Episode Transcript
[00:00:01] 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.
[00:00:25] Speaker B: What's up? And welcome to the Street Pricing podcast. I'm Marcos Rivera, author, founder and pricing coach. Today, my guest is someone who did it at the startup level, at the big, large enterprise level. I'm super excited to bring him with us today to share his pricing stories. Today I have Hamza Hefestjeef Hamza, welcome to the show, man.
[00:00:46] Speaker C: Marcus, thank you for having me and thank you for the kind introduction as well.
[00:00:51] Speaker B: It's fantastic. So listen, so you're currently the group product manager at advance. Why don't you tell us a little bit more about your background and what does advance do?
[00:00:58] Speaker C: I'll start with a bit about me. I've been a product manager my entire career, so unlike most product managers who sort of find their way into product, I always say I was born in product, born creating value, and happened to find myself monetizing value as well. Started off as a uni grad, as a product manager and 1011 years on still working in product management as a group product manager. I'm fortunate because I've had the opportunity to move across various industries. I've worked in agricultural tech, NFP Tech, ed Tech, hospitality tech, and now I'm in HR tech advanced. Depends what day you look. We're either the second or third largest software house that's headquartered within the UK. We deliver vertical specific software for the legal industry, the NHS, education, and then we overlay that with our horizontal market products, which are sort of the core ERP, finance, HR, spend management and governance.
[00:01:55] Speaker B: Fantastic. So we have a little vertical, a little horizontal there. And of course, the bias is obvious. Also grew up in product management, so that's where I learned about how do you create, how do you capture value over time? And so this perspective, I think a lot of folks need to hear. So let me give out a quick roadmap for where we want to go today. Right, so today we're going to base everything on the structure of the book street pricing. Right? So we're going to start with rewind, go back in the past, tell us a pricing story, a juicy one of where you change pricing, you learn something. I want to hear it. All the struggles and success, let's lay it out there. And then we're going to bring it back to the present. We're going to go to play on what's working today really well for you. So how does capturing value working for you today, and what are some of the techniques that are really applying then you have fast forward. Now fast forward moves us into the future. What's next? What do you plan on changing and why? When it comes to capturing value, we want to hear from you. And then I'm going to throw you for a fun little loop at the end. You have to tell me what your favorite jam is or was growing up. All right, I'll take whatever, but it has to be your favorite. I want to talk about it there. So keep that in the back pocket. Okay. So if we're ready to go, let's start with the pricing story. Hamza, take it away.
[00:03:06] Speaker C: Sure. As you're sort of running through that dialogue, I was thinking, what pricing story do I start with? And as I said, I've been fortunate that with all the industries that I've worked in and products that I've looked after, I've played a critical role in sort of monetizing the value that we're creating from a product perspective. But I think the immediate one that probably sticks out is for the product that I'm working for right now. Advanced, an interesting product that was founded in 2017 primarily around talent management, traditional startup purchased by Big Tech and now sort of trying to scale up. So I faced the challenge of how do you transition a product from a startup pricing strategy and then crossing the chasm to really scale up and remove some of those sort of growing pains that we had. Now, the product was, from a pricing perspective, it was quite immature. So we were priced with a core, with a series of packages and add ons. The modules didn't really offer enough value to be sold as add ons. Only 10% of customers ever opted for an add on. And the usual point that they'd purchased these was that point of acquisition. So naturally this was hurting our net revenue retention, albeit we're doing really well. Net revenue retention 100% in certain segments, creeping above the 100%. But this was all down to selling additional seats as opposed to selling additional product or delivering greater value to the customer in the form of additional modules, for example. And as I mentioned, the phase that the product was in was we were trying to cross the chasm and traditionally, customer success, professional services, it either wasn't well defined in areas, and at the same time we're giving it away without any additional cost. It wasn't very scalable. But the good news of all of this was that we had great advocacy. If I think about all the products I've looked after, this is the one product where it has great virality. It's a product where the buyers love it and the users can't stop singing its praises as well. That has all the ingredients that tells you, wait, hold on. We should be reviewing pricing here because we're not capturing enough value.
