649: 3 Mistakes You're Probably Making with Your Pricing w/ Patrick Campbell

ABOUT THIS EPISODE

In this episode we talk to Patrick Campbell, Co-Founder & CEO of ProfitWell.

LinkedIn: https://www.linkedin.com/in/patrickccampbell/

There's a ton of noise out there. So how do you get decision makers to pay attention to your brand? Start a podcast and invite your ideal clients to be guests on your show. Learn more at sweet fish Mediacom. You're listening to the be tob growth show, a podcast dedicated to helping be to be executives achieve explosive growth. Whether you're looking for techniques and strategies or tools and resources, you've come to the right place. I'm James Carberry and I'm Jonathan Green. Let's get into the show. Welcome back to the BB growth show. We are here today with Patrick Campbell. He is the CO founder and CEO of profit. Well, Patrick, are you doing it? A man doing well, man doing well. It's awesome to be here talk about some some growth in the good old world to be to be yes man. I heard you on seeking wisdom, I guess was a couple weeks ago now, and I've heard you on some other podcasts as well. You are a wealth of knowledge around all things pricing that and we're going to actually talk about a lot of that in this interview. But before we get into that, I'd love for for folks to understand just a little bit more contact if they're not already familiar with you. So tell us a little about profit well and what you're in your team er up to up there. Yeah, it's totally the the most generic way I can explain it, which seems to be the best, is we help subscription companies grow, and I realize that's basically the the title of mostly every page on the Internet right now to be software. But you know, we specifically target subscription companies and we have a free we metrics products. You plug in your billing system, stripe, Zora, whatever you're using, and get free access to your Mrr, churn, your engagement data, just basically all the data that you need for free, and it's a hundred percent accurate. And then we which was not an easy feet. I say that very like, Oh yeah, it's a hundred percent accurate. That was like the hardest thing in building the company. And then we have some paid products that help you with with problems. So our whole philosophy is if we're going to show you a problem or opportunity, that should be free, and then once we help you with that opportunity or making more money, that's when that's when you'll pay us, and a lot of our products are set up in a way that you only pay us when you make money, which is obviously a you know, a good, good little value metric to use. But yeah, we actually started with the world of pricing, but we've kind of reposition to this, you know, kind of more broad or broader kind of vision of helping subscription companies overall about it. Could you give us a little bit more context there? What would be an example of a product that that somebody would need once you know they're using your free tool that identifies a problem? Tell us about one of the one of the products that kind of solves a problem that people realize they have once they're using profit well, for free. Yeah, exactly. So let's say you're, you know, a company that's US or or charge be or one of these other billing systems. So you come in two minutes, you click in and all of a sudden you get all this you know, Mrr all your financial data in a nice little, you know, tight analytics package, and then all of a sudden you will see inside the APP, Hey, here are the things that you're having problems with and we're benchmarking that and let's say all of a sudden we find your delinquent churn is really, really high. Delinquent Churn is credit card failures. Turns out about twenty to forty percent of people who are churning or people leaving your product or actually because of credit cards. And there's a whole I could talk about credit cards for hours, but that's not entertaining so I'll just stop right there. But let's just say that that that's the problem. Well, based on that, we have a product that you just plug in called propera retain that does all the work for you and basically lowers your churn using our algorithms in this data stack that we're sitting on. And then you only pay us for, you know, the folks that we recover up and above your current, you know, current recovery rate. And then let's say you're using that and all of a sudden, you know, we point out, Hey, your our poo or your average revenue per user. It's growing, but it's not growing as fast as you know, your cohort or the upper, you know, upper group of your cohort, like companies.

