Episode Transcript
[00:00:00] Speaker A: Never, ever, ever, ever justify or apologize for the pricing. The price is the price.
[00:00:04] Speaker B: When people see a wet towel, they squeeze it. If they think there's water in there, they're just going to keep squeezing.
[00:00:10] Speaker C: And all of a sudden they're like, whoa, there's savings to be had here. And they're just going to push, push, push.
[00:00:14] Speaker D: If you really want to understand what your customers think about you, don't change your product, change your pricing.
[00:00:18] Speaker E: Marcos. I feel anxiety before I do pretty much anything. Hell, yeah. I was super scared.
[00:00:26] Speaker B: Most founders don't have a pricing problem. They have a confidence problem. They know they're creating value, but they're not sure how to capture it, how to structure it, or how to defend it when the customer pushes back. Over the last season, we've sat down with founders, operators, investors, and pricing experts to find out what actually works. Consider this your cheat sheet. I want to hear how you were able to help entrepreneurs who are trying to grow, trying to sell their product, trying to get those first 10 customers. How do you help them with their first pricing model, with their first prices, their first deals?
[00:00:57] Speaker A: I ask, what do you want?
What do you ultimately want? Why are you doing this? And what do you want it to deliver to you?
Because I find, and it doesn't matter whether I'm Talking to an MD of a 40 million ARR, somebody who wants to be a coach and wants to earn 5k a month, or somebody who wants to earn a couple of hundred grand a month, the same intent, the same purpose is underlining why they're doing what they're doing. So once I establish why are you doing this? And I'll give you an example, if I may.
[00:01:30] Speaker F: Yeah.
[00:01:31] Speaker A: There was a particular person that wanted to transition from working from a disruptor into, from a chief evangelist to being a coach. And she kind of was a coach even in her role as a chief evangelist.
And she was charging X amount of dollars, hundreds of dollars per hour. But the value she was giving was so ridiculous. It was so far stretched. It was actually costing her more in her time, in her relationships, in the value she could ultimately deliver long term. So therefore, it wasn't sustainable. So she jumps on a call with me, we have a conversation, and I base it all around, well, you know, let's say her name's Mary Lou. Mary Lou, what do you really want? And with this particular person, it turned out that to have the flexibility to be able to spend more time with her daughter, but also earn more than what she was earning before. And I said, okay, but who's going to pay for your sick days, who's going to pay for your holidays, and et cetera, et cetera. Because I think a lot of entrepreneurs forget that, yeah, I might want to earn 100 grand a year, but in actual fact, to earn that hundred grand, you might need to actually turn over 300 grand or 400 grand, depending. Long story short, it's is after a couple of sessions, we ended up her agreeing that she would 100x her price and she would start having that conversation. So for argument's sake, if she was charging $500, she's now charging $5,000. And it was based upon the same criteria that she wanted to give, because that, that value she wanted to give, she wanted to maintain and have that. And I said, but you're too cheap. Because people are starting to question, right? And this will go back into, you know, how I start doing my pricing now. But she was too cheap, people questioned it.
And now she went the next day and charged that exact same price. And that's all she's charging now. The point being is that you have to think of it from a very not linear process because you have to understand that the pricing is subjective, yes, to competitors, to what people are prepared to pay, but you have to value what you're offering, services, product, whatever it is, so that not only do you feel comfortable in doing it, because many times in the beginning I never priced so low that I wasn't comfortable, but you have to be comfortable enough in pricing so that you keep delivering and feel comfortable in delivering that value because people will expect it. And she's doing that now. And she's wrapped like wrapped. She has flexibility. She has to say no, she charges a crapload of money.
And so she should, because she's freaking good at what she does.
And you should pay for what you do and how good you are.
[00:04:19] Speaker B: You know, bring. Bringing on that example, you can flip to another one if you want to. When you try to get them to pick the number and pick the package or pick the position or whatever they need to get started and start winning some customers and getting some business in the door, how are you helping them land on that? Because they could be waffling around or not.
[00:04:36] Speaker F: Sure.
[00:04:37] Speaker A: Yeah, that's a really good question. I smiled because that's exactly what happened in that example. So this person pushed back and she turns around, she says, pj, are you insane? Like, there is no way I am charging that price. Are you insane? And I said, listen, if you don't charge that because you're not. Now, how does it make you feel?
Well, I'm undervalued, underappreciated. I'm too cheap on this. I'm. That I'm. Okay, so what kind of price do you want to charge that will make you feel better about yourself? Valued, that you're delivering value? And then she turns around and says, okay, let's say I agree to the pricing. What about how am I going to get clients?