[00:05:18] Speaker B: Hamza, I got to stamp that one because you just said something very critical for everybody here, which is revisiting the pricing and packaging of the product. So you laid it out so nicely. But I want folks to double click on the fact that they started with a structure that was a core with a bunch of modules. And I see this in a lot of startups because they're building new stuff and they don't know exactly how to package it or present it. So they'll make them a module, say, let's capture the value. The other opposite problem, which could also create limitations, is just shoving everything into the product and giving everything away for free. So both of those extremes can be problematic. And you're pointing out the one where you have a lot of modules which add some complexity, but no one's really buying them. You said what, 10% or less are really picking these things up, and then mostly at time of purchase later on, no one's buying anything. The only growth path is more users. And so if you see this happening where you're not really growing in more than one dimension, or if you just really can't expand and sell those modules across, that's a signal that you should step back and relook at the pricing and packaging. So, Hamza, take it away, man. Now what? Now you realize you got a problem. Now you realize you got to relook at this. What did you do next?
[00:06:26] Speaker C: We always recognized we had the problem, or I always had it in my mind that we had the problem. I think just to your point, when you're in the fortunate position of being in big tech or at the point of being the acquirer, usually there's patterns that you look out for, and the examples that you gave are the patterns that I always look out for as well. There's opportunities to capture greater value, particularly when you're in product management, when we own the price book. So as well as that, we started to recognize that actually when we were thinking about the competition and coming up against them, we weren't positioning ourselves from a go to market perspective as a premium product when the expectation is that we should be doing that. And I think that was down to the limitations of our pricing, because our pricing was cheaper, we are coming across as a cheaper product, not as a premium product. So we decided to run an exercise. We started off with a bit of a mystery shopping exercise. One was to learn more about not the price point of petition. We were quite confident on how the competitors were pricing, but more so to understand how are they positioning their products, what are they calling out as their value drivers, how are they differentiating in their sales messaging.
We were always very confident that the lever that we could push and win on was go to market execution, which includes pricing. Pricing is one component of it. So we did a series of mystery shops, which was like a month exercise, but at the end of it we were just left with tons of data. We had great understanding of where we were internally and how we were struggling to capture value. And at the same time we almost validated a lot of that findings with the competition and found that, hey, hold on, we have a real strong opportunity here. We overhauled the entire price book. We shifted to good, better, best model we did was we embedded customer success and professional services into the good, better and best. Now, this was very, very deliberate, because sometimes you see the good, better and best, but customer success is still separate as an add on or as its own package, and you have professional services implementation as its own. And I think that's too complex. It's something that really irritates me when I look at pricing models, because when you're a buyer, you go online, you want to get a price point and you want to walk away and saying, okay, I know I've got to pay. I don't need to redefine in a fine print. I can just purchase and get on with it. So we found that actually our point of differentiation was not just in the technology, it was in the services we were offering. So we built out a good, better, best services wrapper alongside the tech. The various elements were complementary to one another, so it really dictated how we positioned each of those three packages, if you like.
Outcome was great. It was everything that we expected shifted to packages. We raised our win value by 50%. So we started off at eleven k and went up to 16k on the average order value, surpassed our initial prediction of 30%. We set a goal of, hey, we want to increase our win value by 30%, significantly increased. And we're now starting to see net revenue retention has jumped by plus five points. Incredibly positive. I think that's been one of the biggest challenges actually, I always find implementing pricing for new business or new customers is so simple, right? You publish a new price point, they go purchase and it's done. Actually the complexity is, hey, what do you do when you've got customers on an old price point? They've got a really good rate and actually you want to go back to them and say, hey, Mr. Customer, Mrs. Customer, you actually got to pay us a bit more. That's always a challenge because you've got to ensure that you have the right strategies in communicating the value, enabling the team to communicate the value, and then actually deploying a coherent message from both your marketing messages as well as the messages that your people on the ground are sharing. Thankfully, we've started to crack that nut and that's been proven through the net revenue. NRR improvements as well.