Do you want some help with this? And then we can get them on the phone and talk about price intelligently and, you know, basically say hey, like, this is how we can help fix your our poo or fix your pricing. And don't get me wrong that that sounds much more salesy than it actually is. Rat Better, if for worse. We we actually are are not reaching out to as many folks as we probably should be, you know, considering we have so many people in the free product. But it's one of those things where we're playing the long game and that's why we're given away the base metrics for free. I love that. So you mentioned something earlier, Patrick. You made reference to a value metric. That was something we were talking about a little bit offline. Can you expand on this idea of a value metric and why the folks listening to this show really consider what it is and and and implement it in what they're doing? Yeah, absolutely, and I think so. Value Metric is how you charge or what you charge for. So the simplest example, as we've all probably used a crm at some point or some sort of sales product, the traditional value metric that a sales product will sell you on is per user. Other value metrics for marketing products might be per hundred visits or per hundred contacts. And the value metric that we use for retain is the amount of money that we recover. So actual money. And the purpose of a value metric is you want to make sure that you're pricing along where the customer sees value. So for most B tob products, that is money, right. It's either saving costs or saving time, which is money, or bringing more money to your customer. But most of us don't have a kind of you know, picture perfect you know in with our customers like we do, which is, you know, we're right inside the billing system. So charging based on money is hard, right. So typically what you want to do is you want to take one step back, which is all right. What's the proxy for money? So if I'm hub spot or a marketing product, it's things like leads. If I'm a sales product, there's typically well, my sales people are bringing in the money. So it's going to be you know, per salesperson or per user. And the reason it's so important is that when you look at your actual numbers, a value metric allows you to bake expansion, revenue and growth right into your pricing model. So if you're just doing feature differentiation. You're relying on someone going, Oh, I like that feature in that next tier, let me upgrade, or you're relying on them getting frustrated because they can't do something and then you go hey, in order to do that thing, you need to pay us more money, which isn't always the best experience. And so if you use a value metric, then you make sure that well, if they're using more of the product, Aka they're getting more value out of it, more seats, more visits, more contacts, then they're more than happy to pay most of the time and it makes the relationship really easy where you're like, Hey, you're getting more out of the product, you're getting more value, we're just going to start charging you more, or you can delete these users or delete these contacts, and most people go yeah, okay, yeah, that makes sense. It's like a much easier relationship and we just see from a very number standpoint that it's you know, those companies that are using a value metric are growing. I think it's close to to x the the rate as those companies that aren't using a value metric, and it's amazing how few. I think it's less than forty percent of you to be companies are using value metrics and their relatively easy, especially given all these new billing systems that exist where you know you don't you don't need to do any heavy coding to have a value metric. You literally can just do some drop down many as inside of charge, be years or whatever you're using. So it's not necessarily people not knowing what their value metric should be so much as it is people using a value metric at all. I would say, yeah, I think it's a little bit of both, because some people like, for example, per user. I know I talked about it a lot, but it's actually pretty much a terrible value metric for most companies. So if you're a sales product, a help desk or a chat product, per user, per seed is exactly what you want to use, because the value of that product typically does expand for each seat that the the company has.