Well, how'd you get speaking engagements before when you were the chief evangelist for X Company? Well, I went on social media. I promoted myself. I spoke about what I did. I did this. I became a trusted advisor, an expert.
Okay, so why can't you do that for yourself? Because inadvertently, you are being paid to do that job anyway, and now you're going to get paid a little bit more and also have the flexibility and the control over when and what and how.
Okay? So for me, when I talk to an entrepreneur or solopreneur or anybody about how do I build sales? It's all about, what have you done in the past that you can replicate and therefore do it at scale for yourself? Now, sometimes people don't want to scale, and that's okay. But to get that first client in the door, you have to have that credibility, and you have to bridge that gap.
[00:06:13] Speaker B: But let me flip the script and ask you another question, the opposite question.
What do you want these entrepreneurs, and maybe even this story as well, what should they never, ever do in this scenario as they're trying to figure out their value and charge for what they're
[00:06:30] Speaker A: worth, justify or apologize for the pricing?
[00:06:33] Speaker B: Oh, I love it.
[00:06:35] Speaker A: Never.
[00:06:35] Speaker G: I love it.
[00:06:36] Speaker A: Never, ever, ever, ever. The price is the price.
Why are you pricing that much? So give you a quick example. I had somebody question my alley rate. My alley rates X and my. And somebody questioned it, and they said, well, that's three, four times more than I'm getting paid. And I went, okay, I can appreciate that. I can appreciate the question and the concern even. So why are you charging that price?
Because I'm worth it. Because I can deliver what you're asking. If you and I have a conversation and if you and I apply each other's skill set together, because together we can move forward.
And it was funny because he turned around and he said to me, listen, pj, he goes, you're charging an exorbitant amount of money compared to everyone else. And I said, but that's my differentiator, because I'm not everybody else.
[00:07:27] Speaker B: I am me.
PJ says, Charts what you're worth, which is easy to say, but Rob Walling actually had to do it. And that meant tearing up his pricing model and building it from the ground up, which sounds reasonable until you realize that there are customers sitting there with static lists of like 30,000 names and they're paying practically nothing, while competitors will charge hundreds of dollars a month for. For the same value.
[00:07:51] Speaker E: Redoing the pricing I knew was going to be some effort, both technically and then we had to re. We had to think through the tiers, so there was like some logistics and then it was going to be communication to prior customers and new customers. And I knew all of that. I was, it was just something, you know, that thing that sits on your to do list for months and you just don't. You keep not doing it because you're just like, have this resistance to it.
[00:08:13] Speaker D: Oh, yeah.
[00:08:13] Speaker E: And that was, that was what was happening. So the, the. That's the first thing I did was procrastinate and not do it. The second thing I did was like, after a month or I was like, oh, I know this is a problem. And I took a weekend and just kind of got up the.
I don't know, the gumption to just. I had some coffee and like sat down and I mapped out everything. I was like, this is what I think the pricing should be, you know, and it was 2,500 subscribers at 49amonth and 5,000 to 99amonth. You know, it was just kind of mapped it out and I wanted to just sit with it for, for several days to just feel.
I often, I try to use as much data as possible, but there's oftentimes like being a founder is making hard decisions with incomplete information. And you, it's rare you have less or more, you know, less information than in the early days of a startup. And usually your V1 pricing and maybe even V2, you're kind of making it up. You know, as much as we. I want there to be science and I want to do a survey and I want to do this and that. I was just like, you know what? I'm going to take a crack at it. So I sat down, mapped it out, and then I met with my developer and said, what's it going to take to implement this?
[00:09:14] Speaker B: Excellent. And so you, you, you, you sat, you sat your butt down and finally said, okay, I'm going to figure this thing out. Rolled up your sleeve, took whatever had. Which I think is the right, scrappy approach. Right? You're not going to have perfect information at that stage. And by the way, things are going to look pretty darn different a couple years from that point anyway, so you got to stay nimble. So I, I, I totally key into that. But now, okay, you got, you sketch something out, say, all right, let's go ahead and put this out there. I imagine you were looking for some signal that this is better, this is worse, what am I going to change?
And I'm curious to know what that signal was.
[00:09:46] Speaker E: Yeah, the signal that we saw was that folks like, especially new customers that signed up, I saw within 60 to 90 days, folks that had existing lists. I saw expansion revenue start popping in, and I was getting an email every time someone went from that 49 plan to the 99 and the 149, you know, and I started seeing like, oh, man, this is it. This is the cheat code. One of the cheat codes of SaaS is, is, you know, expansion revenue, which leads to net negative churn.
