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Modern B2B Pricing Best Practices · Sales Pipeline Radio

• 0:02
  All right.
• 0:03
  Welcome everyone to another episode of Sales Pipeline Radio.
• 0:07
  My name is Matt Heinz.
• 0:07
  I am your host.
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  We are here live Thursdays at 11:30 Pacific 2:30 Eastern.
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  Thank you so much for joining us today.
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  We've been dark the last couple of weeks as I joined my family down in our annual
• 0:18
  trip to San Diego, but back and back in the saddle and excited to be here.
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  If you are catching us live in the middle of your workday, thank you so
• 0:24
  much for making us part of your day.
• 0:26
  You have an opportunity to be part of the show.
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  If you have a comment, if you have a question, if you have a rebuttal.
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  And it's worded in a family friendly way.
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  We will put that into the show.
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  We can put up your question.
• 0:36
  We can call out your question to Dan and just address it in general.
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  So thanks so much for joining us live.
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  If you're watching or listening on demand, very much appreciate you being part of
• 0:43
  this, every episode of sales pipeline radio past, present, and future always
• 0:47
  available at salespipelineradio.com very excited to have with us today,
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  live from sweltering Austin, Texas, the founder of Product Tranquility,
• 0:58
  Dan Balcauski.
• 0:59
  Dan, thanks for joining us.
• 1:01
  Great to be here, Matt.
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  I'm excited for our conversation and thank you to anyone who's joining us
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  live in the middle of the workday.
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  I appreciate it.
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  Absolutely.
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  Well, look, I don't have an MBA.
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  I didn't go to business school.
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  I didn't really study business, but I, I'm familiar with these four P's, right?
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  That we talk about in marketing forever.
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  And I feel like in B2B, we have become fixated with promotion.
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  As really the primary B2B marketing function.
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  Your business really focuses primarily on pricing.
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  And I feel like it is a lost art oftentimes amongst marketers and something
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  that we don't really take seriously and don't think strategically enough about.
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  So maybe just start by introducing people to you, your background,
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  and then we'll get into it.
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  Absolutely.
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  Well, I, I completely agree.
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  I think it is a, well, maybe not lost art.
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  I think it's a building art, you know, in much of the way that product
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  management has built into itself into an actual legitimate practice over time.
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  I think pricing is on that same journey.
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  And I see the building blocks every day, getting us closer and closer to that.
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  But, you know, I spent my entire 20 year career in software.
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  I started more on the, we'll call the value creation side and
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  value capture side at first as an engineer and engineering management.
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  Ultimately, I became much more fascinated by how our products created customer
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  value and turned into dollars and cents for the business than the individual
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  bits I was moving around in the software.
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  And this interest led me to pursue my MBA.
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  I didn't realize it then, but I was quite lucky with pursuing my MBA.
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  Kellogg was a widely recognized for its excellence in marketing.
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  I didn't find out until very
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  recently, very few MBA programs have courses in pricing, so I got
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  my theoretical grounding and pricing there and got thrown into the pricing
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  world, immediately in my internship where company very successful Silicon
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  Valley startup I was working for, they had a question on CEO's desk of should
• 2:35
  they do a freemium approach and asked me to help them figure it out at TLDR.
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  We might get into it later, but definitely do not recommend
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  freemium for any of our listeners.
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  So we'll put a pin in that.
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  Maybe we'll come back to it later, but you know, over time spent
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  more time on the value creation side and product management.
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  And you're right.
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  Like there were product marketing at those companies was ostensibly
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  responsible for pricing, but they would come to me and be like, well,
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  I've got to do this pricing thing.
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  I don't know what they're supposed to do.
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  Like you may, you've got some background in this, right?
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  Could you help?
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  Between the theoretical grounding and business school by MBA internship.
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  And then the other product marketers being asked to do this analysis.
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  I don't really know what they should be doing here.
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  Got my feet wet on, on that side of the thing.
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  So now I that's all I do is help founders and CEOs define pricing packaging for
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  new and existing businesses, helping them make sustainable pricing practices
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  that help them be profitable and serve as many customers as possible.
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  So immediately a LinkedIn profile, best practice.
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  If you look them up on LinkedIn
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  just Balcauski, just his last name, you're going to see his headline under
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  his name says" I dispel B2B SaaS pricing illusions", which begs the question.
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  What are some illusions of B2B SaaS pricing?
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  I mean, we can talk about best practices.
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  Let's talk about dumpster fires first.
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  Like what are some of the things that people get wrong, in a
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  well meaning way or otherwise?
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  I think the first one is when it comes to SaaS pricing, most executives think that
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  what you charge determines your success.
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  In fact, who and how you charge determines your success.
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  So often these conversations with people here who do pricing, they
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  want to talk about, okay, should our price be $19 user or $99 user?
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  So our price, it ends in fives and nines.
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  That's all very interesting, but if I were you, I'd spend most of my time on what
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  the price tag goes on and who I'm selling it to and much less time on what number
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  actually goes on the particular price tag?
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  So that'd be one.
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  I could list off some more if you want.
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  Let's go, let's get at least one more.
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  Absolutely.
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  Yeah.
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  So I think the other thing is you don't really have a choice of
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  whether you will have a pricing conversation with your customer.