But for most other products, like a marketing product, for instance, you know per seat, I can just have everyone use the same log in and get the same value right, and so a good proxy is is that if someone can log in and get the same experience as another person logging in on the same log in. You probably shouldn't be using per user, and the answer isn't to you know, basically, you know, attack their Ip address and make sure they can only log in from one Ip because then that's that's a mechanical solution that you know, you're you probably just not focusing on the right problem. But I would say they answer your question directly. I think it's the bigger problem, I would say, is exactly what you said, which is, you know, people just not using them, and I think that there's there's plenty of people who are getting kind of their value metrics incorrect as well. Have you seen a value metric that stood out to you super unique? Obviously not going to not going to apply to every business that's that's listening to this, but just to get people thinking creatively about, you know, what that value metric could be for them? That's a great question. So for be to be and some PC products, whenever you can get as close to money as possible or actual money, that's that's the best thing. So there was this APP called parabus. I don't know if you heard of it. Actually, I think they got bought, but I don't know. There were a B Toc product where you plugged in your Amazon account and then they track Amazon's price increases and decreases and basically, when there was a price decrease, they automatically filed for a refund and then basically it was like found money. So they just took a cut and it was a pretty big cut. It was like twenty percent, but you're fine with it because you're sitting there and you're like, Oh, this is ten bucks I didn't have. Totally fine if you take two dollars. And it's something where I think Amazon eventually was trying to shut them down. I can't remember. I know they got bought and it wasn't necessarily for the right reasons, if that makes sense, but I don't know enough, so I probably shouldn't have said any of the last thirty seconds. But some unique value metrics. I think one thing that's kind of cool is that there's this agency called Pr Two thousand and twenty. That's Paul rets are, and he he actually came up with his own point system because what he does is marketing agencies. So He's basically selling, you know, blog posts and all kinds of other stuff to run your inbound marketing, and that was kind of his style and he he had this problem where it's kind of how do you scale that type of a machine and kind of solve the agency pricing problems? We actually came up with his own point system and it worked really well because all of his competitors were doing just kind of on scope or on spack and it was really confusing and he was providing predictability. So that's that's something where you could actually make your own up, but most of the time you want to kind of go and really talk to your customers, and your customers are the ones who are probably going to point you in the best direction of where they actually receive value. And so I'm racking my brain and I realize both of those aren't maybe very unique, but those are those are some of the more unique ones that we've seen in the market. I think even even the way you guys have done it at profit well is super interesting to me. Charging it's by the dollars that they save, right, is that? Is that how you retain product works? Yeah, exactly, and in the point there was to make it as easy as possible. So someone comes to us and says, Hey, you know what, what is this? And we go we're going to make you more money and they go, okay, but what about the ones I'm already recovering? And we say, Oh, that's fine, up to that point is free. So up to their current recovery rates completely free, and then over it is you know, when we start charging, it's kind of like that parabus product that I was describing. It's Hey, if we make you money, we take a cut, if we don't, it's free. And that made our sales cycle really simple. That made everything like picture perfect. And if you think about other industries where you're not as close to the money like we are, you know, let's talk about like a crm. You know, imagine going and trying to sell a crm and saying something like Oh, we charge, you know, per ex contacts, per why? This, per z that, and that's something that you know kind of sales force tries...

...to do. It gets super confusing, especially if you have, you know, a multi touch sales process, whereas you know, a basic crm that's just like hey, it's per seat, you get these features. There's per seat and you get these features, or it's this per seat and you get these features. It makes the sales process much, much cleaner. I love it. So, speaking of a lot of BB companies and making the mistake of trying to overcomplicate their pricing, you're actually doing a new series. It launched today, you know, the day we're recording this, and it's called pricing page tear down. Can you tell us a little bit about what you're what you're doing with that show and a kind of what the what the concept is? Yeah, definitely. So we're to take a step back. We're basically redoing our entire approach to content and essentially going, you know, series by series, and that's where, you know, we we've studied a lot of folks like sweet fish and other companies out there to basically figure out, you know, how are these folks doing this and can we do it on our own or do we need to hire a bunch of a bunch of these folks? And I think the the they of answer is they're both right. So we're probably going to be hiring folks like sweet fish to try and, you know, help us, you know, produced podcasts and different pieces of content, also doing a bunch internally and in so that this is our second series pricing page teardown, and what we ended up doing was basically going out a pricing page, collecting a ton of data on that pricing page and then providing commentary just like we would do with our customers, but in a quicker kind of a little bit more, you know, a little bit of more of a show of manner. And so the episode that we just aired was was Netflix, and then the next one that's coming up, that's actually launching, I think it's going to be launched a day or so before this podcast errors, is actually on sales force, and that's, you know, you and I were joking a little bit before we started recording at sales force is basically that one of the most complicated pricing pages out there and it's one of those things where only sales force can get away with it. Anyone else out there should look at it and run, because it's definitely you need. You literally, as I kind of jokes before, you need a legend, you need like a map legend, and I think they literally have one on their page to figure out what is in what plan, how much each plan is, and it takes almost a half hour just to just to figure out what's going on on their page. And so it's so you guys are you're collecting data, like you're getting like hey, this is this is how this page is converted over the last ninety days, or what kind of data are you guys pulling? Yeah, it's a great question. So we're actually going out to customers, or target customers, of each of these companies, and we're not talking like a dozen, we're going out to thousands. So for Netflix, we collect did forty five hundred customer responses? For Sales Force, I was I can't remember, but it's definitely close to that as well, and we're actually collecting we have some algorithms that allow us to collect data like willingness to pay and what features they enjoy. It's kind of our what we use for our pricing product and we're basically figuring out, hey, Netflix is is actually priced pretty well here, but here's all the mistakes they're making. Or sales forces priced okay here, but here's all the mistakes they're making, just to essentially, you know, help you learn that even these big giant companies still have pricecing mistakes. And then there's a few episodes that we filmed that are a little bit more controversial because we found some, it's a major mistakes and certain pricing, pricing strategies, but will let you check those out before I reveal too much. Was I saw the Netflix episode today on Linkedin. Are there other channels? Is is going to be on Youtube? Where can folks find the content? Yeah, so the the easiest ways we're sending these out each week to to an email list. So you can just go if you find the episode on Our Price Intelligently, your prof wil blogs, just sign up there. But the other you know, if you don't want to get on the email list, it's either on my linkedin at Patrick Campbell or...