And I had never owned a SaaS company that had net negative churn before.
And that's, we, we didn't see it within 90 days, but we saw expansion revenue within, you know, 60, 90 days. And then further out, we eventually did hit net negative churn in most months.
[00:10:31] Speaker B: So, so I got to get this because you, you took, it took courage to put that out there and wait and see if this thing was going to work. What I, what I seen a lot of founders out there, or even just folks that are SaaS operators today, is that they know they should probably change it, but they're, they're kind of nervous. Like, they're, they're scared. Oh, man, I'm going to kill my, my momentum. I'm going to, you know, customers are going to leave me and churn or whatever it is. And so I want to ask you, how did you feel? Did you feel any, any anxiety or any nervousness before rolling it out?
[00:11:00] Speaker E: And how'd you overcome it, Marcos? I feel anxiety before I do pretty much anything. Like, that's just, that's just how I'm wired. Hell, yeah. I was super scared. And in fact, the most, one of the most common advising calls that I do with founders I'm invested in is pricing. And it is telling them. Usually it's either raising or adjusting. There's a value metric that's off. There's something that's just not working, and finding pricing that's probably 80 or 90% correct, I find is not, it's not as hard as it sounds. The hardest part is I do coach the founders on you're going to be really stressed and you're not going to want to do this. Like, I'm going to talk you, not talk you into it, but I'm going to help talk you through it is probably a better way to say it. You will feel anxiety. Fewer people are going to be mad than you think. You know, I've seen this dozens, if not hundreds of, you know, of times of people changing pricing. So that's the long answer. The short answer is, yeah, I was pretty stressed about it, but I knew it was just one of those things where I knew I had to do it. And so I just like, said and I told the team. Our team was probably three or four. Yeah, it was probably three people at that point. Tiny, Tiny. But I told everyone we were doing it. So then, then, I'm the boss, I have to do it now. I can't back out. It was a nice account of forced accountability to be like, let's implement this. And then the other thing that helped me actually was I sat down and I wrote a blog post and an email to all the customers and prospects. And I worded that in a way of like, here's what we're doing and here's why, and here's why this is justified. And if you have questions, get back to me. And that actually was a bit cathartic. It helped me be like, oh, this is actually a pretty reasonable thing. I'm not being a jerk here, you know, and even through that, of course, you get, you know, a couple people that are pissed off, right, and they email you huffy things. I can't believe I'm changing to blah, blah, blah, which they never do, really, you know, I mean, they're going to switch and it's like, no, you're not. So it was.
It was stressful. It was more stress leading up to the moment. And then once we did it, it was actually not nearly as stressful as I thought it was going to be.
[00:12:57] Speaker B: Being scared to make a big change is normal. It's human. But before you can confidently raise your prices, you need to answer a more fundamental question.
What value are you actually creating? Let's walk through perceived value versus economic value. What does all that stuff mean?
[00:13:11] Speaker G: You have a product, it does two things. The one thing it does is this creates this concept of total economic value. So which basically means, what are you doing with this product and how is it calculating? How is it creating value for your customer? So, for example, let's say for you are a company that sort of sells the software that helps power plants run.
[00:13:34] Speaker F: Okay.
[00:13:34] Speaker G: And you're more efficient than your competitor.
How much more efficient are you?
How much like Are you 40% more efficient? Are you 50% more efficient? Do you have less downturn with your equipment or with your software? Do you have more efficiency? Are you more sustainable?
So the concept of total economic value basically say that hey, you have to quantify the value you create for your customers. When people say value based pricing, sometimes they sort of say, oh that, you know, it means what my customer is willing to pay. No, it basically means you got to quantify first of all how much value you are creating for your customer. And it could be millions of dollars. Sometimes as a business you're creating millions and millions of dollars of value for a customer. So that is the concept of total economic value, which is what is the higher end of the value that you're creating for your customer?
[00:14:22] Speaker B: Yeah, so what is it like intangible dollars and cents? Like what is this thing in tangible
[00:14:27] Speaker G: dollars, in cost savings in revenue that you' efficiency that you're creating for them? And there's always a way, especially in B2B, there's always a way to quantify that value. Like hey, how many hours are you saving them? How much more revenue are creating for them? Is it more efficient? Are you 20% more efficient? What does that really mean in terms of cost? So, and there is a mathematical way to do it, right? Like you basically take your inputs, you apply some level of hey, did my product does this thing this much better? Then you quantify it. So that's your total economical value. So you say, hey, okay, my, that's the ceiling.
You put it, okay, product creates $10 million worth of value for you every year.
