Latest / Profit With A Plan / Ep329 Pricing Mistakes That Are Costing You Millions

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Ep329 Pricing Mistakes That Are Costing You Millions · Profit With A Plan

• 0:21
  Marcia Riner | Profit Booster®: In this conversation, Dan is going to break down why pricing is rarely the math problem, but almost always the strategy problem.
• 0:31
  Marcia Riner | Profit Booster®: You'll hear how to monetize AI features without confusing your customers, and why the most important pricing decisions have absolutely nothing to do with numbers on the page.
• 0:42
  Marcia Riner | Profit Booster®: So, if you're a SaaS founder, or product leader, or just anybody responsible for pricing decisions, this podcast is worth a listen. So join in on Profit with a Plan.
• 0:56
  Marcia Riner | Profit Booster®: Hey, entrepreneurs, are you working too hard for too little profit? Well, welcome to Profit with a Plan podcast, where we help you scale smarter, increase profitability, and build a business that's worth more, whether you keep it or sell it.
• 1:10
  Marcia Riner | Profit Booster®: I'm Marcia Reiner, Business Growth Strategist and the Profit Booster behind Infinite Profit.
• 1:16
  Marcia Riner | Profit Booster®: Whoop! As I get my little alarm going off, we help countless entrepreneurs turn their businesses into highly profitable and sale-ready assets, so they enjoy more income now and a bigger payday later.
• 1:28
  Marcia Riner | Profit Booster®: So join me for practical strategies, expert insights, and proven steps to make your business more profitable, more valuable, and built to last.
• 1:37
  Marcia Riner | Profit Booster®: Today's episode is sponsored by Infinite Profit, where we don't just talk profit, we deliver it.
• 1:43
  Marcia Riner | Profit Booster®: Alright, so if you're tired of, flat revenue and marketing that just doesn't seem to pay off, well, the new Profit Booster Growth Map might be for you. In just a few minutes, it shows you exactly how to bring in more qualified clients and plug those profit leaks that are seamlessly eating your cash.
• 2:02
  Marcia Riner | Profit Booster®: So go get your growth map right now at ProfitBooster.biz, and start turning missed revenue into real money.
• 2:09
  Marcia Riner | Profit Booster®: Alright, let's jump into today's episode. My guest today is Dan Balkowski, the founder of the Chief Pricing Officer at Product Tranquility.
• 2:21
  Marcia Riner | Profit Booster®: He is the go-to expert for B2B and SaaS companies that want to get their pricing right.
• 2:28
  Marcia Riner | Profit Booster®: Dan works with high-volume SaaS CEOs who are launching new products and need pricing and packaging strategies that actually support growth instead of slowing it down.
• 2:39
  Marcia Riner | Profit Booster®: He brings a rare mix of experience from both B2C and B2B markets across scrappy startups and large public companies.
• 2:48
  Marcia Riner | Profit Booster®: He gives that practical, real-world view of what pricing… what makes pricing effective, what customers really value, and how companies can stop losing revenue to confusing offers and outdating pricing.
• 3:02
  Marcia Riner | Profit Booster®: Dan works, dan's work is about clarity, simplicity, and building pricing systems at scale. So, if you've ever wondered whether pricing is helping you or holding you back.
• 3:14
  Marcia Riner | Profit Booster®: You're about to get the masterclass. Alright, Dan, welcome to the show, thanks for coming on!
• 3:19
  Dan Balcauski: Thank you for having me.
• 3:20
  Marcia Riner | Profit Booster®: Alright, this is, this is an interesting topic. I know that, most business owners
• 3:27
  Marcia Riner | Profit Booster®: don't really understand pricing, so I think we're gonna get into this in the details, and I love it. But before we do this, how in the world did you find pricing as your, secret weapon?
• 3:41
  Dan Balcauski: Oh, man, well, I think it goes back to when I was 5 years old, I was really intrigued by the pricing of juice boxes at the grocery store. I'm kidding.
• 3:50
  Marcia Riner | Profit Booster®: That lemonade, it wasn't 25 cents.
• 3:52
  Dan Balcauski: Exactly.
• 3:52
  Marcia Riner | Profit Booster®: 46 cents.
• 3:54
  Dan Balcauski: Exactly. I only knew about cost plus pricing at that point. I've evolved since. No, I've spent 20 years of my career all in the software world, starting out as an engineer, moving into engineering management and product management, and learned really early on that most companies focus mostly about acquiring new customers, shipping features and using that to acquire new customers, and spent
• 4:15
  Dan Balcauski: very little time on how to capture that value that they were delivering, and that insight crystallized during my MBA internship for a very successful Silicon Valley startup, where, on the CEO's desk, I… they asked me to lead a freemium pricing project that the CEO happened to be looking at, among a couple other projects that summer, and through my research, I under…
• 4:35
  Dan Balcauski: I uncovered that that…
• 4:38
  Dan Balcauski: popular pricing model only works under very specific and surprisingly rare circumstances, and so, you know, over time, I got asked to help out in different areas of other pricing, and realized that this was a widespread issue, and today, I have the privilege of helping B2B SaaS CEOs transform pricing from confusing liability into a strategic advantage, whether it's helping them
• 5:00
  Dan Balcauski: Uncover millions in revenue through revenue leakage, or helping them establish, you know, pricing processes they could use going forward for their new product ventures?