[00:10:23] Speaker B: Yeah, to 100 to 105 you said, right? So it's like a five point jump. And listen, you put a lot of great stuff just in that last few minutes. There is something that I want everyone also to key in on is you went to a more good, better best structure, which tends to be a pretty common structure in SaaS today. Right? You have those who want less get less, pay less, and those who want more get more and pay more, and you have a nice little trajectory there. But what you did was something very clever, was you took the information you got from the secret shopper, which I'm going to ask you how you did that exactly, because everyone's probably behind me wondering like did he literally just shoot over a quote or a question or inquiry? The main thing here is that you found out that it's the services that set you apart. And then instead of giving them away for free, you started blending them into the package and creating what I call more of an experience than a package. And so the services that are included help the customer get to value in a certain way. And that is also part of what they're paying for. Not just the value, the features and whatever itself, but also how they get there and what type of support and onboarding they get and all those other things. So that's a very key piece is blending it into your packages is a really great way to extenuate some differentiation on the experience you want to give your audience. Right now you got some information through some mystery shopping end, just break it down. Like what did you do? Did you pick up the phone? Did you shoot over an email? How did you get that info?
[00:11:46] Speaker C: It was an interesting one, but just before I jump onto that, I just want to touch on the point that you made a short while ago around blending in the customer success and professional services element. You have to remember where we are in the product lifecycle as well, right? So we're in scale up mode. We're not as feature rich as the main competition that have mature products out there. So we had to really think about differentiating. And I'd urge everyone thinking about, hey, what are your points of differentiation? Doesn't always have to be your features. And especially when you're at that point in your product lifecycle, you'll find, you'll look at your pricing and you'll see all your features and you'll feel depressed comparing it to the competition. But you shouldn't because there's other ways to compete and drive value from your overall offering. Anyway, that's my two pence. How do we mystery shop? We had a salesperson who was our team. Funny enough, he actually handed in his notice. He was getting ready to move on, but in a unique way. He was getting ready to move on and open his own business. He was starting a consultancy. So we sat down with him and he was like, hey, we want to run this project. You've just started up your own business. It's not in this industry. How about you run a mystery shopping exercise for a tool that may benefit your business? It may not, but you could leave on a bang. So under his business name, the pretense of his business, business, emails and everything else went away. Set out feelers on websites and we worked our way through. And actually, when we were measuring the mystery shop, we weren't just measuring, hey, let's get through to the demo and understand experience and intelligence. Actually, we were measuring and trying to understand the full experience from the point of going onto a website and clicking book, demo or inquire now right through to the point of receiving a price point. And we are finding competitive levers that we could potentially pull throughout that journey of the go to market cycle.
[00:13:33] Speaker B: Beautiful.
[00:13:34] Speaker C: It was great. We had like a 90% hit rate. So we set out like six customers that we wanted to hit and 90% of them got back to us and gave us their pricing and how they differentiate and gave us a full sales experience.
Literally, as, I mean, we were drowning with data. We were drowning in data. It was great.
[00:13:52] Speaker B: That is fantastic. I hope everybody listens to that one here because you were fortunate to have that rep leave and start a business. Sure. Companies have people leave all the time and start businesses, so I'm sure there's something there too. But you weren't just looking for price points, you were also looking for that sales experience. What levers can you pull? You also looked at how they positioned, how they differentiated. So competitive intelligence around pricing isn't just about getting the other price point, it's all the other levers that you can pull that whole experience from end to end, from the inquiry all the way to getting the price and then beyond that. So I'd love how you use that as a great source of information to start moving away from that guesswork. Right. I talk about that in the book all the time, moving away from the guesswork and getting to some type of real growth. So you went from 100 to 105. What else happened?
[00:14:40] Speaker C: I mentioned, look, on the average order value, the average order value jumped by 50.5%, which was an incredible piece for us from going from eleven k to 16k, targeting the mid market, we wanted to position ourselves as the premium mid market player on the block. We now position ourselves as a premium player. Actually, it's benefiting us as a business as well. And the sales team have so much more confidence. If I think about some of the challenges that we had, and if I think about the biggest challenge amongst all of this was going back out to the sales team as we were bringing in our intelligence and saying, hey, guys, we're going to go to market and we're going to change the way we price. And by the way, we're going to become more expensive. If you think back to that message I shared earlier, which was, hey, if you look at our product versus the competition, feature by feature, we could not get into a feature war. We still can't get into a feature war. But we had confidence that we were the premium product. So the challenge for us was managing that go to market and getting people comfortable selling in a new way, for one, and also enabling them feel confident that we're listening to some of the challenges that they were hearing on the ground as well, that was the biggest challenge for us.