That's your total economic value. Now comes into this, this notion of perceived value. So what does your customer perceives that value at? Like, hey, they're obviously not going to pay you $10 million. They're maybe they're willing to pay you a million dollars for it. Right. So we always say the value capture in value based pricing is somewhere around 5 to 10%, maybe as high as 20% in some cases. So that's where your perceived value sits as to what your customer is willing to pay for that value compared to the economic value. Right.
[00:15:39] Speaker B: And those are different. And those are different.
[00:15:41] Speaker G: Yeah, those are two different. There's a total economic value which you're generating for the customer and this is what the customer is willing to pay you for. Right out of that total value and sales role is to make sure that you try and capture that perceived value day in, day out. Like, hey, you're going to get your customer as high in that perceived value or closed. So you base your pricing based on your perceived value. That hey, I'm going to capture 10% of that $10 million. I'm, I'm, I am creating for my customer. So my pricing is going to be around a million dollars. And sales role is to hit that million dollars every day, day in, day out flows enough, you know, and some days they'll probably use some discretionary discount and bring it down. But that's their job.
Now there's the, there's that and there's the total economical value and there's this big delta in between that you're creating for the customer that's surplus for them. That customer is basically cashing in on that $9 million that they're saving basically. This is where marketing comes in. Yeah, marketing's role in this is to raise that floor.
They know the ceiling, they know the floor and now they got to make sure that they close the walls in basically. And, and that's where marketing's value is to basically say, hey, how can I increase the perceived value of this product?
And you increase the perceived value of the products by doing all the traditional thing where showing your value, customer success stories, creating ways for them to use your products.
This is what customer success, this is what customer success really means. This is what customers, how do you make. And in the SaaS world, you talk about customer success a lot. Customer success teams, the role of that customer success team is to make sure that you maximize the value you are generating with your software, with your service. Right? And that's marketings and customer services role to bring that value up, the perceived value from a million to million 5 to 2 million so that you can. And then the product's role is to keep increasing the, to make the product better, to keep raising the ceiling on that economic value.
[00:17:37] Speaker B: So hey, the top side got it.
[00:17:40] Speaker G: Our software is gonna like, you know, Snowflake was talking about how they're sort of making the product more efficient next year or something like right now. So they're basically increasing the ceiling of their product, right? They basically saying, hey, my product's going to get delivered incremental value next year. So they raise the ceiling and marketing and customer success is going to make sure that the floor keeps moving and you have finance who basically is covering its costs. And that's basically value based selling in a nutshell. And that's how it was designed.
[00:18:11] Speaker B: Knowing your Value is one thing. Getting customers to actually pay for it is another. And that starts with how you package it, not just what you charge.
[00:18:19] Speaker F: I think people spend their time not in the best way. Like I, I think they spend 80% of their time thinking about price levels and 20% thinking about packaging. When I think the best way is they really should be flipped. You should be spending most of your time thinking about what we're selling and how we're selling it. And the 20% should be on the actual price points themselves. And I mean a couple of reasons for that. One is that the how you sell in terms of packaging is really going to dictate your expansion motion and your expansion revenue. I've seen so many companies over this last year just they don't have enough things to sell or they're over bundling at the start. You know, how you package is really going to dictate how much customers buy from you later. The second reason is that price levels are easier to move up and down as you go than packaging. Like, packaging might require some engineering changes. You might even be taking something away from customer who's used to a certain feature.
So nail the packaging first. The price points you can help hone in on later.
[00:19:22] Speaker B: That's the big unlock. Then it's like, hey, instead of 80, 20, 80 on the price, 20 on the package. Flip that right and spend most of your time on the package. Get that, you know, whatever that structure, those tiers, you know, what's in, what's out. Get all that right? And then you start focusing on the price. And like you said, that stuff can move up and down as you learn and get data and information or as the, you know, whatever, the product gets better. I mean, all those things factor in. So the guy who comes up to you and says, look, what if we just do bronze, silver, gold and just be done with. Who cares? Like what's the big.
When you're saying, you know, packaging is not getting enough attention, what's really going on here? What are people missing?
[00:20:01] Speaker F: What they're missing is they're not understanding what customers, how they actually land with their product.
Like when they, when the prospect signs up, what is the minimum core things that they need to be successful? No more, no less. I think the temptation is let's just give them everything or overserve them because we think that adds more value.
And really it doesn't because they end up just undervaluing them because they're paying for them or not using them.
But also what's offering that we don't want to have too little that they say, oh, you know, we couldn't be successful because we didn't get the right amount of services. For example, I think it's really focusing on that expansion path from they land here and then they grow to these three, four upsells down the line.