• 5:09
  Marcia Riner | Profit Booster®: Love it, love it. Okay, so pricing is really, a tactical situation that I feel.
• 5:17
  Marcia Riner | Profit Booster®: And I think that that's something that a lot of, companies miss today, right? I mean, they just come out and go, okay, well, maybe they're smart in saying, well, here's our cost of goods sold, right? And here's our, you know, fixed cost, let's price it in with a margin of X. Or they just come out and go, oh, well.
• 5:36
  Marcia Riner | Profit Booster®: we can sell it for this. So there's that, you know, that big gap, but they don't think about all the nuances in there. How do you bring that reality to the customer?
• 5:48
  Dan Balcauski: Well, I think you've mentioned a couple of things in your question, which is, you know, if you have a new product.
• 5:56
  Dan Balcauski: You don't necessarily know what it's necessarily going to cost you to serve, or maybe if it's particularly innovative, there's not…
• 6:05
  Dan Balcauski: direct comparables that you could look at in the marketplace. So often, you know, we talk about a lot of these companies today in the world of these new AI capabilities. They're like, hey, this thing can do something that your computer's never been able to do before for you.
• 6:22
  Dan Balcauski: Actually, we don't know how much it's gonna cost you to run this either, so there's a big question of maybe in some of those other traditional businesses, you're selling Coca-Cola, I know how much water and flavoring and sugar cost me as my fixed inputs, and I've been doing it for 100 years.
• 6:40
  Dan Balcauski: Oftentimes, that's not really the situation that we're running into, and so…
• 6:45
  Dan Balcauski: But as you mentioned, there's often just a lot of, you know, guessing or…
• 6:52
  Dan Balcauski: gut reaction of, like, we think we could charge X.
• 6:56
  Dan Balcauski: And I think one of the…
• 6:58
  Dan Balcauski: misconceptions about pricing is, oh, it's all black box magic voodoo, nobody knows what they're doing. And in the absence of that, there's an old cliche of, like, if nobody… if nobody has data, we're going with my opinion.
• 7:12
  Marcia Riner | Profit Booster®: Right, and your opinion matters, right?
• 7:14
  Dan Balcauski: Well, well, in the context of maybe the highest paid person in the room saying that, not my opinion specifically, but I think that there are… look, there's definitely an art and science to this, and I think a lot of people think it's way more art than there is science. It'll always be art, because within this world, we're dealing with
• 7:33
  Dan Balcauski: humans and psychology and their perceptions of value, and so there are ways to measure that, but there will always be some amount of art to it, but in the last, I would say, 50 years, there's been plenty of research to back that up with appropriate data-based methods to unwind that. So we can go a lot of different directions from there, but hopefully at least it gives a little bit of sense of my overview of where I play in this
• 7:56
  Dan Balcauski: broad space.
• 7:57
  Marcia Riner | Profit Booster®: Love it, love it. Okay, so, you know, you brought up a couple of points in here. I think that I love the fact that it's, you know, the art versus science that comes into the pricing strategies that we want to employ.
• 8:10
  Marcia Riner | Profit Booster®: And with the craziness of technology that's all really coming out, there's so many different directions we can go, and the always unknown that gets in the way. But thinking about this in a… in a matter of, okay, I'm a young company, I've… I've put together this thing, right?
• 8:28
  Marcia Riner | Profit Booster®: And, I'm not new to the market, and I'm obviously not the only one selling this. How do we…
• 8:36
  Marcia Riner | Profit Booster®: how do we price that without racing to the bottom, I guess? Because there's always the cut cost, you gotta be the lowest, and so on.
• 8:44
  Marcia Riner | Profit Booster®: I know there's alternatives to that, but how do we price it so we're not racing to the bottom?
• 8:49
  Dan Balcauski: Yeah, early stage… I think this is probably not talked about that much, so there's a concept of price positioning, and I think especially for early-stage companies, this is maybe the most important strategic
• 9:05
  Dan Balcauski: decision, that applies to the pricing realm, which is, where are we going to play? And so, I might use, for example, the car market, right?
• 9:16
  Dan Balcauski: a Toyota Camry and a Lamborghini are both cars, but they occupy very different spaces in the minds of buyers, and in fact, like, if you're going out and buying a car, my sense is that you're probably not comparing one against the other. You're probably in very different markets, and so…
• 9:36
  Dan Balcauski: You know, there is a core decision when starting a company or launching a product, saying, who do we want to be? Who do we want to be for? You know, do we want to be…
• 9:46
  Dan Balcauski: everybody switch between here and go, you know, do I want to be Rolex or Timex? Both tell the same time, but I'm going to be competing in very different markets, my buyers are going to compete in very different things, and we have something to drive value in one element or the other in how we're going to make our decision. And that's a choice, and so when you're… especially, you know, as we were talking before, you know, you're going into maybe an innovative space.
