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“Thanks for the Lecture on Price” · Uphoff on Media Podcast

• 0:01
  SPEAKER_00: Hey, it's Tony.
• 0:02
  SPEAKER_00: One of the most telling questions you can ask a B2B executive is, how do you set your pricing?
• 0:08
  SPEAKER_00: This seemingly simple question is often met with a blank stare,
• 0:12
  SPEAKER_00: a long pause,
• 0:13
  SPEAKER_00: and a response along the lines of,
• 0:15
  SPEAKER_00: well, we take multiple factors into consideration.
• 0:19
  SPEAKER_00: You might also hear the old saw, well, it's part art and part science.
• 0:24
  SPEAKER_00: This is a tough question because setting price is tough.
• 0:28
  SPEAKER_00: Markets shift,
• 0:29
  SPEAKER_00: new business models emerge, and most importantly, customer demands and needs evolve.
• 0:34
  SPEAKER_00: At the end of the day,
• 0:35
  SPEAKER_00: price should be a reflection of customer value, not simply a calculus of costs plus.
• 0:41
  SPEAKER_00: This is easier said than done, however.
• 0:44
  SPEAKER_00: Today's episode of the Uphoff on Media podcast provides a framework and a system
• 0:49
  SPEAKER_00: for setting price to value.
• 0:51
  SPEAKER_00: You can download the price to value framework and use it in your company from
• 0:54
  SPEAKER_00: the post on Uphoff on Media Substack.
• 0:58
  SPEAKER_00: This episode is titled, Thanks for the Lecture on Price.
• 1:02
  SPEAKER_00: Okay, let's get to work.
• 1:07
  SPEAKER_00: Most B2B companies run a third of a pricing process and call it a strategy.
• 1:12
  SPEAKER_00: Positioning, the part that turns price into value, is the part they skip.
• 1:18
  SPEAKER_00: The largest contract computer intelligence had ever sold came down to one meeting.
• 1:24
  SPEAKER_00: I was leading sales and marketing for Ziff Davis's research business,
• 1:27
  SPEAKER_00: and on the other side of the table was the president of
• 1:30
  SPEAKER_00: a large enterprise software company.
• 1:32
  SPEAKER_00: We gave a long presentation, slide after slide, breaking down the pricing.
• 1:37
  SPEAKER_00: When we finished, he looked at us and said, thanks for the lecture on price.
• 1:42
  SPEAKER_00: Perhaps we can now have a discussion about value.
• 1:46
  SPEAKER_00: We have presented the price as if it were the value.
• 1:48
  SPEAKER_00: Software companies and services firms still make that mistake every day and
• 1:53
  SPEAKER_00: the market has stopped letting them get away with it.
• 1:57
  SPEAKER_00: Three in four B2B software companies changed their pricing or packaging in the past year.
• 2:03
  SPEAKER_00: Most of them changed the model.
• 2:04
  SPEAKER_00: Almost none of them changed the process that sets the price.
• 2:09
  SPEAKER_00: These numbers come from Kyle Poyer's 2026 State of B2B SaaS
• 2:14
  SPEAKER_00: and AI Monetization Report,
• 2:16
  SPEAKER_00: a survey of more than 230 software companies that was done this spring.
• 2:21
  SPEAKER_00: Hybrid pricing jumped from 25% of companies to 37% in a single year.
• 2:28
  SPEAKER_00: Per seat pricing hangs on mostly at the top of the market.
• 2:31
  SPEAKER_00: 29% of companies above $150 million in ARR still use it.
• 2:37
  SPEAKER_00: And when the survey asked which pricing model investors would prefer,
• 2:41
  SPEAKER_00: hybrid was the outright favorite at 35%,
• 2:44
  SPEAKER_00: ahead of outcome-based pricing at 26% and usage-based pricing at 24%.
• 2:52
  SPEAKER_00: Flat fee and seat-based pricing barely registered at 10% and 5%.
• 2:59
  SPEAKER_00: The clearest sign the shift isn't finished,
• 3:01
  SPEAKER_00: the single loudest monetization complaint in the survey,
• 3:04
  SPEAKER_00: especially among flat fee and seat-based companies, is not enough expansion revenue.