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  The only decision you get to make is when you will have that conversation and let's,
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  for the love of God, hope it's not your poor sales rep when you just launched
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  the product and he's having initial conversations trying to sell the product
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  you just invested millions, if not tens of millions of dollars into , that's the
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  first pricing conversation you're having.
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  So I highly recommend as much as you could front load the pricing conversation.
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  Yeah, I would put the cart all the way behind the horse and let's start with
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  pricing as a way to help determine what we should build in the first place.
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  Let's not wait until we've somehow-- at some point, Pricing and packaging
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  got slotted into the marketing launch plan sequence of like, okay,
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  well, we're 30 days out from launch.
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  So now we've got to figure out what our pricing and packaging looks like.
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  Absolutely not.
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  It should have been there from day one, because eventually
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  you're going to have to have these conversations with your customers.
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  So why not get it out of the way upfront, really understand what
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  your market is willing to pay for before you invest millions, if
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  not tens of millions of dollars.
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  Well, in pricing has to have context, right?
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  Like whether I charge $10,000 or 10 million dollars, those are very big
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  differences in numbers, but like the context of like, what am I getting?
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  What's the value?
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  What does that mean ? Help me understand how to think about the number, but
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  then the key pillars of the context behind justifying the right number.
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  Yeah, so I think there's a couple of different dimensions there.
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  The first is that intelligent price management follows from
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  intelligent value management.
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  I have an overall model I use for SAS pricing.
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  It's called The Services Model stands for the four components
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  of the model: segments, value, competition, and strategy.
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  We'll touch on those first two elements.
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  Cause I think they're incredibly relevant to what you're talking about.
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  So the first is that we really, in any pricing exercise, and you've
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  got an audience of marketers, so I'm sure they'll appreciate this.
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  We really need to start with customer segment.
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  Customer segment is critical.
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  Because customers in different contexts will value your product differently.
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  They will also have different competitive alternatives available to them.
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  They will rank order, different value drivers of your product.
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  So understand they will have different constraints that dictate what is,
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  and what is it was not feasible.
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  What's causing them friction in their current environment?
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  So we have this all the time, right?
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  If, I, am on a drive across country, I stop at a gas station, I buy a bottle
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  of water, that bottle of water is going to have a distinctly different value
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  to me than if I've been walking through the Sahara desert for the last two weeks
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  and someone tries to sell me a bottle of water, that water will have a distinctly
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  different value and price I'm willing to pay depending upon that context.
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  You brought up earlier this idea of presenting price and doing it earlier.
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  And I think if you talk to a lot of salespeople, that is a
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  very stressful conversation.
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  I think there's a lot of fear about bringing up pricing
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  in a sales conversation.
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  You're throwing out a ton of the just truth bombs around thinking about the
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  value side before the pricing side.
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  And honestly, in the sales process, if you can identify the value, if you can
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  identify quantity and quality, identify the value, the impact that's going to
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  have and the importance that has to your prospect, it puts the value in and in
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  context and puts the pricing context.
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  Why do you think so many salespeople have a fear of bringing up pricing?
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  And how do you help mitigate that?
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  Because they're operating without any sort of guidance from on high, right?
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  So when I was talking about having pricing as early as possible.
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  I was not even talking about the sales competition.
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  I was saying, move that up.
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  The product management team, the product marketing team, the executive team that
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  is thinking about developing a net new product needs to be thinking about their
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  pricing and packaging from day one.
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  And we should not be leaving it to the end salesperson.
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  Now as we get into nuance here, right?
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  There is a difference between what you might call product versus
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  services pricing and services pricing.
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  Every offer, if you're doing consulting is customized.
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  Right.
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  And you, have a value discovery conversation at an individual level
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  with a, with a customer, right?
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  Because you're, you're building a customized offering for them.
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  Going back to your point though, these salespeople, they're not having a good
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  pricing time with pricing because they don't have strong pillars to stand on.
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  Right?
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  We can't just do value based pricing.
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  The pricing team or whoever goes off into a closet somewhere and does some
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  ROI calculations and then springs it on the rest of the org and says, "all
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  right, here you go, sales team, go sell a thing at this price" because
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  they're going to be ill equipped, right?
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  Because you have to have value based selling, value based customer
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  success, value based messaging, right?
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  So unless it's a true organizational mandate held on high that, we're going
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  to support everything we do with a value based mindset, like they're going to
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  have sales teams out there on their own.
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  Right.
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  And then what, what tool do they have?
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  If they haven't been given the support that they need, the enablement, the
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  training the foundational pillars of a strategic, a price list, a
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  good, overall discounting, strategy that's, that's actually enforced.
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  What tools left to them?
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  Is it leave price to the last minute and then discount if pressed.
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  So, so I don't blame them.
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  Talking today on Sales Pipeline Radio with Dan Balcauski.
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  He's the founder of Pricing Tranquility.
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  If you haven't already pricingtranquility.Com, don't miss it.
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  Lots of great content.
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  We're going to way run out of time.
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  We're going to have to bring you back, talk about value pricing steps
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  to calculating a SaaS economic value.
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  There's so many great topics we can cover here, but you mentioned something earlier.
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  I thought I heard you say this.
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  Is that you are anti freemium, is that right?
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  I am.
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  That is correct.
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  All right.
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  So freemium is a very popular strategy or tactic in a lot of SaaS companies.
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  A lot of product led growth folks like live on it.