• 10:10
  Dan Balcauski: or a space where you don't have knowledge of your direct cost to serve. That's a place where you say, hey, are we gonna be high-priced? Because that's going to be
• 10:17
  Dan Balcauski: in… That decision is gonna invite the comparison of who are we being compared to.
• 10:22
  Marcia Riner | Profit Booster®: Hmm…
• 10:23
  Dan Balcauski: And then it's about differentiation. So you talked about this race to the bottom.
• 10:29
  Dan Balcauski: And so we need to understand what is our… competitive differentiation.
• 10:35
  Dan Balcauski: I think many folks, if you went to college, or maybe in high school, you maybe took an equivalent of an Econ 101 class, and there was these neat supply and demand graphs.
• 10:46
  Dan Balcauski: And…
• 10:47
  Dan Balcauski: Those are good, but you probably only learned about, really, two market structures, and they kind of glossed over this, or maybe you've forgotten.
• 10:56
  Dan Balcauski: they always talk about the perfectly competitive market. I'm selling soybeans, or orange juice, or gold.
• 11:05
  Dan Balcauski: which is a totally commodity undifferentiated market, versus… oh, there's then the monopoly pricing market, I'm the only vendor in the space, and how those two differ. But there's a broad.
• 11:15
  Marcia Riner | Profit Booster®: And the huge gap in between, right?
• 11:18
  Dan Balcauski: There's a gap in between, and the problem is, is that the vast majority of companies are in the middle of those. And especially in my B2B software world, you might describe them more as an oligopoly market. In an oligopoly market, there may be…
• 11:35
  Dan Balcauski: 3 to, say, 15 players in my space that do what I do.
• 11:41
  Dan Balcauski: And…
• 11:43
  Dan Balcauski: all of them are going out with different messaging. You know, they… at a high level, if you look at their landing page hero, they kind of might blend together, but if you look at their products, who they're trying to serve, the features and capabilities.
• 11:57
  Dan Balcauski: They have differentiation from each other, and so you want to be clear
• 12:02
  Dan Balcauski: And be able to connect that differentiation, which is part of your core product positioning.
• 12:09
  Dan Balcauski: then back into pricing and packaging. I'm a firm believer your positioning defines your product and packaging, and we should be able to… our packaging should help us tell that story. So, these are things like, I want to…
• 12:25
  Dan Balcauski: be able to describe, if I have multiple offers on a pricing page.
• 12:29
  Dan Balcauski: Who these things are for, who these offers are for, and why they matter, and why they're different from each other, to make that choice easy for my customers.
• 12:38
  Dan Balcauski: And if I create that choice architecture correctly.
• 12:43
  Dan Balcauski: I then can change that conversation from…
• 12:47
  Dan Balcauski: hey, do you want to buy from me or not? To which one of these do I want to buy? Because we have… we solve different problems and have organized as such, so it changes that frame. And so I think that is one of the key lessons for folks who are in this oligopoly market. They're not, you know, pure monopolists, they're not pure commodity.
• 13:06
  Dan Balcauski: But then they…
• 13:08
  Dan Balcauski: frame the conversation with the buyer such that, you know, we often talk about good, better, best, about 70% of B2B SaaS pricing.
• 13:16
  Dan Balcauski: Vendors have this choice architecture, but that frames a conversation of which one is the best one for you versus you trying to compare each feature on every plan to these 10 other competitors' plan, and that really helps a lot in avoiding that race to the bottom.
• 13:30
  Marcia Riner | Profit Booster®: Love it. Okay, so, so to dissect that a little bit, it sounds like
• 13:35
  Marcia Riner | Profit Booster®: The pricing comes after you have
• 13:39
  Marcia Riner | Profit Booster®: A figured out who your ideal audience is, and B, what offer you're going to make them, or what product solution, you know, piece that you're going to make them, and then you start thinking about pricing. Is that kind of the methodology you use when you're trying to price something?
• 13:57
  Dan Balcauski: Yeah, so I would say, you know, this conversation would differ for companies at different stages of maturity. I would say early stage.
• 14:06
  Dan Balcauski: you know, that price positioning question you have to define, right? And, you know, just another great example I think we're all familiar with, Southwest Airlines, the only airline that's been profitable through the course of its history. Every other one has gone bankrupt probably multiple times in my lifetime.
• 14:22
  Dan Balcauski: But they… their price positioning was, hey, they started in Texas, and they said, hey, we know business travelers are having to go from Houston to Lubbock. Right now, they're taking their cars or a bus.
• 14:33
  Dan Balcauski: Can we make it cost competitive?
• 14:35
  Dan Balcauski: with their own pers… them taking the time to drive, right? And so they made that decision early, that that was the differentiation they were going to compare on.