• 3:11
  SPEAKER_00: That's exactly the symptom you'd expect when what it cost to deliver
• 3:14
  SPEAKER_00: the product changed and the price never fully caught up.
• 3:18
  SPEAKER_00: Even at the earliest stage when a company has no pricing legacy to unwind,
• 3:23
  SPEAKER_00: more than a third of companies under 5 million in ARR are still choosing flat fees,
• 3:28
  SPEAKER_00: a model with no built-in mechanism for expansion revenue at all.
• 3:34
  SPEAKER_00: The gap says more about leadership than about software.
• 3:38
  SPEAKER_00: None of this is really a software story.
• 3:40
  SPEAKER_00: I've been brought in as CEO five times,
• 3:42
  SPEAKER_00: most often to turn around a business in decline or to lead
• 3:45
  SPEAKER_00: a significant transformation, and pricing was one of the first things I examined.
• 3:50
  SPEAKER_00: Not because it's a marketing question or a finance question.
• 3:53
  SPEAKER_00: Pricing is the fastest read there is on whether
• 3:56
  SPEAKER_00: a leadership team understands its unit economics and whether it has a real process
• 4:02
  SPEAKER_00: for setting price to value and managing it over time.
• 4:07
  SPEAKER_00: A real pricing process has three parts.
• 4:10
  SPEAKER_00: Market analysis,
• 4:11
  SPEAKER_00: what competitors,
• 4:12
  SPEAKER_00: substitutes,
• 4:13
  SPEAKER_00: and the buyer's other options cost, including the option of doing nothing.
• 4:17
  SPEAKER_00: Financial analysis, what it costs to win and deliver a unit and what margin that leaves.
• 4:23
  SPEAKER_00: And positioning,
• 4:24
  SPEAKER_00: what the outcome is worth to the buyer and how the offer is framed
• 4:27
  SPEAKER_00: so they can see it.
• 4:29
  SPEAKER_00: This is where price turns into value.
• 4:32
  SPEAKER_00: Most companies run one of the three and call it a process.
• 4:35
  SPEAKER_00: Cost plus shops do the financial analysis and stop.
• 4:39
  SPEAKER_00: Rate card followers do the market analysis and stop.
• 4:41
  SPEAKER_00: Positioning the part that connects price to value is the one that gets skipped.
• 4:46
  SPEAKER_00: It's exactly what that president was asking for.
• 4:50
  SPEAKER_00: Three questions tell you whether the process exists at all.
• 4:56
  SPEAKER_00: Number one, what was the price set against?
• 4:59
  SPEAKER_00: Cost a competitor's rate card or what the outcome is actually worth to the buyer.
• 5:04
  SPEAKER_00: Number two, what process produced it?
• 5:06
  SPEAKER_00: All three analyses run on purpose with someone accountable for the result
• 5:11
  SPEAKER_00: or whichever department had the loudest voice in the room the year it was decided.
• 5:16
  SPEAKER_00: And number three, how is it monitored?
• 5:18
  SPEAKER_00: A number someone checks every month against current delivery data or
• 5:22
  SPEAKER_00: a number everyone quotes from memory that nobody has verified since
• 5:25
  SPEAKER_00: the day it was picked?
• 5:27
  SPEAKER_00: A leadership team that can't answer all three in one plain sentence each is running
• 5:32
  SPEAKER_00: a guess it stopped checking a long time ago.
• 5:38
  SPEAKER_00: The bigger mistake is usually what you're pricing, not the price.
• 5:42
  SPEAKER_00: When I came in as a CEO, the pattern I found most often had little to do with the rate.
• 5:48
  SPEAKER_00: It was the menu.
• 5:49
  SPEAKER_00: Products were priced a la carte, line by line.
• 5:52
  SPEAKER_00: When the customer was trying to buy an integrated solution that worked like
• 5:55
  SPEAKER_00: a recipe, we were selling ingredients to people who had come for dinner.
• 6:00
  SPEAKER_00: At thomasnet.com,
• 6:01
  SPEAKER_00: moving from an a la carte to solution pricing lifted our average sale by nearly 40%,
• 6:06
  SPEAKER_00: and the integrated programs performed better for customers than
• 6:09
  SPEAKER_00: the same products bought one at a time.