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  I've heard pros and cons on both sides of this.
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  I'd love to hear your take.
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  Why are you anti freemium?
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  Yeah, so first of all, keep in mind, I deal with only B2B SaaS at this point.
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  So one misconception or misconstrual around pricing is people try to
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  adopt things that may work in a B2C context into a B2B context
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  and they fail dramatically, right?
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  So, this not only applies to freemium, but people think about AB testing pricing.
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  And that's an absolute nightmare.
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  Never do that in B2B.
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  You're going to have a bad time.
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  I promise you, but you asked about freemium specifically.
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  So I think that's probably the first misconception is people
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  are like, Oh, I saw, you know, this consumer company do it.
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  I saw this candy crush app that I have on my phone.
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  They do freemium.
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  So I'm going to use it for my enterprise workflow software.
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  No, absolutely not.
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  The better answer, number one, anyone says freemium almost universally,
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  the better answer is free trial.
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  I'm absolutely a huge fan of free trial.
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  And, and I think free trials make a lot of sense.
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  Free trials and freemium generally work under the idea that of what
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  economists call software, they would classify it as an experience good.
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  So there's search goods, experience goods, and credence goods.
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  Search good, it would be like you're buying a can of Campbell's tomato soup
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  so I could search for it online and know what I'm going to get, right?
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  If I've had that before versus experience good, right?
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  You might think like getting a haircut, right?
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  Like I don't know until i'm done with that.
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  I can't really judge the value of it.
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  With software our experience and our perceived value changes as we use the
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  software and so a free trial really helps that I know you've got a lot
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  of really smart talented marketing folks that listen to this show.
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  Those folks can do all of the web design, copywriting, messaging,
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  work white papers, webinars.
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  But until there's something primal, this hits our lizard brain.
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  When we see our own data in a piece of software that really changed
• 12:07
  our perceived value of it and a free trial accomplishes that.
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  But a freemium, uh, it, it just doesn't work for a whole lot of reasons.
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  I know we're running out of time, so I'm happy to elaborate them.
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  Number one is, I think it creates is a giant mirage.
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  So first of all what I see happen is that the people that end up on
• 12:24
  the free side are fundamentally different than you're paying users.
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  I've seen this in extremists with some clients where if you go on like Trust
• 12:32
  Radius or G2 or any of those review sites, you'll actually see a bunch
• 12:36
  of reviews that don't make any sense.
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  It's because the people that for B2B SaaS company is because the
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  reviews that they see on those sites are from are from consumers.
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  They're from like families who are using it for some home use case.
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  But you know, they outnumber the business use case 10 to one.
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  Those people are never going to buy in the model that you want and they're
• 12:54
  polluting your go to market messaging.
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  So, and then also you're filtering all of that user data into the product management
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  organization . Sometimes they're getting feedback from multiple different channels.
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  They, they're not always checking who's a, who's a free user, who's a
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  paid customer when they're getting feedback and soliciting it and all of a
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  sudden you've got a whole user segment that's not your real target market.
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  And also I think it's, it's this barrage, right?
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  Again, very talented marketers I'm sure who work every day to get customers
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  and there's this tension of, OK 99% of our user base is on the free side.
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  It's really hard to do SEO, to do paid search, to do
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  social, to get new customers.
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  If we just tried a little bit harder with our product, if we just did XYZ, change
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  this onboarding flow, added this feature that the free users say they want...
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  it's like, I'll sell one toothbrush to every man in China kind of thing.
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  If I could only convert 1% or 2% of those free users, but it's a mirage.
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  And I think it just ends up wasting a bunch of time, energy, and resources in
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  the organization that is better spent just building a product that real users who
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  are your target customers will pay for.
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  Fantastic soapbox on freemium.
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  I love it.
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  So many people just put in comments and I want to go back to something
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  Jill said earlier I think reinforces your point here, Dan, that, pricing
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  is part of the launch discussion when done well -- it's too often
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  part of the last discussions versus sort of earlier in the conversation.
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  And just because you discuss value and price up front doesn't mean you might
• 14:15
  change and pivot, but to make that a core component of the discussion versus an
• 14:20
  afterthought, I think is important here.
• 14:23
  In the last few minutes we have here, Dan Balcauski thanks for joining
• 14:26
  us today on Sales Pipeline Radio.
• 14:27
  He's the founder of Product Tranquility (https//:producttranquility.com).
• 14:32
  You brought up right before we went on the air, this concept of pricing
• 14:35
  fairness and fairness-- we can spend a whole nother hour just talking about
• 14:39
  just what fairness means relative to price, but maybe unpack like why this
• 14:42
  has become kind of controversial of late.
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  And what are your thoughts on it?
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  We talk a lot about price differentiation.
• 14:47
  And so people are like, "well, no, everyone should pay a fair, same price".
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  The thing is, is that your definition of fairness really is a lot more
• 14:57
  influenced by tradition than you realize.
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  So one example would be, I pay one price when I get on a bus, but a
• 15:05
  senior citizen pays another price.
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  And maybe in the US that made sense at one point.
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  But if you look at the demographic information now, pretty much
• 15:12
  98% of the wealth is owned by people over 50 years old.
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  So why are they going to get discount to ride the bus when our
• 15:18
  poor millennial friends are not necessarily doing that, right?