• 14:46
  Dan Balcauski: But then… you know, I think the second step beyond price positioning you mentioned is
• 14:52
  Dan Balcauski: You need to go out and sell something, and most early-stage companies
• 14:57
  Dan Balcauski: are in value discovery mode for a while. So, what does that mean? They have a hypothesis of, like, hey, this is a problem that needs to get solved, and we think we have a solution to solve it, and they need to go out and see if people buy that approach.
• 15:15
  Dan Balcauski: So the price there is always, you know, through any stage of company maturity, pricing is always part of the conversation, but it's not generally what's going to kill you at those earliest stages. Because it doesn't matter what your price is, if you don't actually solve a problem, if people don't see value in the solution.
• 15:34
  Dan Balcauski: then it's… or you can't reach or talk to those customers, it doesn't matter what your pricing and packaging is. So, very early stage, it tends to be, are we actually solving a problem people care about? At that stage, you want to generally, I would say, keep things simple, right? Don't overcomplicate it.
• 15:50
  Dan Balcauski: But also charge something, because as you go out and do that value discovery, you want to… if we think about the human brain, we might say that value is the pleasure and the price is the pain, and in order to get really valid market feedback, we want to have both, right? Right. So, I think it's generally a mistake
• 16:09
  Dan Balcauski: for folks to go out and say, well, we're still early, so we're just… we're getting users, not customers. We're just giving everybody the product, right? You're not really getting a good market signal in that case.
• 16:20
  Dan Balcauski: And, again…
• 16:22
  Marcia Riner | Profit Booster®: I think that's important to have that market feedback that tells you, hey, you know, I always… I always thought, well, pricing to get awareness right, start to get activity, start to get users right, but then slowly increase that price to a point where you see
• 16:39
  Marcia Riner | Profit Booster®: people are still willing to pay for it, but, you know, what's that price that they stop willing to pay for it, right? That it's no longer valuable in it. And I think you keep using the word value, which I want to go into next, but I mean, am I on that point that, you know, you're thinking.
• 16:57
  Marcia Riner | Profit Booster®: Well, where do we price it based on, so we can get that market feedback?
• 17:02
  Dan Balcauski: Yeah, so you, you generally have an idea…
• 17:05
  Dan Balcauski: at least early stage, because you mentioned, you know, different customers or ICP, you know, you usually have a, I would say, ICP hypothesis, much like you'd have a positioning hypothesis. And so, you want to create something such that you can go out and get validation on that hypothesis.
• 17:25
  Dan Balcauski: But just understanding you're probably going to be wrong, and there's going to be some iteration, right? And changing the price point can be part of the iteration. But I'd also encourage folks to do is something like
• 17:37
  Dan Balcauski: having, you know, if we think about, there's multiple elements of packaging, but one of them is your bundles or offer configurations. You alluded to it before, and sort of good, better, best.
• 17:48
  Dan Balcauski: is going out with a couple of offers out of the gate, such that you have the thing where you're like, look, this is the no-brainer basic offer, I don't expect to get any resistance.
• 18:00
  Dan Balcauski: But then I also have the higher-priced one.
• 18:03
  Dan Balcauski: That is stretching my comfort level a little bit in even saying it out loud sometimes. And, you know, often, I think there's a anchoring bias that companies have. We often talk about anchoring with consumers, but companies often have an anchor to, like, oh, I don't want to ask for this thing.
• 18:20
  Dan Balcauski: But that structure, when you're going out and doing that testing, instead of just moving one single price point, allows you to say, okay, I've got this thing, I think it's a no-brainer, you know, it'll get me some validation because I'll be able to get customers. And I've got this thing that's maybe a little bit outside of the range of my comfort.
• 18:36
  Dan Balcauski: And now I have multiple dimensions I can play with.
• 18:40
  Dan Balcauski: to get that price visibility, because you may be surprised how many folks take… just don't even blink and sign on the dotted line. There's the ultimate, there's a well-known, theory in economics called the winner's curse, right? Which, you're like, if I, give someone an offer, I say, hey, this is going to be a million dollars, and they go, great, give me the contract, let me sign it right away. You're like, oh no, did I just give it away?
• 19:03
  Marcia Riner | Profit Booster®: I'm charged too.
• 19:04
  Dan Balcauski: I should've charged 2. I should've charged 10! They signed so quickly, right? So, you know, that allows you to stretch that and get that feedback in a little bit more structured way. Does that help?
• 19:14
  Marcia Riner | Profit Booster®: And I like this. This sounds like a theme for you, to have a good, better, best, or a low offer, a medium offer, and a high offer, because you want to give your buyer choices, right? They don't want to know that this is the only one, because if there's…
• 19:28
  Marcia Riner | Profit Booster®: You know, there's that theory that, you know, oh, don't confuse them because a confused buyer doesn't buy, but you're not confusing them, you're giving them choices
• 19:36
  Marcia Riner | Profit Booster®: of, here's package A that includes this, or package A is the bare minimum, do-it-yourself kind of model, package B has got some support and more bells and whistles, and package C happens to have everything in the kitchen sink in it. And I think that's where you're testing
• 19:55
  Marcia Riner | Profit Booster®: with the buyer what they want to do, right? One comes with, you know, it's all done for you, or so on, and I think that's really important in having those opportunities for the buyer in your pricing structure.
