team is that you're going to have big corporations that are going to come to you and they are going to be very different. They are going to need things that are very different from each other and they are going to have a context that's very different. Your SMB, you sell serve 99 for everyone. Who cares? It's 99. 99. But I'm a baker, I should pay 89. No, I'm a butcher. It doesn't matter. They're all going to pay the same. But a large german corporation is going to expect things with their price and the way they're presented with pricing that's going to be, or legal stuff or privacy or everything, pricing being part of a whole that's going to feel different than an american franchise of McDonald's in Nevada or whatever. If your pricing is too strict. Oh, this is my pricing framework. I can't get away from that. So I have to quote you that crazy amount that you're never going to accept, that's not going to work. So creating flexibilities and adapting to different situations by identifying them and calling them, for example, let me give you a very clear example that everybody's going to understand. So basically, before our pricing was based on number of users and a price per user, a number of social profiles and a price per social profiles. And then we started to have customers who came in and say, well, I have 300 social profiles.
If I apply my pricing on social profiles, suddenly it's like nobody's going to pay twenty five k a month for a social media measurement software ever. Well, maybe some people will, but not the kind of people we're selling our software to right now. But that's what our pricing was saying and that's the framework we gave them the spreadsheet we built for them. So we built another pricing metrics where the number of social profiles could go really high because it fits with that use case. So we identified the use case depending on who they were and what their needs were to get the pricing that fit that use case. So you basically have to think about the same for legal. Sorry, I'm going on and on with this because I'm so passionate. Keep going. You have to make legal work for them. Don't make legal a pain in their butt. Make legal a pleasant experience. Same for pricing. Make pricing something they're pleased with, not something they have to fight against.
[00:22:01] Speaker B: I think that's really to me one of the biggest advice you can give out there, especially for those pushing up market to sales led. I'll say this, the baker, the butcher, the example is perfect. So when you're in that smaller segment, you're pricing the product, all right, it's $99 for the product. You're done. For these bigger deals, enterprise especially, you're pricing the deal, the whole transaction, all the different pieces that come in and out, factor into it. It's not just the number. To me that is, I think a big lesson for everybody here today. I'm glad you mentioned it because everyone needs to hear it. I want to hear about fast forward, man, what is going to happen next? You got things, some things are working, some things are not. What is on your mind for the next change of your pricing?
Or the top one, I should say you probably have.
[00:22:45] Speaker C: It's no secret to the people in our industry that expansion is a real struggle for social media management software. For the reason I just shared with you, we price on seats, on users and on social profiles and more and more. Sprout doesn't even price on social profiles anymore. It's like all inclusive. It's like all you can eat, no additional cost. So your room for improvement on expansion, like what you can do to get more revenue going on to get that gross churn. We're always going to have gross churn. It's impossible to have 0%, so you always have some level of percent, 510, 15 depending on how big you sell and revenue expansion is your only way to offset that and at least be at 100% nr and ideally 105, 110 and 115 if you're amazingly good. But right now I'm aiming for 100% as the whole base, which is a hard challenge because our base is still mainly SMB, so they have to churn more than the mean market ones. But 95% of our challenge pricing wise is how do we create expansion? That's what it is. And obviously yes, you do that by going up market, for sure. You do that by doing selling wave of sales motion where there are commitments, annual and two year commitment, where SMBs are mostly monthly, like there's no commitments, but there's also in how do you create value in the product that has this embedded in it? How do you create features and value, add and value props that makes them want to expand over time? And that's the challenge, and that's the future. So now, every time we do customer discovery and we hear pains, we think about can we solve this pain in a way that the more we solve it, the more they want to pay, the more pain we remove from their plate, the more they want to grow? How much they pay us? Can we do that? Sometimes the answer is yes. Sometimes the answer is no. But when it's yes, it gets really exciting. Because at the end of the day, we can still invent so much in how we target our market and we help our market. There's so much yet to be done, created and invented. You and I know Darren Martel, and Darren Martel keeps telling me we live in a world of abundance. There's so much for us to seize. It's just we're not living a limited world, and I think we can create that.
And we all get very excited every time we think about. And we actually are releasing a feature very soon that has this. And I can't wait to see how it's going to work and how it's going to expand. But that's the future. It's like having a pricing that has expansion potential built into it and that actually works.
[00:25:27] Speaker B: That's the holy grail right there for me, if you think about it. Listen, we could probably talk for double, triple the time on all this good stuff, man, you came up with. We're talking about price is not just a number, how it really represents what you get and also value signals to the customer. We talked about attracting and repelling customers. We talked about being know, when you're changing your know, guesswork, it may come back to bite you. All the good stuff you're doing with the leaner entry point, right? With flexibility in the enterprise, a discounting matrix structure. You are chock full of good stuff, man. Emrick, I am rooting for you to continue to push forward. You got to give me one more thing, though. You got to give me that song if you can. What is your favorite hip hop song? Ninety s, two thousand s. Doesn't matter.
[00:26:09] Speaker C: Yeah, so when you say hip hop, the music I listen to is hardcore techno. It's like hardcore electronic music. Usually the djs I'm listening to are Germans or danish or Swedish or that kind of crew. So I'm not a big hip hop guy.
Is it rap?
[00:26:29] Speaker B: Give me a dj then. Give me a favorite dj.
[00:26:32] Speaker C: A favorite dj. That's a good one.
I like Tiesto, but Tiesto is a little bit too high in tone. I like lower rhythm. Let me check. Because that's the problem with Spotify. You listen to playlist all the time and then you just mix it all in, right?
[00:26:52] Speaker B: It'll make.
[00:26:53] Speaker C: I'm looking at my like you're pulling up your Spotify.
So tita low is the one I've been listening to. Cyrus D. I love Cyrus D. Is a great dj.
S-I-R-E-Z. Boris Bretcha. B-R-E-J-C-H-A amazing DJ. John Dalbach. It's all my liked Spotify.
[00:27:21] Speaker B: Now, you know you're not making it up because it's coming straight from your list, right?
[00:27:23] Speaker C: Yeah.
[00:27:24] Speaker B: Rick, man, you are so much fun to have on everyone here. I hope you take these lessons to heart. Listen to them, apply it, and just make sure that you don't make the same mistakes that our guests are making. That you take these and do something about it. Change your pricing. Until next time, I want you to stop guessing and start growing. Thanks for joining us today.
[00:27:43] Speaker C: Thanks, Marcos.
[00:27:44] Speaker A: Thank you and much love for listening to the street pricing podcast with Marcos Rivera. We hope you enjoyed this episode and don't forget to like and subscribe. If you want to learn more about capturing value, pick up a copy of street pricing on Amazon. Until next time.