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  The thing is, is because that's been a tradition.
• 15:23
  It's we've always had senior citizen discounts.
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  And so we continue to.
• 15:26
  If I go to Europe, I, they put bread on the table and I eat it, I'm
• 15:29
  going to get charged for that bread.
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  But in the US they put bread on the table and I eat it.
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  I'm not because we have tradition that the bread is free.
• 15:35
  So if I get charged in Europe, American visiting over there for
• 15:37
  summer, I'm going to be upset.
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  "This is unfair.
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  I didn't order the bread.
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  You put it on the table."
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  "Yes, but you ate it "and that's social tradition.
• 15:44
  So I think one of the things that's really come up over the last couple
• 15:47
  of weeks, and we don't have time to unroll the whole scenario, but anyone
• 15:50
  who's been following the saga with Reddit has noticed a major fairness
• 15:54
  problem with the reaction they have.
• 15:56
  They rolled out pricing changes for their Reddit's API and end up having a revolt on
• 16:02
  their hands from all of the moderators who are free users of Reddit that take their
• 16:08
  free time to help Reddit moderate their discussion forums and basically ended up
• 16:12
  having a full blown revolt on their hands.
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  So, one of the things we go through in terms of fairness
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  is first we judge the outcome.
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  All right, here's this price.
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  Is this, do I judge this as personally fair?
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  If the answer is no, then I go to this other section of social fairness, right?
• 16:27
  So is there a precedent for it?
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  And what was the process?
• 16:31
  So I think this is really where Reddit fell down is one of the aspects we
• 16:35
  look for when we're judging social fairness is voice and a choice.
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  If you give your customers a ability to give a, give their voice, give their
• 16:45
  opinion about an upcoming change, then they're much more likely to accept it.
• 16:49
  Even if the end result ends up not being perceived as fair so so we go
• 16:53
  through this this two step process of is it personally fair to me?
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  Okay, if not, I go to is it socially fair?
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  And then I start looking at the process . I think this is a big reason why democracy
• 17:01
  works, not to get into politics But you know you we go vote our team didn't win
• 17:06
  this time, but we say okay Well, I guess the other team won, you know four years
• 17:10
  later, but I had a voice in it And so we don't end up having riots and you know,
• 17:13
  we have peaceful transfer power usually.
• 17:15
  So I think the same thing happens in fairness.
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  So I think, you know, if Reddit maybe had helped bring along their
• 17:20
  community a little bit more, they could have avoided this absolute
• 17:22
  revolt on their pricing changes.
• 17:25
  So much to unpack there.
• 17:26
  Yeah.
• 17:26
  We are unfortunately out of time.
• 17:27
  This has been awesome, Dan.
• 17:29
  Thank you so much for your time, your generositywww.producttranquility.com.
• 17:34
  Check that out.
• 17:35
  Where else, Dan, can people learn more about you?
• 17:36
  Happy to connect with folks on LinkedIn.
• 17:38
  Just send me a connection request.
• 17:39
  Let me know you heard me on Sales Pipeline Radio, so I can
• 17:42
  separate it from the LinkedIn spam, but thank you so much, Matt.
• 17:45
  And if I had to rename my company again, I would make it easier to pronounce.
• 17:47
  So I apologize for that.
• 17:49
  I think it's fantastic.
• 17:50
  If I can go back in time, I wouldn't have named my company Heinz Marketing.
• 17:53
  I would have come up with something far more interesting.
• 17:55
  I think Pricing Tranquility for a pricing conversation is fantastic.
• 17:59
  So congratulations on your success.
• 18:01
  And thanks again so much for being here today.
• 18:03
  Thank you so much.
• 18:04
  Thanks everyone for listening and watching, listening and commenting.
• 18:06
  As always, we'll see you here next week.
• 18:08
  11:30 Pacific 2:30 Eastern.
• 18:11
  My name is Matt Heinz.
• 18:11
  See you next week.
• 18:12
  Sales Pipeline Radio
• 18:16
  recently, very few MBA programs have courses in pricing, so I got my.
• 18:19
  Theoretical grounding and pricing there and got thrown in on the, into
• 18:23
  the pricing world immediately in my internship where company very successful
• 18:27
  Silicon Valley startup I was working for.
• 18:29
  They had a question on CEO's desk of should they do a freemium
• 18:32
  approach and asked me to help them figure it out at TLDR.
• 18:35
  We might get into it later, but definitely do not recommend
• 18:37
  freemium for any of our listeners.
• 18:38
  So we'll put a pin in that.
• 18:39
  Maybe we'll come back to it later, but you know, over time spent
• 18:42
  more time on the value creation side and product management.
• 18:45
  And you're right.
• 18:46
  Like there were product marketing at those companies was ostensibly
• 18:49
  responsible for pricing, but they would come to me and be like, well,
• 18:53
  I, I've got to do this pricing thing.
• 18:54
  I don't know what they're supposed to do.
• 18:56
  Like you may, you've got some background in this, right?
• 18:58
  Could you help?
• 18:59
  And so that kind of was my, you know, between, you know,
• 19:01
  the theoretical grounding and business school by MBA internship.
• 19:05
  And then, you know, the other product marketers being like,
• 19:07
  I'm asked to do this analysis.
• 19:08
  I don't really know what they should be doing here.
• 19:10
  Got my feet wet on, on that side of the thing.