• 6:12
  SPEAKER_00: At Pipeline 360,
• 6:14
  SPEAKER_00: we built a branded demand solution that combined programmatic display
• 6:17
  SPEAKER_00: and data-driven demand generation under one price.
• 6:21
  SPEAKER_00: Campaign performance improved by more than 35% on average,
• 6:24
  SPEAKER_00: and average order size and customer attention both went up with it.
• 6:28
  SPEAKER_00: Neither move was a discount or a price increase.
• 6:31
  SPEAKER_00: Both decisions weighed unit economics and customer value together,
• 6:35
  SPEAKER_00: what each sale earned us and what the customer was actually buying.
• 6:38
  SPEAKER_00: That's the question the software survey never asks.
• 6:41
  SPEAKER_00: It tracks how companies charge.
• 6:43
  SPEAKER_00: It doesn't track whether they're charging for the thing the buyer came for.
• 6:48
  SPEAKER_00: A la carte pricing almost always lands in the bottom half of the map below.
• 6:53
  SPEAKER_00: Every line item gets priced against its own cost,
• 6:56
  SPEAKER_00: and nobody prices the value of the combination.
• 6:59
  SPEAKER_00: Here's where you should go to Uphoff on Media on Substack and download
• 7:03
  SPEAKER_00: the price-to-value map and plot your own business on it.
• 7:06
  SPEAKER_00: Be honest about the vertical access.
• 7:08
  SPEAKER_00: It's the line between a lecture on price and a discussion about value.
• 7:12
  SPEAKER_00: Most teams that think they price-to-outcome are pricing to last year's rate card.
• 7:19
  SPEAKER_00: Most companies are hiding in one of two quadras.
• 7:22
  SPEAKER_00: Flying blind is the default position for any company
• 7:25
  SPEAKER_00: that inherited its pricing instead of designing it.
• 7:28
  SPEAKER_00: No process behind the number,
• 7:30
  SPEAKER_00: no one checking it,
• 7:32
  SPEAKER_00: a rate everyone repeats because no one has ever been asked to defend it.
• 7:36
  SPEAKER_00: Cost plus discipline looks like the safer place to be.
• 7:39
  SPEAKER_00: There's a process and someone reviews a number on a schedule.
• 7:42
  SPEAKER_00: But if that process is only the financial analysis,
• 7:46
  SPEAKER_00: running a price against cost instead of what the buyer actually gets,
• 7:50
  SPEAKER_00: the discipline is rigorously protecting the wrong number.
• 7:54
  SPEAKER_00: That quadrant is more crowded than it looks.
• 7:57
  SPEAKER_00: When the same survey asked what drove pricing on new AI capabilities,
• 8:01
  SPEAKER_00: the most common answer at 54% was internal costs and margins.
• 8:05
  SPEAKER_00: Even the newest thing these companies sell got priced against what it costs
• 8:09
  SPEAKER_00: to deliver, not what it's actually worth.
• 8:12
  SPEAKER_00: Value left on the table.
• 8:14
  SPEAKER_00: This shows up when good instinct meets no process.
• 8:17
  SPEAKER_00: Someone in the room already senses the outcome is worth more than the invoice says,
• 8:21
  SPEAKER_00: but there's no positioning work or pricing policy to charge for it consistently.
• 8:25
  SPEAKER_00: So it varies deal to deal and disappears into discounting.
• 8:29
  SPEAKER_00: And price to value is the only quadrant where the answer
• 8:33
  SPEAKER_00: to all three diagnostic questions is a current verified number instead of
• 8:37
  SPEAKER_00: a guess repeated until it sounded like fact.
• 8:42
  SPEAKER_00: The map covers the first two questions.
• 8:44
  SPEAKER_00: The third decides whether you stay where you land.
• 8:46
  SPEAKER_00: The price nobody rechecks drifts back toward flying blind, whatever quadrant it started in.
• 8:54
  SPEAKER_00: Each quadrant has one move out of it.
• 8:57
  SPEAKER_00: If you're flying blind,
• 8:59
  SPEAKER_00: put a process in place,
• 9:00
  SPEAKER_00: starting with the financial analysis so you know what a unit costs to win
• 9:04
  SPEAKER_00: and deliver before anyone debates what it should earn.