...on our youtube account, profit Weil YouTube account. So you'll be able to see it and a couple of different ways and hopefully you won't have to go too far before you see it if you're in the BBSASS world. So so we've talked about the concept of the value metric. Loved the examples that you share there and really just the importance of getting people to think in terms of is their pricing aligned with this, with this concept. We talked about you not making a pricing too complicated. You guys doing an entire an entire show dedicated to this, which I think is incredible. Last thing I want to talk to you about, Patrick, before I let you go today is this idea of localization. We're talking about a little bit offline, but can you expand on this idea before I let you go? Yeah, if you're not familiar with so, this localization or internationalization of your pricing, especially if you're be tob company and especially if you've never done anything with your pricing, is is probably the easiest and best thing to start with. And the basic concept is is that human beings and just our ecosystems are all a little bit different. So someone buying a crm in Boston or Florida, where James You are, it's it's probably something that the willingness space probably going to be similar, right, whereas the willingness to pay for someone buying that in London or in Eastern Europe is probably going to be very different, depending on the saturation of CRM's there, the brand that we're selling, how how much word of mouth is in those regions. And so what we typically find is that most people, you, sure most companies you, should be changing your prices or adjusting your prices for each major region that you're in. And if even ten percent of your customers are from outside the United States, you should be localizing your pricing in those regions. And what localization means is the first step is to just make sure your currency symbols or set up so if someone's coming you from the United States or Canada or even the Australian region, just putting in dollars, if someone's coming from the UK, make sure it's pounds sterling and if someone's coming from Europe's making sure it's the euro. And then one step from that is basically making sure that the relative price in each of those regions is is adjusted. And so I can tell you right now, and it's a little bit different depending on the product, but the Nordic region is typically willing to pay about thirty percent more than the United States. The UK region is typically probably about twenty percent. Europe as a whole twenty or fifteen percent, depending on Easter or Western Europe, and all of these different incremental changes are obviously pretty big to your revenue, especially if you know thirty percent or forty percent of your base is actually from outside of the United States. So it's definitely something to kind of consider and it's one of those things where you don't have to necessarily change your pricing dramatically, and so we normally suggest if you've never done pricing, which most business is unfortunately haven't done much, the average amount of time most businesses spend on their pricing and the entire history of their business is actually fifteen hours. It's scary little much time. Yeah, it's insane. So and it's mainly because you know, you don't, you never learned how to do it. You're uncomfortable because it is something that's pretty important. And so this is an easy project where it's like, oh, we don't have to change anything drastically. We literally just have to change the prices in different regions and get some technology that allows us to do that and then we beautifully. You can, you know, just kind of, you know, get some get some confidence in changing our pricing as a whole. Well, that's such a fascinating stat that most business has spend no more than fifteen hours in the life of their business on pricing. So, with the title of the show being be to be growth, I think this is again something that we talked about before. I promised I'd let you go after after talking about localization. But there's one last piece that I want to jam with you on because I think this is going to be really, really helpful for listeners. So when most people think about growth, they think about, you know, new user acquisition, and really it seems like the root of what profit will was built on this is this idea that they're tremendous growth opportunities by looking at things like pricing and retention. Can you kind of hammer that point home...