• 19:13
  So now I.
• 19:14
  You know, that's all I do is help founders and CEOs define pricing packaging for
• 19:18
  new and existing businesses, helping them, you know, make sustainable pricing
• 19:21
  practices that help them be profitable and serve as many customers as possible.
• 19:25
  So immediately a LinkedIn profile, best practice.
• 19:28
  If you look them up on LinkedIn
• 19:29
  LinkedIn,
• 19:30
  just Balcauski just his last name, you're going to see his headline under
• 19:33
  his name says I dispel B2B SaaS pricing illusions, which begs the question.
• 19:39
  What are some illusions of B2B SaaS pricing?
• 19:42
  I mean, we can talk about best practices.
• 19:43
  Let's talk about dumpster fires first.
• 19:45
  Like what are some of the things that people get wrong in a
• 19:47
  well meaning way or otherwise?
• 19:49
  Yeah.
• 19:49
  Well, I think the first one is when it comes to SaaS pricing,
• 19:52
  most executives think that what you charge determines your success.
• 19:55
  In fact, who and how you charge.
• 19:58
  Determines your success.
• 19:59
  So often, you know, these conversations with people here who do pricing, you
• 20:03
  know, they want to talk about, okay, should our price be 19 user or 99 user?
• 20:08
  So our price, it ends in fives and nines.
• 20:10
  That's all very interesting, but if I were you, I'd spend most of my time
• 20:13
  on what the price tag goes on and who I'm selling it to and much less time.
• 20:18
  on What number actually goes on the particular price tag?
• 20:22
  So that'd be one.
• 20:23
  I could, I could list off some more if you want.
• 20:26
  Let's go, let's get at least one more.
• 20:27
  Absolutely.
• 20:28
  Yeah.
• 20:28
  So I think the other thing is you don't really have a choice of
• 20:31
  whether you will have a pricing conversation with your customer.
• 20:34
  The only decision you get to make is when you will have that conversation and let's.
• 20:38
  For the love of God, hope it's not your poor sales rep when you just launched
• 20:43
  the product and he's having initial conversations trying to sell the product
• 20:47
  you just invested millions, if not tens of millions of dollars into the, that's the
• 20:51
  first pricing conversation you're having.
• 20:53
  So I highly recommend as much as you could front load the pricing conversation.
• 20:58
  I think.
• 21:01
  Yeah, I would put the cart all the way behind the horse and let's start with
• 21:06
  pricing as a way to help determine what we should build in the first place.
• 21:12
  Let's not wait until we've somehow at some point Pricing and packaging
• 21:17
  got slotted into the marketing launch plan sequence of like, okay, well,
• 21:23
  we're 30 days out from, from launch.
• 21:25
  So now we've got to figure out what our pricing and packaging looks like.
• 21:28
  Absolutely not.
• 21:28
  It should have been there from day one, because eventually
• 21:32
  you're going to have to have these conversations with your customers.
• 21:34
  So why not get it out of the way upfront, really understand what your market is
• 21:37
  willing to pay for before you invest millions, if not tens of millions of
• 21:40
  dollars.
• 21:41
  Well, in pricing has to have
• 21:42
  context, right?
• 21:43
  Like whether I charge $10,000 or 10 million, dollars you know, like those are
• 21:47
  very big differences in numbers, but like the context of like, what am I getting?
• 21:51
  What's the value?
• 21:52
  What does that mean for, help me understand sort of how to think
• 21:56
  about the number, but then the sort of the key pillars of the context
• 22:00
  behind justifying the right number.
• 22:03
  Yeah, so I think there's a couple of different dimensions there.
• 22:05
  So I think the, the first is that intelligent price management follows
• 22:11
  from intelligent value management.
• 22:12
  So really, you know, we may talk a bit about I have an overall sort
• 22:16
  of model I use for SAS pricing.
• 22:18
  It's called the services model stands for the four components of the model segments,
• 22:21
  value, competition, and strategy.
• 22:24
  And so we'll talk about, we'll touch on those first two elements.
• 22:27
  Cause I think they're incredibly relevant to what you're talking about.
• 22:30
  So the first is that we really, in any pricing exercise, and you've
• 22:34
  got an audience of marketers, so I'm sure they'll appreciate this.
• 22:36
  We really need to start with customer segment.
• 22:39
  Customer segment is critical.
• 22:41
  Because customers in different contexts will value your product differently.
• 22:46
  They will also have different competitive alternatives available to them.
• 22:49
  They will rank order, different value drivers of your product.
• 22:51
  So understand they will have different constraints that dictate what is,
• 22:55
  and what is, it was not feasible.
• 22:56
  What's causing them friction in their current environment.
• 22:59
  So we have this all the time, right?
• 23:01
  If, if I am.
• 23:03
  Just on a drive across country, I stop at a gas station, I buy a bottle of
• 23:06
  water, that bottle of water is going to have a distinctly different value to me
• 23:09
  than if I've been walking through the Sahara desert for the last two weeks
• 23:13
  and someone tries to sell me a bottle of water, that water will have a distinctly
• 23:17
  different value and price I'm willing to pay depending upon that context.
• 23:23
  So I think you brought up earlier this idea of sort of presenting
• 23:26
  price and doing it earlier.
• 23:27
  And I think if you talk to a lot of salespeople, that is a
• 23:29
  very stressful conversation.