[00:20:52] Speaker B: That's. That's counterintuitive, man. I don't get it. Like, look, I do get it, actually. But what I don't get is there's this big gap, right? And what I'm trying to hear is, is I. I'll give you an example. I was watching the. What is it? The Ninja blender infomercials, right? And they want to sell you something, and in order to get you to buy, they'll say, and there's more, and there's more, and they'll keep adding all this stuff to get you to buy. So more gets you to buy. So if I get more for my money, I should, in theory buy.
But what you're saying is that giving him the right amount of value, no more, no less, is the better approach.
And I'm sitting here saying, but what about the more, man, what a utility maximizing human. Wouldn't I just want more? How would you argue with me?
[00:21:39] Speaker F: Yeah, well, you have to want the more.
[00:21:41] Speaker D: That's the key.
[00:21:42] Speaker F: If I said, you know, if I was trying to sell you a blender and say, well, to increase the value, I'm going to add in a chair, you know, it's the year to walk away and say, I'm gonna go somewhere else. That's just selling me a blender. Because those two things aren't. I don't need those two things together. Now, the blender deal works because maybe I'm selling you an extra shaker, and I'm like, oh, I need that shaker. Cause that having a second cup will help me. That's why it works, because I'm gonna need that shaker. So really, it comes down to need and actually solving a related use case versus something that's actually unrelated, something that I'm not gonna need in the near future.
[00:22:17] Speaker B: Peter's right. Don't weigh your plans down with stuff people don't need. But there's a flip side of that, which is giving away too much of what they do need. Right? In your entry tier, your starter plan needs a little bit of friction, not a free pass. I always say, look, if you have 40, 50, 60% of folks hanging out in your entry plan and they're not moving up and they're not upgrading, they're not doing something, then there's something wrong. It's usually one of two things. It's usually that the entry plan is just way too damn generous. Just too much stuff in there. They're happy, they don't need anything else. You're also have a lot of different value going on in that entry plan for the same price.
[00:22:51] Speaker G: But that also.
[00:22:52] Speaker B: The second thing is the jump to the next plan might be too far, meaning that the use cases that you're solving or the spend or whatever it is is just not, not adding up for that audience. And so they're not making the jump, they're kind of making do in that plan for those that need it. So those are what the two most common culprits. When I see too much hanging out in the entry plan. But you said something, I want to, I want to unpack this a little bit more because you said the word, you said positive friction, right? And it sounds like a weird oxymoron thing, right? Positive friction and all this literature and talk about remove friction from your process, remove friction from your pricing, but you're saying no, no, no, we can have positive friction and it actually is helpful. Can you like give us your philosophy on what positive friction is and it's not.
[00:23:37] Speaker H: Um, so for me, I think of, yeah, like, I think of like you friction can be bad, obviously, and there's, you know, bad bad friction and good friction. So for me, good friction or positive friction is this idea that we know as SaaS, founders or people are building product, what makes companies successful, or at least we should.
So when we have our customers in packages and as they grow, for an example, you know, we know if they hang around in that bottom package, they're eventually going to get frustrated with that making do and they're going to really feel that. But we know if they move to the next package, we're going to be able to either make them more efficient or operationalize certain things because we've got those features in there. And so my philosophy on that is that we want to understand when that tipping point is and then insert some limits to actually force the issue. Right, Almost force the issue so that they understand that, okay, well I'm at 100 of these things now and that means I'm probably at this size of a company or at this size of complexity.
And we know for you to be successful in the long run, you need to be here. So I want to introduce a bit of that positive friction so that you feel like it's time for you to move up. I want them to feel like it's time. Now I will caveat. It's not about putting limits in that. Don't let them get a job done. This is my most important thing. Those packages need to solve a use case and they need to solve it really, really well, top to bottom. And they need to do it over and over and over again.
And so I also look at Positive Friction from a value perspective.
So if we think about sort of the three stages of value, we've got perceived value, you know, realized value, and adopted value. So I want to get them way down into that adopted value phase where it's just now part of their every day. And then when they, you know, they're like, yes, I want more of this is kind of when I want to introduce that positive friction.
[00:25:27] Speaker B: Real quick, I want to tell you about something my team's been building.
[00:25:30] Speaker D: It's called Curve.
[00:25:31] Speaker B: So many of the companies we work with run into the same problem. Their pricing lives in spreadsheets, old decks, email threads. Nobody actually owns it. So it doesn't change when it should and when it finally does, it's a guess. Curve fixes that. It connects straight to your live sales data and shows you the actual impact of a pricing change before you make it. Every decision log and easy to explain beta is open right now. If you want in, go to pricingio.com/meetcurve. That's pricing IO.com/me.