[00:15:48] Speaker B: I got to ask you, man, that sales team, it is a bit daunting to go up to them and say, yeah, we're going to sell differently now. We're going to have these new packages, it's going to be more expensive and you're still expected to hit quota, right? What was maybe like a big pushback? What did sales say? How do they feel reacting to that news? Did you get anything, any knee jerk reactions from them before you're able to calm them down?
[00:16:09] Speaker C: Oh, we got loads of. You always get the knee jerk reaction from sales. Right. We're not going to win like this. We can't sell this way. How can we be positioning as a premium product? I think this is where my experience came in. Right. I think with any change initiative that you're delivering the go to market execution is so important. So what we did was we embedded the sales team into the decision making from day Dot. They were part of the pricing committee, or at least influential members within the team were part of the pricing committee. Even when at times we had already made decisions, we were fairly confident with where we were going, but we helped the team to feel as if they owned the change. Now, part of that was once we implemented, we said, hey, we're going to go through. We were so confident we had it right because we had so much data, right. For half a year, we said, hey, we're going to have an open pricing committee. Every deal that you guys sell, we're going to measure, we're going to understand what impact did it have from a commercial perspective? What was the experience with a customer and what was your experience from a sales perspective? And we dissected every single opportunity. So by the end of it, after a month or two months, the sales teams got sick of it. They're like, let's stop this. There's no need for it.
[00:17:21] Speaker B: Okay, it's fine.
Hey, that's cool. At least they know you were paying attention and that you cared. One thing about sales is like, they always feel like these changes could be the anti sales motion. You're just making it harder for me to get quota. You're making it harder for me to win, but it's actually quite the opposite. So a, you brought them along for the ride, so they were kind of in the decision making, and then just giving them that level of focus and breaking it down step by step along the way. Just let them feel like, yes, you have our back and we're going to be more successful together. Man, that was fantastic. Now, if you had to think about that whole journey, which, by the way, is packed full of learnings from end to end, with the competitive research, with the sales rollout, with everything, what is the one takeaway or the one thing to remember in that whole experience, how would you crystallize it into one thing for our audience?
[00:18:09] Speaker C: I would say articulating value is not just, or selling value is not just the price point. You've got to think about the entire piece of your value chain. Doesn't have to be the product, doesn't have to be your services. It could be just your implementation and support. But it's something to consider, like think about your entire value chain and think about how do you deliver the value for your value chain and recognize it.
[00:18:36] Speaker B: I like that so much because so many get fixated on that number, on that price. It's actually far more than that to make gains, and you've proven that with your research. So let's bring us from the past to the present. Let's bring us to play what's working right now these days. What's a technique or something you've implemented that's getting really good results?
[00:18:55] Speaker C: Yeah. So continue with this sample, because over time we've adapted and we've changed and we've made small edits. I think the one that I think is working really well is probably the one that I find is most controversial with marketing teams, sales teams, leaders of businesses, which is we've changed our pricing, we've seen a huge win rate, we've positioned ourselves differently, but we're going to now publish our pricing online. We're going to be completely transparent.
And I always find that leaders find this so scary. I mean, people might find this provocative. Right.
I don't understand why the biggest insecurity is that your competitors will know your price point and how they react to it. Actually, from my experience, what I find is that the competition focus less on you when they can see your pricing and actually find themselves in a defensive mode. I'll explain it in a bit more detail. What I found was, as we said, hey, we're going to publish our pricing online. We focused so hard as a team on value articulation. How do we articulate the value that our product and services delivers to the market? More than we would have done if we didn't publish it online. I don't think we would have spent so much time really giving it. And what else has happened is we've kept ourselves honest. So as we're delivering more value through the product, delivering new features, assigning them to packages, we go back to that value articulation again. Are we going to articulate it? What does the website look like? What does our messaging look like? Yada, yada, yada, yada. And I think what started to happen with us now is that back to that famous saying, right? Like out of sight, out of mind. So when the pricing is not there, I feel like the competition don't really care. But when the pricing is online, they look at your website, they see the way you articulate the value, and I find that you almost create this smokescreen of fear. It's happened to me. When I started off earlier in my career, I'd look at the competition, I know they weren't great, but suddenly they have pricing, they're articulating the value. Great. You're like, oh, my God, this place is the best product ever, and it's the best place to work for and everything else. And you find yourself in this tunnel. And I always say to my product teams, right, like, hey, guys, competition is one part of the jigsaw when it comes to intelligence. We stay in our lane, we know what we're worth, we know where we're going, and we focus on our trajectory. We'll use the insights that we get, and that's it. It's a component of decision making. So I think it's all about trusting your source, publishing it online, and actually creating that almost smokescreen for the competition. And you know what else is great from a lead gen perspective? We know that if a buyer goes onto the website, they've looked at pricing, they've tinkered around with the numbers, messed around with the packages, read through them, and then hit book a demo that is a much more qualified lead than someone that's just landed on the website, included book a demo.