• 23:31
  I think there's a lot of fear about bringing up pricing
• 23:34
  in a sales conversation.
• 23:36
  You're throwing out a ton of the sort of just truth bombs around
• 23:38
  sort of thinking about the value side before the pricing side.
• 23:41
  And honestly, in the sales process, if you can identify the value, if you
• 23:44
  can identify quantity and quality, if identify the value, the impact that's
• 23:50
  going to have and the importance that has to your prospect, it puts the
• 23:54
  value in and in context and puts.
• 23:57
  The pricing context, why do you think so many salespeople have
• 24:01
  a fear of bringing up pricing?
• 24:02
  And how do you help mitigate
• 24:04
  that?
• 24:04
  Well, I mean, I think that they're, because they're operating off without
• 24:09
  any sort of guidance from on high, right?
• 24:11
  So I, so when I was talking about.
• 24:14
  Having pricing as early as possible.
• 24:16
  I was not even talking about the sales competition.
• 24:18
  I was saying, move that up.
• 24:20
  The product management team, the product marketing team, the executive team that
• 24:24
  is thinking about developing a net new product needs to be thinking about their
• 24:27
  pricing and packaging from day one.
• 24:30
  And you know, we should not be leaving it to the end salesperson.
• 24:33
  Now there is a, as we get into nuance here, right?
• 24:36
  There is a difference between.
• 24:37
  What you might call, you know, product versus services, pricing and services,
• 24:40
  pricing, you know, every offer, if you're doing consulting is customized.
• 24:44
  Right.
• 24:44
  And you, you, you have a value discovery conversation at an individual level
• 24:49
  with a, with a customer, right?
• 24:50
  Because you're, you're building a customized offering for, for them.
• 24:55
  Going back to your point though, I think, you know, these salespeople,
• 24:58
  they're not having a good pricing time with pricing because they don't
• 25:02
  have strong pillars to stand on.
• 25:04
  Right.
• 25:04
  We can't.
• 25:06
  Talk about value based pricing.
• 25:07
  I think value based pricing is we may get into it a little bit more here in
• 25:10
  a bit, but you know, we can't just do value based pricing, right, the pricing
• 25:16
  team or whoever goes off into a closet somewhere and does some ROI calculations
• 25:22
  and then springs it on the rest of the org and says, all right, Here you go.
• 25:25
  Sales team, like, you know, go, go sell a thing at this price because
• 25:30
  they're going to be ill equipped, right?
• 25:31
  Because they're, they're not going to be, you have to have value
• 25:34
  based selling, value based customer success, value based messaging, right?
• 25:38
  So unless it's a true organizational mandate held on high that,
• 25:44
  you know, we're going to.
• 25:45
  Support everything we do with a value based mindset, like they're going to
• 25:48
  have sales teams out there on their own.
• 25:50
  Right.
• 25:50
  And then what, what tool do they have?
• 25:52
  Right.
• 25:52
  If they haven't been given the support that they need, the enablement, the
• 25:55
  training the, the foundational pillars of a strategic, a price list, right.
• 26:01
  A good overall discounting strategy that's, that's actually enforced.
• 26:06
  What is it, what tools left to them?
• 26:07
  Right.
• 26:08
  And it's like, is it, is it.
• 26:08
  Yeah.
• 26:09
  You know, leave price to the last minute and then discount if pressed.
• 26:12
  Right.
• 26:12
  So, so I don't blame them.
• 26:15
  Talking today on sales pipeline radio with Dan Balcauski He's the
• 26:18
  founder of pricing tranquility.
• 26:20
  If you haven't already pricingtranquility.Com don't miss it.
• 26:24
  Lots of great content.
• 26:26
  We're going to way run out of time.
• 26:27
  We're going to have to bring you back, talk about value pricing and sort of,
• 26:30
  you know, just sort of steps to sort of calculating a SaaS economic value.
• 26:33
  There's so many great topics we can cover here, but you mentioned something earlier.
• 26:37
  I thought I heard you say this.
• 26:38
  Is that you are anti freemium, is that right?
• 26:41
  I am.
• 26:42
  That is correct.
• 26:43
  All right.
• 26:43
  So freemium is a very popular strategy or tactic in a lot of SaaS companies.
• 26:49
  A lot of product led growth folks like live on it.
• 26:52
  I've heard pros and cons sort of on, on both sides of this.
• 26:55
  I'd love to hear your take.
• 26:55
  Why are you anti freemium?
• 26:57
  Yeah, so first of all, keep in mind, I deal with much more only
• 27:04
  pretty much B2B SaaS at this point.
• 27:05
  So I think one misconception or misconstrual around pricing is people try
• 27:11
  to adopt things that may work in a B2C context into a B2B context and they fail.
• 27:18
  Dramatically, right?
• 27:19
  So this not only applies to freemium, but people think about AB testing pricing.
• 27:23
  And that's an absolute nightmare.
• 27:25
  Never do that in B2B.
• 27:27
  You're going to have a bad time.
• 27:28
  I promise you, but you asked about freemium specifically.
• 27:30
  So I think that's probably the first misconception is people
• 27:33
  are like, Oh, I saw, you know, this consumer company do it.
• 27:36
  I saw this candy crush app that I have on my phone.
• 27:39
  They do freemium.