All right, let's get back to it.
Getting your pricing and packaging right is only half the job. The other half is holding on to your margins. When a procurement team pushes back the
[00:26:15] Speaker C: percentage of deals that are signed the last week, the last two weeks of a quarter can, can be as high as 80, 90%. So what that means is like if there's, you know, 12 weeks and a quarter, the first 10 weeks, no deals are coming through. Those, those infosec resources, those legal ref resources, those, you know, deal desk resources. I'm not just saying they're sitting around, but like it's kind of a, you know, a fixed cost, you know, capacity model. And yet you're, you're putting this massive stream because you're exactly right. We have been trained. In fact, it's exacerbated when I would say 9 out of 10 SaaS skills. I work on you, you do the demo, you get to the pricing stage and they are the ones who bring it up. They say, hey, we have, here's your pricing. And oh, by the way, it's contingent upon signing by the end of the quarter, it doesn't matter. Like if you were thinking you were going to buy a month from now or two months from now, there's this pressure. Well, the buyer hears that and they say, oh, wow, Marcos really wants to close this bite in a quarter.
And then they're like, I wonder what else I can get from that. So even though the seller was trying to put the urgency on the buyer, a lot of times the buyer will turn it back and weaponize it on the seller, if that makes sense. But yeah, so it's this big artificial, inefficient method. And so I really think that, you know, we need to kind of move away from that in general. I think here's, here's a very high level solution that we can break it down, but you need to balance the short term victories versus the long term aspect. Right? Because when a buyer knows that, hey, they want to close it in the end of the quarter, you are going to end up having to get concessions that you maybe would not have otherwise done if you would have been okay closing it the first couple weeks of the next quarter. Does that make sense? And so, and now in the spirit of transparency, you know, other buyers are going to find out about that, and then, you know, so now they're going to expect those same level of discounts. And so that really erodes the integrity of the pricing that you probably set up and said, hey, this is the pricing model we need to support our business. But now our average price is down here.
[00:28:33] Speaker B: Damn. I mean, listen, this is a very common playbook that a lot of sales folks use, right? They'll say the end of quarters, signature thing. And what, what they're doing is they're, they're trying to create urgency. So the company, you know, buys. And there's other ways to create urgency with, with, you know, priority in the queue and launch and reminding them the cost of doing nothing and things like that. But when you start introducing, say, a discount for end of the quarter or to drive that, what you're showing them is a wet towel. All right? And when people see a wet towel, they squeeze it, right, to get water out. And if they think there's water in there, they're just going to keep squeezing. You've done that before, right? You've squeezed wet clothes, wet towel or whatever. And it's like, I think there's some more water in here. Let me squeeze it again. But if you can show a dry towel where it's like, look, this is what it is. These are the terms These are the parameters. Then. Then there's less likelihood that they'll try to squeeze. Is this crazy talk, or are you like, no, Marcos, I think there's something there.
[00:29:30] Speaker C: No, that is exactly right. And in fact, some companies, Marcos, are doing this correctly. Okay, so Tropic put out a report.
It was pricing variability for top suppliers, normalized for volume, everything like that, for the first half of 2025. And they're a company like Datadog.
The pricing variability, the line's almost touched. Meaning, like, they're not making these interesting concessions. I haven't seen, obviously, what their revenue model looks like, but I'm guessing it's not a hockey. Hockey stick. My guess is it's very consistent, you know, very efficient, that sort of a thing. And. And, you know, which. Which is great.
And then there's other ones where the line is anywhere from negative 50 to 62%. I mean, that. That line is massive, right? And so to your, you know, squeeze. An analogy that's the buyer squeezed, water came out. They squeeze again, water came out. And all of a sudden they're like, whoa, like, there's savings to be had here. There's, you know, opportunity to be had here, and they're just going to push, push, push. Which is really interesting because as a seller, you might think that, like, there's a lot of negotiation strategy that comes into play. But, you know, if I'm buying something from you and I'm like, hey, you know, Marcos, like, you know, I. I hear what you're saying. Like, you know, you quote me $1200, like, I. I'll. I can pay 800. That's my budget. And you're like, okay. And all of a sudden, like, oh, interesting. Like, okay, one more thing, right? Whereas if you were to say, hey, you know, unfortunately, I can't. Here's why.
I can do 1100 hours. But, you know, it's. Once again, you know, we have the resources set aside for implementation. So I can only do that if you're ready to go next week, because that way we can get you up live and going there, that sort of thing. All of a sudden, I feel like, oh, okay, like, I asked for this. He responded here.