...of why pricing is such a massive growth leaver for for be to be companies, you know? And then I will actually let you go. I promised. Oh No, so I can again. I love talking about the stuff, so I can talk for days. Probably it's not not entertaining to your your listeners necessarily, but if here's the thing you've probably heard already and or inferred from this conversation, that were, you know, love our data points and do a lot of research. And to give you some context, we looked at, I think it was right around thirtyzero posts written on growth and mostly be to be. So thirtyzero blog post that were written about, Hey, this is how you grow your business, this is how you grow your business in a be to be environment. And quite literally, between seven and eight out of every ten posts were written about acquisition based growth, meaning this is how you get more customers, this is that you convert more leads, as that you get more leads, all those different things. And don't get me wrong, getting more leads is super, super important. It's very, very important to get more leads. But unfortunately, when I look at this data, I see the fact that it's really that we have a misunderstanding of word growth actually comes from. When you start crunching the data and when you start looking at the effectiveness of your major three levers, especially in a subscription business, your acquisition, your monetization and retention, we're finding that one percent improvement in your acquisition is only bringing you about three percent boost in your revenue, and that number is actually decreasing. So it's not going to get to zero, because obviously acquiring more customers is definitely going to make you grow. But Product is so easy to switch in and out now these days, just because software has gotten so good. Users are very ungrateful because we've just gotten used to, you know, basically having space age technology in our pockets for the past five to ten years. And essentially what's happening is you need to focus more on the monostation or retention, because those are the things that are going to keep those users and obviously keep those users at the right price and that same one percent improvement. If we kind of look at it on monetization and retention, it brings US between, depending on you know, what industry or vertical, you're in a between seven and en x the same impact that acquisition and does. And so the advice is is that obviously you need to spend more time on your retention and monetization based on, you know, the the fifteen hours that they mentioned before. But it also means that you need to really rethink how you're growing and acquiring customers, and that's why we've switched to this kind of multi medium model or podcasting. We've taken, like I already said, a lot of like you know, basically advice and things like that from you know, folks like sweet fish and other like media companies out there, because we need to get better at acquisition. But realize that we need to get better acquisition just to survive, like we're not going to grow. We just need to be really good at content to survive, and then we need to make sure our retention. Our monetization is is really, really good in order to actually grow, and so that's kind of all we look at it personally, based on the data, and that's really what we kind of evangelize externally, which is, you know, this balanced growth. Like. We don't live in a world where we can just throw a bunch of money at the wall in terms of leads and just magically grow our businesses. Now we have to be more of a scalpel and rather than a sledgehammer. That makes so much sense. Patrick, I really appreciate you sharing this. I mean that the data that you bring to the table to me is it is mind boggling. So thank you so much for sharing. If there's somebody listening, they want to stay connected with you. They want to learn more about profit. Well, what's the best way for them to go about doing this? Yeah, I'm Patrick at price intelligentlycom or PC at profitlecom, depending on which domain you're on. They all go to the same place. And then I'm also paddocus Patt. I see us on twitter. It's a childhood nickname. More than happy to explain that and another podcast episode, but it's a that's where I'm at on twitter awesome, and make sure you you follow Patrick on Linkedin. Like I said, I saw the pricing page teardown that he posted earlier today and so you'll want to make sure that you're following the rest of the content that he's putting on linked in as well. Patrick man,...

...thank you so much for your time today. This is this has been incredible, so thanks again for being on the show man, and I love it. Thanks for having me. There are lots of ways to build a community and we've chosen to build the be tob growth community through this podcast. But because of the way podcasts work, it's really hard to engage with our listeners and without engagement it's tough to build a great community. So here's what we've decided to do. We're organizing small dinners across the country with our listeners and guests. No sales pitches, no agenda, just great conversations with likeminded people. Will Talk Business, will talk family, will talk goals and dreams, will build friendships. So if you'd like to be a part of a BEDB growth dinner in a sitting near you, go to be to be growth dinnerscom. That's be toob growth dinnerscom. Thank you so much for listening. Until next time,.

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