• 20:11
  Marcia Riner | Profit Booster®: Because, like you said, you could… they could all be buying the done-for-you stuff, or the big package C.
• 20:17
  Marcia Riner | Profit Booster®: without you realizing, and you were thinking, package A was the… the one that's gonna get them in the door.
• 20:23
  Dan Balcauski: Yeah, exactly. So you're… you're giving them a choice which frames the conversation from, will I buy to which one will I buy, which is.
• 20:32
  Marcia Riner | Profit Booster®: It's already taken that assumption out, right? That you already know they're gonna buy, or you think they're gonna buy, so now which one? A, B, or C?
• 20:40
  Dan Balcauski: And it also gives you a chance to frame the value versus just working with a, hey, this is a thing, this is what it costs. Now you can say, oh, this is… this is this, this is more expensive, but here, let me tell you why it's more expensive, this is all the things that you get.
• 20:56
  Dan Balcauski: And so it allows you to also validate that value in the same conversation. Also, we were talking before about ICP hypothesis. So, when we think about a well…
• 21:07
  Dan Balcauski: Constructed set of bundles or offer configurations.
• 21:12
  Dan Balcauski: Fundamentally, we should be thinking about building those for a particular customer segment.
• 21:18
  Dan Balcauski: So…
• 21:19
  Marcia Riner | Profit Booster®: Know your customer.
• 21:20
  Dan Balcauski: In… in that… conversation. We say, well, a lot of our customers who
• 21:27
  Dan Balcauski: are like X by Y, and this is why they get validated. But other customers really like this, because it has these capabilities, right? And even, you know, we went through a simplifying assumption before the Camry versus the Lamborghini, but, you know, even if I say, well, I want the Camry, right? There's… well, there's the base trim, and then there's the sport package, and then there's the four-wheel drive, and there's the, you know, electric motor version, right?
• 21:50
  Dan Balcauski: So, there's… there's different choices within that, you know, it could be almost overwhelming. I'm actually in the car market right now, and it's… Oh, no!
• 21:59
  Dan Balcauski: I'm waiting for an AI assistant to make the shopping prices better, because, let's just say, you know, probably a shared experience, going on the car lot naive is the last thing anybody wants to do.
• 22:10
  Marcia Riner | Profit Booster®: Oh my god.
• 22:11
  Dan Balcauski: I apologize to all of my…
• 22:13
  Marcia Riner | Profit Booster®: What can I do, Dan, to get you into this blue car today, right?
• 22:17
  Dan Balcauski: Exactly, exactly. Do you need that undercoat? Gotta have that undercoat.
• 22:21
  Marcia Riner | Profit Booster®: Yeah, and then, you know, funny enough, let's stay on this point for just a second.
• 22:28
  Marcia Riner | Profit Booster®: This is probably one of the worst experiences buyers have, right? So it's kind of that dentist fear, you know, going onto the car lot, I've made my decision, I want this blue car with this trim, and the price is X, and I'm comfortable with that.
• 22:45
  Marcia Riner | Profit Booster®: Then it goes back into that back office where they start asking, you want this, you want that, here's the, here's the, you know, all these things that end up pushing you back.
• 22:55
  Marcia Riner | Profit Booster®: how does that… how does that play into the… into your pricing program, where, like, companies like, CarMax says flat price, that's what it is, you know, whatever, and then you get those negotiators that try and jack up all those silly things on the back end?
• 23:13
  Dan Balcauski: Well, I think you brought up a really great point there with CarMax, because what they saw, you know, this goes back to the point about price positioning. What they saw was there is a value differentiator, there are people in the market who…
• 23:28
  Marcia Riner | Profit Booster®: I don't want to hang on.
• 23:29
  Dan Balcauski: Okay, want to pay a fair price.
• 23:31
  Dan Balcauski: But don't want to deal with the BS of going on the car lot, and feeling like I'm in an adversary… like I'm being interrogated, and I'm high-pressure sales.
• 23:42
  Dan Balcauski: And… but, you know, I guess the other, the other kind of corollary is there has been a significant backlash in, recent, even the recent year, about add-on fees, right? We were making this joke about, okay, you think you're done with the sale, and then you get to the financing office, they try to sell you all these other, warranties and undercoating.
• 24:00
  Marcia Riner | Profit Booster®: Exactly!
• 24:00
  Dan Balcauski: else, and we see…
• 24:02
  Marcia Riner | Profit Booster®: It takes you 4 hours to get out of that, right?
• 24:04
  Dan Balcauski: And we've seen that as well with, even in a maybe more relatable example, Airbnb just went through this. Brian Chesky, CEO, founder of Airbnb, basically went out on Twitter and said, hey, like, we screwed up.
• 24:17
  Dan Balcauski: We realized that when you saw that rental, a vacation rental for $100 a night, and then you got to our checkout page, and there was a $900 cleaning fee, and a, you know, a $500, you know, safe…
• 24:29
  Marcia Riner | Profit Booster®: Security charge.