There's not any more. You know, it's like a dry towel here, especially because there's this contingency that benefits me, and I can move forward there, right? So I do think that there's a lot of signals. Once again, you can call me the boogeyman. That's fine. But once again, you kind of treat. You kind of Created the monster, right? And we're doing it because we've been trained that it, it works.
[00:31:44] Speaker B: I think that's exactly the case here is that the salesforce are creating the monster. They're fighting, they're creating the boogeyman and then having to do all these, you know, unnatural things to try to get a deal done. So for, for me, sometimes I think quota makes crazy behavior. And if you don't have the right guardrails and discipline behind the scenes, then you run into trouble. So a couple of things that I've seen out there that works and tell me if you've seen this come across your desk on the procurement side is discounts that are already predefined and baked in. So for example, hey, if you sign up for a longer term like you know, from month to month to annual or whatever, we're going to give you discount the old fashioned volume ones, right? Hey, you, you, you get a thousand credits or you get a hundred thousand credits, you're going to get a nice break on the unit price if you buy and commit to a lot more. Another one here is if you do a specific bundle, hey, if you buy these products A and B, we're actually going to give you a nice break in buying both of those together, right? So those are some of the things where it's baked. It's understood there's sort of this kind of give, get or reward mechanism of saying hey look, I want this behavior multi products, longer terms, more volume and I'm going to reward for that in my discounting structure. But a lot of the, the sort of, you know, fly by night, you know, hey, I'll give you 25% off if you, if you sign tonight and all these kind of weird things, you want to keep those to a minimum. So structured discounts versus not.
[00:33:08] Speaker C: What do you think of that crazy what you're describing? That's exactly right because what you're describing is, you're describing optionality, which absolute should be a good thing, not flexibility. And there's a big difference between those two things, right? Optionality is very logical. It's very like, you know, data driven. It's like, hey, you know, obviously if you're going to buy ten licenses versus a thousand licenses, there can be a discount there, right? If you're going to commit to a three year versus a one year, obviously there could be a discount there. If you're buying multiple SKUs versus one SKU, very much a logical discount there. The flexibility is where you get into trouble, right? Because then it's like, hey, you quoted me this price for this dollar amount. I'm asking for that same quantity that I'm not changing any variations. All I'm asking for is the price to change. And that flexibility is where, you know, companies start to get into trouble. But when you lack this discipline, when there's exaggerations, when there's, you know, maybe very fluffy ROI numbers, when you are forcing the buyer to kind of haggle with you to get the best price, all of that erodes trust.
All of that erodes credibility.
Having that trust, that credibility and that price and discipline will be a competitive advantage and become increasingly more so in the very, very short future.
[00:34:29] Speaker B: Strong pricing isn't about negotiation tactics. The best companies make the pricing conversation easier long before the buyer ever talks to sales. How do you view brand and pricing?
[00:34:40] Speaker I: Well, I can start with an anecdote that I, Shannon, has probably heard me say thousands of times. I forget where I first heard it, but essentially one of the ways that I think about that relationship is that an rfp, a request for proposal, a typical process that people Follow in the B2B space, an RFP is just a logical justification for an emotional decision that
[00:35:02] Speaker B: you've already made made.
[00:35:03] Speaker I: And so I think where brand comes in is that brand is a piece that is causing you to have that emotional decision. And then the pricing piece and the packaging piece and the features and all those different checkboxes become the logical justification for the brand piece that it's kind of already won your heart over. So it's kind of that heart versus mind mentality. And Shannon and I love to start with the heart and we think the heart is kind of what wins.
[00:35:28] Speaker F: Right on.
[00:35:28] Speaker B: Shan, you, you completely agree with that? I see you nodding.
[00:35:31] Speaker J: Yeah, no, definitely, I completely agree. It makes me think too of I worked at a cybersecurity company called Dashlane for about four years as well in their marketing and creative department.
And you know something that brand also really helps influence is the sort of hidden buyers of your product, especially if you're talking about B2B SaaS, often your buyers aren't your end users and your end users care about different things than your buyers care about. And so Dashlane is a password manager and I think it is still the most intuitive, user friendly, most beautiful, best designed out of our competition. And when you're talking about our buyer was our IT managers and so our buyer is thinking about specs, they're thinking about integrations, they're thinking about SOC2 compliance, they're thinking about all these things that me as like the editorial director in the marketing department, I don't care at all about those things. I care if Dashlane is going to ruin my workflow because it's popping up or it's doing something buggy or it's making my Chrome crash or whatever. And so something that brand also really helps with and like. And you cannot underestimate the power of how miserable that it person's life is going to be if everyone at the company hates the thing that they just shipped to the whole company. Right. And it's, you know, it's not just cybersecurity stuff like this applies to all SaaS software. They're the end user and the buyer are not the same person. And so if they don't want to hear it all day long on Slack. And if I as the end user have an emotional attachment, sorry, Microsoft, if somebody tried to give me teams instead of Slack, I would riot. And that's a brand decision, right? Like, yes, of course. Like, the functionality is slightly different, but it's a brand decision. And so when your end users are actually super influential to your buyer, even if they're not in the conversation, they're not on that sales call. And your buyer isn't necessarily like, talking to you about them.
