B2B Growth: Your Daily B2B Marketing Podcast
B2B Growth: Your Daily B2B Marketing Podcast

Episode 2049 · 4 months ago

A Guide to a Better Pricing Model w/ Ajit Ghuman

ABOUT THIS EPISODE

Pricing is a complex balancing act. But how can we craft a pricing structure that fits just right when it comes to serving all of our business’ needs?

Ajit Ghuman, Head of Product Marketing at Narvar, has pricing down to a science. He says it’s a path best approached one step at a time. Ajit gives us his step by step framework to simplify the pricing process and how to do it with confidence.

 Ajit’s advice: Don’t fear pricing!

Yeah, a jeet a jeep buhman, I'm so glad thatyou get to join us on the show. Thanks for having me so pumped. Yeah man, wewere talking, I think it was, it was just before break, but you're blowingmy mind even in setting up for this call so I cannot wait to get intoeverything that we're gonna get into today just to kick off. What is acommonly held belief about marketing that you passionately disagree with?Yeah. About about pricing, right? Like the question or marketing. Yeah, well,I mean for either because usually yeah, I guess in particular tell me more of acommonly held belief about pricing that you disagree with. So basically like wewere talking last time and I've been kind of on this process that I've seenso many companies kind of think about their product development process in acouple different silos and I'm actually really frustrated about it because theproduct manager says it's not my job to think about how this thing is going tobe sword and it's not my job to think about how it's going to be marketed arepriced as a market. And I'm like, but you do know that if you don't thinkabout it, your product is not going to be successful, right? And so I do thinkabout it. But what I see is like time and time again. We are such atechnology driven culture out here in the valley that were like, hey, what isgoing to build the best technology? And we literally think build it and peoplewill come not exactly right, you hire the salespeople, but which is so muchmore. It's so true. Yeah. It's like if it's a good enough product, we'll worryabout churn and pricing and all that later. Yeah. And I mean, the honesttruth and this is the marketers truth that people don't like to hear is likeyou can have a shitty product and do well and you can have a great productand not do well. And that's the...

...difference that sometimes technicalleaders and technical companies don't realize that they accept. I'm sorry tosay Salesforce is not that great of a product, but it still doesn't. Anyway,it's terrible. I hate Salesforce man. Especially if it is literally the baneof most sales people's existence because they're like, I'm just doingdata entry these days, like I don't actually have to sell, but it it'stheir successful companies. So they were really good at martin. You know,the whole whole nine yards of marketing. Yeah, absolutely. So what's the mainthing about pricing that you would say that people will say, okay, it's thisguy's job, is this guy's job. What's the gist is it that it's complex? Isthat what you disagree with? Tell me more, That's the impression. So peoplekind of thing, Okay, marketing will figure it out. Most companies, not evenmarketing, its people think it's like, we don't really know anything about thecustomers, so we will let sales figure it out, right. And you find theseplaces and companies that have Just put some random pricing on the board andhave survived for so long and you look at them like you could have done somuch more here and instead of being a $20 million $35 million dollar revenuecompany and you could have a double evaluation by now that I mean that'sthe literal impact of what you could have done now. I'm not saying like, seeI'm not the founder, I think founders are created. I think they create a lotof value, but I think there is more that can be done and it's not out ofreach in all these consulting companies that offer value, they have experience.But do you really need to spend 100 kids who have somebody else? Tell youabout your startup then? You, you know, you know, your customers, you know whatthey like, what they care about, you know, how much they're gonna pay. It'sjust a matter of knowing a few steps and a process by which you need to comeabout. Okay, I've checked off the boxes. This is my kind of decision frameworkand now I am confident that I have a pricing structure that is going toserve my needs. That's really what...

...we're talking about. What are youfollowing? The simple process that's going to solve you? It's not rocketscience and it's definitely not what they teach you in business school,which you know, complex conjoint analysis and uh you know, let's look atthe impact of this attribute, nobody does it like that and you don't have tobut A G. I get all these people coming to me telling me, look man, we got tohire this firm, we don't know how much we could charge. What if we're leavingmoney on the table. What if what does it look like as they scale, What doesscale look like? So how would you respond to all these? I think I thinkthe honest people are leaving money on the table more often than north. Idon't think the conservancies are bag like I think they offer value, I thinkthey have experience but I think you have as a business the most knowledgeabout your market and your customers and you just need a simple framework.So at my current company now where I, I do all of the pricing and packaging andthis whole realization started once I started this project is hey, uh, thisis actually simple, but there is no document that I can read that justtells me it is take the sequence of steps to come up with the process. Andif I found out what to do by calling people, I'm like, hey, you're pricingat this company, tell me how you did this, right? So I called 56 people inthe industry and I just knew what I needed to know and that's an investmentof four or five hours. So that's my P O V Wright. If you if you know just thesequence of steps you need to take, you can cut all of that out and be moreconfident. It's really about confidence in the decision that you want to makefor your business. Sure. Okay. So can you give me example of, you know, wherewhere would you start, where do you even start? How do you even know youshould start focusing on pricing? I would say that there it depends on thelifecycle of a company, like how do you know, at some point when you'restarting, you need a number on the...