• 27:41
  So I'm going to use it for my enterprise workflow software.
• 27:44
  Like.
• 27:44
  No, absolutely not.
• 27:45
  So look, the better answer, number one, anytimes anyone says
• 27:50
  freemium almost universally, the better answer is free trial.
• 27:54
  I'm absolutely a huge fan of free trial.
• 27:56
  And, and I think free trials make a lot of sense.
• 27:58
  Free trials and freemium generally work under the idea that of what
• 28:02
  economists call software, they would classify it as an experience good.
• 28:05
  So there's search goods, experience goods, and credence goods search good,
• 28:09
  it would be like you're buying a.
• 28:10
  Can of Campbell's tomato soup so I could search for it online and
• 28:13
  know what I'm going to get, right?
• 28:14
  If I've had that before versus experience good, right?
• 28:17
  You might think like getting a haircut, right?
• 28:18
  Like I don't know until i'm done with that.
• 28:20
  I can't really judge the value of it with software our experience and our
• 28:25
  perceived value Changes as we use the software and so a free trial really
• 28:29
  helps that I know you've got a lot of really smart Talented marketing folks
• 28:33
  that listen to this show those folks Can do all of the web design, copywriting,
• 28:39
  messaging, work, white papers, webinars.
• 28:42
  But until there's something primal, this hits our lizard brain.
• 28:45
  When we, we see our own data in a piece of software that really
• 28:48
  changed our perceived value of it and a free trial accomplishes that.
• 28:51
  But a freemium it, it just doesn't work for a whole lot of reasons.
• 28:54
  And I know we're running out of time, so I'm happy to elaborate them.
• 28:57
  I think, you know, number one is, I think it creates is a giant mirage.
• 29:02
  So first of all, I see.
• 29:03
  What I see happen is that the people that end up on the free side are fundamentally
• 29:08
  different than you're paying users.
• 29:10
  I've seen this in extremists with some clients where if you go on like trust
• 29:15
  radius or G2 or any of those review sites, you'll actually see a bunch
• 29:18
  of reviews that don't make any sense.
• 29:20
  It's because the people that for B2B SaaS company is because they're.
• 29:23
  The reviews that they see on those sites are from are from consumers.
• 29:27
  They're from like families who are using it for some home use case.
• 29:31
  Right.
• 29:31
  But you know, they outnumber the beat business use case, you know, 10 to one.
• 29:35
  And so now you've, you know, so first of all, those people are never going to buy
• 29:39
  in the model that you want and they're polluting your go to market messaging.
• 29:42
  These review sites.
• 29:43
  Right.
• 29:43
  So, and then also you're filtering all of those, that user data into
• 29:48
  the product management organization, a product management organization.
• 29:51
  You know, sometimes they're getting feedback from multiple different channels.
• 29:55
  They, they're not always checking who's a, who's a free user, who's a paid
• 29:59
  customer when they're getting feedback and soliciting it and look, all of a
• 30:02
  sudden you've got a whole user segment.
• 30:04
  That's not your real target market.
• 30:06
  And also I think it's, it's this barrage, right?
• 30:08
  Again, very talented marketers.
• 30:10
  I'm sure who work every day to get customers and there's
• 30:12
  this tension of OK 99%.
• 30:15
  Of our user base is on the free side.
• 30:18
  It's really hard to do SEO, to do paid search, to do
• 30:21
  social, to get new customers.
• 30:22
  If we just tried a little bit harder with our product, if we just did XYZ,
• 30:27
  change this onboarding flow, added this feature that the free users say they
• 30:30
  want, we could like, look, if we convert, it's like, I'll sell one toothbrush
• 30:33
  to every man in China kind of thing.
• 30:35
  If I could only convert 1% or 2% of those free users, but it's a mirage.
• 30:39
  And I think it just ends up wasting a bunch of time, energy, and resources in
• 30:43
  the organization that is better spent.
• 30:45
  Just building a product that real users who are your
• 30:47
  target customers will pay for.
• 30:49
  Fantastic soapbox on freemium.
• 30:51
  I love it.
• 30:52
  We are running a little bit at a time.
• 30:54
  I, we, I love, thank you so much to Jill, Michael Preston.
• 30:56
  So many people just put in comments and I want to go back
• 30:58
  to something Jill said earlier.
• 30:59
  I think reinforces your point here Dan, that, you know, pricing is
• 31:02
  part of the launch discussion.
• 31:03
  When done well versus sort of offering or somebody it's, it's too often
• 31:07
  part of the last discussions versus sort of earlier in the conversation.
• 31:10
  And just because you discuss value and price up front doesn't mean you might
• 31:14
  change and pivot, but to make that a core component of the discussion
• 31:19
  versus an afterthought, I think.
• 31:21
  Is important here in the last few minutes.
• 31:23
  We have here Dan Balcauski Thanks for joining us today on sales pipeline radio.
• 31:26
  He's the founder of product tranquility.
• 31:28
  https//:producttranquility.com We will spell that for you and put
• 31:32
  a link in the, in the show notes.
• 31:34
  You brought up right before we went on the air this concept of
• 31:37
  pricing fairness and fairness.
• 31:39
  I mean, we can spend a whole nother hour just talking about just what
• 31:42
  fairness means relative to price, but maybe unpack like why this has
• 31:45
  become kind of controversial of late.