Like, brand is doing sneaky work for you in the background.
[00:37:47] Speaker B: In that way, brand can carry you a long way. But eventually reality checks in. Often, right. When you're forced to rethink the whole business model, price included. I gotta ask you this because you pivoted like five freaking times in that company. Right. People listening here are probably wondering, how do I pivot? How do I do it right?
What can I learn from someone who's done it multiple times? Can you, if you, if you had to sit in front of a, an operator or founder right now, who's thinking about pivoting their pricing model level, what, you know, one to two, like big lessons you would tell that person on the pivot, the art of the pivot.
[00:38:21] Speaker D: I wish I knew. I can offer some advice, but I certainly won't say that I have a playbook that is going to work every time because it is an art and not necessarily a science. I think the first thing to understand is any. Anytime you're pivoting your product, your business model, and certainly your customer base, you really need to look at pricing as part of that. I think often people kind of think about pricing as something that happens after product afterthought.
[00:38:49] Speaker B: Yeah.
[00:38:50] Speaker D: Or after the delivery or after the thing's been built. And designed. And so you get all these strategies that are really focused on the product itself and the customer and the tam.
But whenever you build a product, you really need to think about how it's being priced because at the end of the day that's, you know, what someone's willing to pay for a product is really what matters. In business.
There's a feedback loop between how you price and what kind of product you're going to build.
And so if you, if you build a product, you build a piece of software that does something, it automatically kind of limits what your left and right lateral limits are for how you can price.
Right? Because if it's, if it is something that like an AI model gets more expensive every time it's used, that, that definitely impacts how you're going to price. Whereas, you know, traditional SaaS software, it's really focused on how many users they're going to be.
And so all those things kind of need to, there needs to be a cross functional team that's thinking about that, or certainly the CEO in a smaller company needs to be really thinking about the product, the pricing and how customers are using that all in kind of one breath makes sense. I think the other thing that's super important when doing a pivot is you really need to understand your customers because the customers are going to drive all of the value for your company. You know, businesses exist to serve their customer base.
And I think a lot of CEOs and certainly startup founders, they run into a brick wall and then they pivot, looking for the next door to go through without really understanding what the customer is trying to accomplish or who their ideal customer is. And you're just looking for someone who's trying to buy your product without actually thinking, how do I serve this customer better? Is it the problem? Is it the problem with me? Is it with the product? Is it with the customer? And so all of that has to be wrapped up into how you pivot, why you pivot, where you pivot to.
[00:40:49] Speaker B: It's, I can't agree more with that. I cannot agree more. There is, most of the time the pivot is typically TAM and product led, where you really need that pricing. When you pivot, you're pivoting the economics too. And so what you put in and the pricing on the other end, what customers want to pay, how they want their problem solved, what parts of their problem they're willing to pay for, which ones they're not, all those things are factored into the pivot, but tend to come later after the pivot is already in motion and done. I think we need to pull that stuff up. As you're evaluating if you should pivot and put that into the equation. I think you're. You're spot on with that, Evan.
[00:41:26] Speaker D: Yeah, I mean, something. Something I've found through trial and error is if you really want to understand what your customers think about you, don't change your product, change your pricing.
Because the moment you change your pricing and you charge them differently, there's going to be someone on the other end of the phone who's going to call you up and tell you exactly what they think about the product.
[00:41:45] Speaker B: No missing words.
[00:41:46] Speaker H: No.
[00:41:47] Speaker B: They'll say exactly what they feel about that. That is very true. You change your price, you'll get the real. The real reaction and not just what they think of you, what they value, what they don't.
I think that's. That tells all right. For me, pricing is. Is truth and nothing more. Pricing is truth, and that's what we build pricing IO around. Not guesswork, not gut feelings, just what your customers and what your numbers are telling you. These were some of the biggest lessons from last season. This season, we're going to dive even deeper. Drop a comment below to let us know which lesson stuck with you the most or what pricing challenges you'd like us to tackle next. And remember, it's time to stop guessing and start growing.