[00:21:44] Speaker B: That's a very key point there and all that. So some of that's a little counterintuitive, right? You're like thinking like, oh, wait, did I just expose all that? But the psychology play, the putting them on the defensive, the strutting in your lane, I love that. And being focused on what you do and knowing what you're worth is really the key behind a lot of that. Hamza. That was fantastic. One last thing on the future. So things are working, but you're going to change something, I bet. What are you thinking of changing and why?
[00:22:10] Speaker C: This is another big change that we're actually implementing at the moment or in the process of. Right. So the next change for us is to consider product led growth driven by two factors, right? The numbers prove the impact of PLG. I mean, when you read some of the stuff from Openview, which I'm sure most of your listeners probably do, significant gains across all SaaS metrics, whether it's revenue scale growth, multiples, NRR rule of 40, yada yada. But the product that we look after, it has everything in its armory to drive virality. And we've been really considering how do we do that? How do we take our pricing and acquisition to a new level. And I think being in product management allows us to think about this way being in product management and owning the price book allows us to do this. I think if I wasn't in product management, maybe we wouldn't be thinking about this way. So we've actually started off with an experiment. You'll find this interesting. We have on our website, we have, like, over 70,000 to 100,000 users a month that land on the website and might consume some content or book a demo. We've created a Blackdoor experiment. We changed the book, a demo button to get started. Now customer clicks, the prospect clicks on it, and all it takes them to is a window saying, coming soon. But we're experimenting, seeing. Wait, hold on. From our organic traffic, how many buyers do we have that are actually interested in getting started now? So we're currently in measure phase. We've had one month of the experiment. It's proven really valuable. We're going to run until the end of December, and then from there, we're going to plan, actually, how do we implement product led growth? The hypothesis is that we will start with a freemium and then really go at it, but the experiment is leading itself down. Potentially, we might start with a free trial, but, yeah, that's what's on the agenda for us. Big change. We will have a get started now and then keep with our starter, standard, and ultimate packages as well. So, yeah, really exciting times.
[00:23:59] Speaker B: Super exciting. And it's all deliberate. It's all intentional, step by step. No guesswork going on here. Like, every single thing you're putting in place is leading you or giving you a piece of information for the next step. So I wish you best of luck on that freemium launch and as you continue to plow forward. So, Hemza, you came in today with a phenomenal accent and even better content, and you're giving us some good stuff today, man. Thank you so much for just taking it to the streets, dropping some knowledge today, man. I want to thank you for all the key lessons on competitive, on just crossing that chasm. As you mentioned in the beginning, I thought that was phenomenal takeaways, man. Thank you again.
[00:24:35] Speaker C: No, you're welcome.
[00:24:37] Speaker B: And one last thing, hamza, what's your favorite jam? You got to tell me, man.
[00:24:41] Speaker C: So I grew up in the 90s, right? 93, listening to my brother listen to music and sing in his bedroom, the tune that always stuck with me till today. My wife hates it because I listen to it too much or too often. Tribe call quest. Can I kick it?
[00:24:55] Speaker B: Oh, wait a minute. So you take it all the way back to Qtip, and the tribe that is phenomenal. I know. Now I know you're a true hip hop head man, if you're quoting tribe called Quest. Man, that was fantastic. Thank you again for bringing that knowledge, team. That's it for today. Please take this knowledge, put it forward. Everything you learned, you can apply right away, and I'm looking forward to seeing those changes. And remember, stop guessing. Start growing. Until next time, thank you and much.
[00:25:25] Speaker A: 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.