• 24:29
  Dan Balcauski: security charge, that is a really negative buying experience. And so we have to be aware of that, because this is also where the art and science comes in. Like, and we've all dealt with this, even my beloved Southwest has just gone and said, we're getting away with the bags filing.
• 24:46
  Marcia Riner | Profit Booster®: They're charging you for seats now.
• 24:48
  Dan Balcauski: well, we're charging for seats, we're gonna charge you for bags, I wish them well, I probably… I think it's a strategic mistake, they have their reasons. But we do have to be sensitive to this, and I think this is an area where, you know, we may talk about
• 25:02
  Dan Balcauski: you know, price points, right, or these different sort of designs, but I think nothing…
• 25:07
  Dan Balcauski: In this process, I could…
• 25:10
  Dan Balcauski: emphasize more, then you need to talk to your customers, and I think this is where folks have this idea of, like, you cannot talk to… you cannot talk to customers or prospects about price. There's a way to do it. You do not want to do it in a negotiation setting, in a, hey, we're trying to get you to buy this thing, but you can set up customer interviews or prospect interviews.
• 25:31
  Dan Balcauski: Were you…
• 25:33
  Dan Balcauski: Talk about the value of your product, you ask them, understand the problems they're trying to solve, especially folks that have recently been in that market.
• 25:40
  Dan Balcauski: what were their decision-making criteria, and then once you've described your product, you can have conversations about, like, okay, you know, if we present it like A or B, which would you prefer?
• 25:51
  Dan Balcauski: And, you know, for the purposes of example, I'll just allude to all the details and just say, you know, economically for the year, it would cost you the same thing, but they're presented in different ways.
• 26:01
  Dan Balcauski: the pure rational homo economicus, you know, this god-like being that doesn't exist.
• 26:08
  Dan Balcauski: would say, hey, there's no difference in the price paid between those two, they should be completely indifferent between those choices, and you will get very different reactions from the humans that you talk to, because they will say, well, look, like, if you price it like this, I understand what you're trying to do, but that creates a bunch of uncertainty, because this implies some blah blah blah.
• 26:28
  Dan Balcauski: And you want to listen for that, because that's probably what's going to be going through the mind of your prospects, but they're not going to tell you about that during a sale. And so, you can have very upfront conversations with them to say, hey, how does this… how does this land with you, right? And there's better and worse ways to sort of ask those questions. We can get into it if you want, I've covered them in detail in other places, but, you know, you absolutely can talk to your customers. And look, I think this
• 26:53
  Dan Balcauski: This is one misconception I would love to clear up generally across all industries, but you don't have a choice of if you're going to talk to your customers about price, you only have a choice about when.
• 27:05
  Dan Balcauski: Correct. So, do it as early in your process as possible, meaning, like, hey, we're thinking of building this product, this is how we're thinking… this is what we're thinking of building, is that valuable? Here's how we're thinking of pricing it, like, does that… would you be a buyer? Why? Why not? Because your alternative is to wait till the… you've spent…
• 27:23
  Dan Balcauski: hundreds of thousands or millions of dollars of investment to build this thing, and now you have a poor salesperson on the call who first time ever has to talk about pricing, that's never been validated or spoken about with a customer before. So, you know, which situation do you want to be in? And obviously, that's two ends of a spectrum, but I feel folks.
• 27:40
  Marcia Riner | Profit Booster®: You're like.
• 27:40
  Dan Balcauski: well, we can't talk to people about price, but it's like, well, you will. Like, if you ever want to sell it, you will talk to them about price. Yeah.
• 27:47
  Marcia Riner | Profit Booster®: So I know that surveys are difficult, and getting that honest feedback from your customer, or your ideal customer, is sometimes challenging, or in many cases, previously, expensive to go through the survey company and have this and, you know, do all that kind of stuff.
• 28:06
  Marcia Riner | Profit Booster®: How do you feel about, you know,
• 28:09
  Marcia Riner | Profit Booster®: to put it kind of in a real basic kind of analogy, A-B testing, right? You know, you do… here's, you know, a certain segment of the population gets this pricing, and a certain segment of the population may get a different model of pricing that does that. I mean, is… are you… is that, like, taboo in the pricing structure?
• 28:31
  Dan Balcauski: It is…
• 28:33
  Dan Balcauski: It works in B2C scenarios. In B2B, it breaks down quickly. And there's a bunch of reasons why, but one reason is, anytime you get sales involved, then… so say you have public pricing and packaging, and different
• 28:50
  Dan Balcauski: people going to the website see different versions. The salesperson gets on the phone, they don't really know what the customer saw.
• 28:56
  Dan Balcauski: So, so, and a lot of this is about trust, right? So, if… if I'm changing pricing and packaging, and let's say, right, I mean, those, even those systems that show you
• 29:06
  Dan Balcauski: version A one day, and maybe they drop you a cookie, so you're supposed to always see that version, but then you log in from your phone, you see, you know, when you're at home, you're like, you see another version, all of a sudden, you may be like, wait, are they… they're trying to pull one on me? Now I'm confused, now I'm distrustful, now I move on to the next vendor. Also, yeah, also sales cycles.