• 9:08
  SPEAKER_00: If you're in cost plus discipline,
• 9:10
  SPEAKER_00: keep the financial rigor and add the other two parts,
• 9:13
  SPEAKER_00: the market analysis and the positioning work that turns price into value.
• 9:18
  SPEAKER_00: If you're in the value left on the table quadrant, turn the instinct into a process.
• 9:22
  SPEAKER_00: Do the positioning work, write the pricing policy, and stop letting each deal renegotiate it.
• 9:28
  SPEAKER_00: And if you're in price to value,
• 9:29
  SPEAKER_00: put the number on a monthly review against current delivery data.
• 9:33
  SPEAKER_00: That's what keeps it there.
• 9:36
  SPEAKER_00: B2B marketing has less excuse than software does for missing this.
• 9:41
  SPEAKER_00: Agencies and consultancies carry a version of this cost
• 9:44
  SPEAKER_00: that almost never gets allocated to the deal that required it.
• 9:48
  SPEAKER_00: Discovery calls,
• 9:49
  SPEAKER_00: a strategy deck built before the contract exists,
• 9:52
  SPEAKER_00: a campaign concept pitched on spec to win the account.
• 9:56
  SPEAKER_00: That's a real cost to winning the business and most agencies book it
• 9:59
  SPEAKER_00: as overhead instead of against the account it won.
• 10:02
  SPEAKER_00: So gross margin can be right and total and wrong for every individual account
• 10:06
  SPEAKER_00: and leadership ends up pricing off a number that was never true at the unit level.
• 10:12
  SPEAKER_00: And every one of those hours just got cheaper to produce,
• 10:15
  SPEAKER_00: with the Gentic AI drafting the first passive research,
• 10:18
  SPEAKER_00: the deck, or the campaign brief.
• 10:20
  SPEAKER_00: A marketing services business that hasn't repriced against
• 10:24
  SPEAKER_00: that changed cost is making
• 10:25
  SPEAKER_00: the same mistakes software companies are only now getting measured on,
• 10:30
  SPEAKER_00: just with a campaign instead of a product roadmap.
• 10:33
  SPEAKER_00: I build up off Advisor on the bet I laid out in the post-solo scale,
• 10:37
  SPEAKER_00: the new business model AI just made possible,
• 10:40
  SPEAKER_00: that a services business can run priced and structured like a software company.
• 10:44
  SPEAKER_00: The test above isn't one I'm suggesting to readers from the sidelines.
• 10:48
  SPEAKER_00: It's the one I run my own business against.
• 10:52
  SPEAKER_00: The model matters less than the number underneath it.
• 10:55
  SPEAKER_00: Every business should be checking two numbers every month side by side.
• 10:59
  SPEAKER_00: What a unit of whatever it sells earns once every cost of winning and delivered is counted.
• 11:05
  SPEAKER_00: Not just the ones that show up on an invoice.
• 11:07
  SPEAKER_00: And what that same unit is worth to the customer who buys it.
• 11:11
  SPEAKER_00: Per seat, per hour, per project, per outcome, the unit changes.
• 11:15
  SPEAKER_00: The process that keeps those two numbers in the same conversation doesn't.
• 11:19
  SPEAKER_00: Market, financials, and positioning run on a schedule with someone accountable for the result.
• 11:25
  SPEAKER_00: The investors funding your category have already worked out which pricing models reward value.
• 11:31
  SPEAKER_00: Your buyers are next.
• 11:32
  SPEAKER_00: Sooner or later,
• 11:33
  SPEAKER_00: someone across the table will thank you for the lecture on price and ask to talk
• 11:37
  SPEAKER_00: about value.
• 11:38
  SPEAKER_00: Have that discussion before they ask or a competitor will have it with them first.
• 11:45
  SPEAKER_00: Well, that's it for the episode.
• 11:46
  SPEAKER_00: If you found this useful, please do one thing.
• 11:49
  SPEAKER_00: Follow the Uphoff on Media podcast on Apple or Spotify and leave a rating.
• 11:53
  SPEAKER_00: It's the single best way to help another operator find this.
• 11:56
  SPEAKER_00: I'm Tony Uphoff, back at it next week.