• 31:47
  And what are your thoughts on it?
• 31:48
  Yeah.
• 31:49
  So I think there's, it's interesting.
• 31:50
  We talk a lot about price differentiation.
• 31:53
  And so people are like, well, no, everyone should pay a fair, same price.
• 31:59
  The thing is, is that your definition of fairness really is a lot more
• 32:02
  influenced by tradition than you realize.
• 32:06
  Right.
• 32:06
  So one example would be, I.
• 32:08
  Pay one price when I get on a bus, but a senior citizen pays another price.
• 32:12
  And maybe, you know, in the US that made sense at one point.
• 32:15
  But if you look at the demographic information now pretty much
• 32:18
  98% of the wealth is owned by people over 50 years old.
• 32:21
  So why are they going to get discount to ride the bus when, when
• 32:24
  our poor millennial friends are not necessarily doing that, right.
• 32:27
  The thing is, is because that's been a tradition.
• 32:29
  It's we've always had senior citizen discounts.
• 32:31
  And so we continue to, you know, if I go to Europe if I, they put
• 32:34
  bread on the table and I eat it, I'm going to get charged for that bread.
• 32:37
  But in the US they put bread on the table and I eat it.
• 32:39
  I'm not because we have tradition that the bread is free.
• 32:41
  So if I get charged in Europe, American visiting over there for
• 32:43
  summer, I'm going to be upset.
• 32:45
  This is unfair.
• 32:46
  I did.
• 32:46
  I didn't, I didn't order the bread.
• 32:48
  You put it on the table.
• 32:48
  Yes, but you ate it and that's social.
• 32:51
  Tradition.
• 32:51
  So I think one of the things that's really come up over the last couple of weeks,
• 32:54
  and we don't have time to unroll the whole scenario, but anyone who's been following
• 32:58
  the saga with Reddit has noticed a major fairness problem with the reaction.
• 33:03
  They have, they rolled out pricing changes for their Reddit's API and
• 33:08
  end up having a revolt on their hands from all of the moderators
• 33:12
  who are free users of Reddit that.
• 33:14
  Take their free time to help Reddit moderate their discussion forums
• 33:18
  and basically ended up having a full blown revolt on their hands.
• 33:21
  So, so one of the things we go through in terms of fairness is
• 33:24
  first we judge sort of the outcome.
• 33:26
  All right, here's this price.
• 33:28
  Is this, do I judge this as personally fair?
• 33:30
  If the answer is no, then I go to this other section of social fairness, right?
• 33:35
  So is there a precedent for it?
• 33:37
  And what was the process?
• 33:39
  So I think this is really where Reddit fell down is one of the aspects we
• 33:43
  look for when we're judging social fairness is voice and a choice.
• 33:47
  If you give your customers, right?
• 33:49
  A ability to give a, give their voice, give their opinion about
• 33:53
  an upcoming change, then they're much more likely to accept it.
• 33:57
  Even if the end result ends up not.
• 33:59
  Being perceived as fair so so we go through this this two step process
• 34:02
  of is it personally fair to me?
• 34:03
  Okay, if not, I go to is it socially fair and then I start looking at the process
• 34:07
  And I think this is a big reason why democracy works, you know, not to get into
• 34:11
  politics But you know you we go vote our team didn't win this time, but we say okay
• 34:16
  Well, I guess the other team won, you know four years later, but I had a voice in it
• 34:19
  And so we don't end up having riots and you know, we have peaceful transfer power.
• 34:23
  Usually, that all Goes goes to saying, so I think the same
• 34:26
  thing happens in fairness.
• 34:27
  So I think, you know, if, if Reddit maybe had helped bring along their
• 34:30
  community a little bit more, they could have avoided this absolute
• 34:33
  revolt on their pricing changes.
• 34:35
  So much to unpack there.
• 34:36
  Yeah.
• 34:37
  We are unfortunately out of time.
• 34:38
  This has been awesome, Dan.
• 34:39
  Thank you so much for your time, your generositywww.producttranquility.com
• 34:44
  Check that out.
• 34:45
  Where else, Dan, can people learn more about you?
• 34:47
  Happy to connect with folks on LinkedIn.
• 34:49
  So yeah, just send me a connection request.
• 34:50
  Let me know.
• 34:51
  You heard me on sales pipeline radio so I can separate it from the LinkedIn
• 34:54
  spam, but thank you so much, Matt.
• 34:56
  And if I had to rename my company again, I would make it easier to pronounce.
• 34:59
  So I apologize for that.
• 35:00
  It's it's no, it's, it's, it's, I think it's fantastic.
• 35:03
  I think Bennett, look,
• 35:03
  if I can go back in time, I wouldn't have named my company Heinz marketing.
• 35:06
  I would have come up with something far more interesting.
• 35:08
  But I think Pricing tranquility for a pricing conversation is fantastic.
• 35:12
  So congratulations on your success.
• 35:15
  And thanks again so much for being here today.
• 35:16
  Thank you so much.
• 35:18
  Thanks everyone for listening and watching, listening and commenting.
• 35:20
  Thank you so much.
• 35:21
  As always, we'll see you here next week 11:30 Pacific 2:30 Eastern.
• 35:25
  My name is Matt Heinz.
• 35:26
  See you next week.
• 35:26
  Sales pipeline radio.