• 29:26
  Dan Balcauski: Because in a B2B cont… you know, usually most consumer purchases are not…
• 29:31
  Dan Balcauski: long considerations. Lengthy. Yeah, not lengthy, but, you know, average B2B sales cycle might be 30 days, 60 days, 90 days, even more. And so then you run the risk of them intercepting a test, or you're in a long sales cycle with your champion.
• 29:47
  Dan Balcauski: and they… they're about to bring a proposal to their boss, and their boss does the swivel check. Well, let me pull up their pricing. Wait, this is different from what you're showing me. Now your team has invested all this money and time into… so, there's…
• 30:00
  Dan Balcauski: other reasons, but those are generally why it tends to not work in B2B.
• 30:04
  Marcia Riner | Profit Booster®: So, so, okay, so we'll stick with the, you know, the responsible thing to do, which is talk to humans, right, that are our customers, or, you know, soon-to-be customers, or so on, that might want to have that conversation.
• 30:19
  Marcia Riner | Profit Booster®: So let's… let's talk, let's go a different path here, because you've given us a lot of insights, and I want to kind of address the… there's an elephant in the room, especially as, you know, we head towards the end of the year, and, you know, Black Friday, and sales, and sales, and sales, and discounts, and coupons, and discounts.
• 30:39
  Marcia Riner | Profit Booster®: from my understanding, I don't think business owners realize
• 30:44
  Marcia Riner | Profit Booster®: How damaging that is when you have that discounted sale.
• 30:50
  Marcia Riner | Profit Booster®: How does that play into pricing strategies that you're talking with your customers about?
• 30:58
  Dan Balcauski: It varies. If folks remember, there was a change of CEO at the retailer JCPenney back in, like, 2012. They brought over a guy, I think his name was Ron Johnson, from… he was running all of Apple retail.
• 31:16
  Dan Balcauski: And JCPenney was very much known as this, we run promotional discounts, etc, and he said, we didn't need this at Apple, we had a very consistent, you get one price, there's no discounts on any of our products, so I'm removing this at JCPenney, and their revenue plummeted.
• 31:35
  Dan Balcauski: And so, The Economist might look at that and say, well, that's odd. But I was actually rereading, there's a Nobel laureate at University of Chicago wrote a great book, Richard Thaler, called Misbehaving, and so he talks about
• 31:48
  Dan Balcauski: This distinction between, there's basically a transactional utility. So.
• 31:56
  Dan Balcauski: folks have either a positive… either… I went to… I went to the used car lot and I got screwed, or I got this great bargain this weekend, right? And so that is a part of the utility we get from a purchase that is not usually found in the sort of rational
• 32:13
  Dan Balcauski: you know, calculations. I say all that to say they can be… promotions can be useful.
• 32:20
  Dan Balcauski: If applied in the right context, if applied consistently with how your buyers like to buy, the JCPenney buyers were very… got a lot of transactional utilities for, oh my god, this sweater is usually 50 bucks, and I got it for $35, like, you know, that says something about me and my shopping skills.
• 32:37
  Marcia Riner | Profit Booster®: They wear it, they wear it like a, like a, like a champion, right?
• 32:41
  Dan Balcauski: Exactly, exactly. In most B2B contexts, that rarely pans out, and there's been some good studies trying to look overall at industries, do seasonal promotions actually have net positive benefits?
• 32:59
  Dan Balcauski: The data's way murkier than you would expect.
• 33:02
  Marcia Riner | Profit Booster®: I can imagine it's.
• 33:03
  Dan Balcauski: So, I would say, you know, in general, those things just tend to pull demand you would have got anyway forward, so you see this, you know, a little bit of bump, and then the next period, you see a lag after the promotion goes away. So, I would say tread carefully, unless maybe you're JCPenney or in those type of retailer.
• 33:21
  Marcia Riner | Profit Booster®: Thank you, because I addressed that problem with a lot of my clients,
• 33:26
  Marcia Riner | Profit Booster®: you know, I had one client that was selling a solid product and was constantly trying to boost sales through discounts and coupons, and, you know, his margin was really high, so he thought he had enough room with it, and I said, but you're training your buyers
• 33:44
  Marcia Riner | Profit Booster®: To stock up during promotional time, and then they don't buy during retail times.
• 33:50
  Marcia Riner | Profit Booster®: And then you've got this peak and valley that's going on constantly, and not a steady flow of manageable or dependable income that's coming through. And that's where I think those sale prices, besides, really, you're not given a 10% off, you actually end up, you know, when you look at the numbers, it's more like a 15% or 17% deduction.
• 34:13
  Marcia Riner | Profit Booster®: When you look at all the abilities of what it does to your margins. But that's a whole other conversation. I just think that they don't realize that that sale mentality, you're training your buyers to.
• 34:25
  Dan Balcauski: Yeah, every…
• 34:25
  Marcia Riner | Profit Booster®: And we have this in B2B as well. Sales folks usually have some amount of discounting, and anyone who's ever bought any software or anything B2B, you know that calling the business at 11 PM on December 31st is going to be your best deal of the year.
• 34:41
  Dan Balcauski: There's a company out there, I think it's Chili Piper, they had a pretty good blog where they don't do any discounting, and one of the things was like, well, you know, we could… the major idea is that in B2B sales, you know, if we're trying to close deals end a quarter, right, we start extending discounts, and that motivates people to buy.
• 34:59
  Dan Balcauski: But what they've actually seen is the same buyer behavior, even without discounts. So what we think may be happening, and again, I would wait to get more rigorous studies, but I think it's the… we've trained B2B buyers to buy software or hardware or whatever at the end of the quarter.
• 35:17
  Dan Balcauski: And there's a inverse implication that discounts are driving that, versus, yeah, we use discounts, but now we've just created this behavior, so it's actually not impacting it anymore, so you might just be giving too much away and attributing the reason people bought was because you extended them that last-minute discount. So, it's an interesting world, and I, again, say tread carefully, because as you pointed out, it could have significant impacts on your margins.
• 35:40
  Marcia Riner | Profit Booster®: Well, Dan, you've given us… you've given us a lot of thought. I mean, pricing is not an easy topic, and it's got so many variances, and depending on
• 35:50
  Marcia Riner | Profit Booster®: you know, what you offer, whether it's a physical product, a SaaS or a service, or it's a physical service provided by a person. I mean, there's so many different variations in how you think on pricing.
• 36:04
  Marcia Riner | Profit Booster®: But it is really important to sit down and review and think of your pricing on a regular basis, and, you know, consult with somebody who understands
• 36:16
  Marcia Riner | Profit Booster®: the marketplace and the economy and the needs of it, as well as interviewing your human customers, right, to get that information. So knowing that this is a big, gigantic project that's probably not just done randomly and guessing, hey, they sell it for this, so we're gonna sell it for $5 less.
• 36:35
  Marcia Riner | Profit Booster®: You know, it just seems like there's so much more for it. So, with that in mind, how do listeners find out how they can price better, not leave money on the table, and make sure that they're meeting the needs of their customers without, you know, without leaving money on the table? Where can they find it?
• 36:54
  Dan Balcauski: Well, I think they've made a good first step in listening to this conversation so far. If they want to learn more, I blog regularly on my website, Producttranquility.com, and I've recently launched a…
• 37:08
  Dan Balcauski: CEO's pricing scorecard, that folks can use to… it's a simple
• 37:14
  Dan Balcauski: I think 12-question assessment, with some prescription… of different, pricing areas, right, of… around things like your discounting policy, or your different offers that you've… you've launched. Very simple to answer, and then the…
• 37:28
  Dan Balcauski: Takeaway has prescriptions for starting to address those, for each, you know, area that, maybe, you, you didn't,
• 37:37
  Dan Balcauski: answer, in the affirmative, too. So, folks can find that if they just go to producttranquility.com. Also happy to connect with folks on LinkedIn at Diana Balkowski, pretty easy to reach there.
• 37:49
  Marcia Riner | Profit Booster®: Great, you oughta call it Dr. Dan, right? Since you're giving prescriptions.
• 37:54
  Marcia Riner | Profit Booster®: Love it. Yeah, super valuable, and I think there's so many nuances with it to have
• 37:59
  Marcia Riner | Profit Booster®: To kind of have a clarity on where you are, and at this time of the year, you know, looking at shifting, making sure that, you know, with the economy ups and downs, or with your competitors' ups and downs, or with your buyers' needs and likes and wishes.
• 38:14
  Marcia Riner | Profit Booster®: You know, really ought to have a time to reflect on how you're pricing and if you need to possibly adjust.
• 38:22
  Marcia Riner | Profit Booster®: I would definitely say take you up on that, CEO scorecard. That would be a great starting point.
• 38:29
  Marcia Riner | Profit Booster®: All right, well, thanks for tuning in today. I hope you picked up some valuable insights and actionable ideas that will help you make your business more profitable. And I know that, Dan's idea and the CEO,
• 38:41
  Marcia Riner | Profit Booster®: the CEO, checklist and scorecard is super important for you to figure out on that pricing.
• 38:48
  Marcia Riner | Profit Booster®: Alright, but before we go, if, you know, if you're thinking that you might want to bring in more clients and keep more of what you earn, I suggest you go check out the Profit Booster Growth Map. It pinpoints your top 3 moves to grow revenue this year and stop those profit leaks. Quick!
• 39:06
  Marcia Riner | Profit Booster®: So go get yours at ProfitBooster.biz.
• 39:09
  Marcia Riner | Profit Booster®: And don't forget to subscribe to future shows. You can always find Profit with a Plan on your favorite podcast platforms, and we're looking forward to more great, profitable information on next week's show. So until then, make your plans and profit with them. Thanks so much, Dan!
• 39:25
  Dan Balcauski: Thank you.