...table. Right? So it may be that notcritical when you're really starting out and you have a new product in a newmarket, you're just testing things out. Okay. I think you can survive, it's notprobably be another world as you get successful. What happens is thedecisions you made early on, kind of these implicit assumptions start tobite you, you start to under undersell sometimes you create more friction inthe sales process than is actually necessary, depending on how you set upyour structure. Uh, and I can give you some examples of other valley companiesthat have found that out. And it's a natural, totally natural and expectedtransition that companies have to go through as they get bigger, they getserious and then they solve this problem. Can you talk a little bitabout the friction piece cutting off? I mean the friction, I'll give you anexample and this is a public example. So mixed panel, I spoke to their headof pricing and they were, when they came out, they were charging, uh, fortheir analytics software by event. Right now. Event is the only thing atthat point that they could measure and track, and they said, well, just giveyou charge by event and all of these customers as you have different typesof customers using your product, they're like, well we're not gettingvalue out of this and you're charging us by event. You know, it's not reallyproportional to how our users are using the system, Right? So it was okay. It'sa fine, it's a rough metric. But that company has been around for a long timeto have only realized it now. Uh, and that I was like, you should, you guysprobably have changed a little bit. So, so I, you know, I covered, you know, asyou know, I'm writing a book on the topic and I covered this with the headof pricing and he mentioned how they selected a new pricing variable, whichnow was like the trackable users on the website. Similarly to the daily activeusers on a mobile. Now, that is much more relevant to business becausethey're like, okay, well I'll pay you based on the usage I have on my product.Right? That's if the product is being...

...used Ivan uneven. Otherwise peoplestart to have these questions, especially in the enterprise, I'mpaying you 50 K or hundreds or whatever I'm paying you and but I'm not happyand that's where the challenge is, right? You have this hard Upsell orrenewal conversations where people are like it's not working for me. And thenew conversations are hard as well. You're creating ry models and you'rekind of rationalizing and your force feeding your sales team to work with anoutdated methodology. Mm That's so interesting. Yeah. One of the pointsyou were bringing up about this is about how sales. One of the indicators,along with what you were just talking about about friction is one of theindicators is sales isn't even following the pricing model. Can youtalk a little bit more about that? Yeah, I've seen, I've seen that in some of myown experiences. The thing is that if, so let's say you're an enterprisecompany right? You always sold a certain way and you've gotten good atdoing that now, now there comes a time to institutionalize that, right? Andyou figure out how to do it properly. If you do it in a cookie cutter manner,you'll do what in the industry is a good, better best model, all of thedifferent pricing charts and what the VCS tell you like. It's just like thiscookie cutter approach and if you look at, I like the guy that priceintelligently, but there they have a podcast, right? And they go throughpricing pages. If you start to go through pricing pages and see, oheverybody does. Just just put better best. The problem is if you have anenterprise company, it's custom scoped, there are many more deals that you haveto figure out and if you, so I have been in a company where this hashappened and where these pretty much cut and dry solutions were offered tothe sale stream, they didn't like it. The problem was here, You're adding 10features here that I'm going to go back to the customer next year and upset thefive features. So why have you bundled these five features into this? Thisbundle? I'm not, I don't want to sell them right now and they're notinterested in this because this is not...

...how the usage scales. Right? So, and soyou block your Upsell potential and your sales team is like, well, I guessI'm the experienced A is not going to follow your pricing and theinexperienced A is going to end up with lower SPS because he's just going tosay this is what this is my pricing and I've been in that situation, but thereis a revolt and the sales team like this is just doesn't work for me andsomebody gets fired. So that's the problem with implementing bad pricingactually in a bigger environment and not thinking thing to, hey everybodyLogan with sweet fish here. If you've been listening to the show for a while,you know where big proponents of putting out original organic content onlinked in. But one thing that's always been a struggle for a team like ours isto easily track the reach of that linked in content. That's why I wasreally excited when I heard about shield the other day from a connectionon, you guessed it linked in since our team started using shield. I've lovedhow it's led us easily track and analyze the performance of our linkedincontent without having to manually log it ourselves. It automatically createsreports and generate some dashboards that are incredibly useful to seethings like what contents been performing the best and what days ofthe week are we getting the most engagement and our average views perpost. I highly suggest you guys check out this tool. If you're putting outcontent on linkedin and if you're not, you should be. It's been a game changerfor us. If you go to shield app dot Ai and check out the 10 day free trial,you can even use our promo code B two B growth to get a 25% discount again,that's shield app dot ai. And that promo code is B the number to be growth.All one word. All right, let's get back to the show. Absolutely. If I was tolook for some indicators, it would be that we put out this pricing model. Butthe contracts either the finalized...

...contracts that I'm seeing don't match.Is that right? Or what would be some other things or will be the complaints?Yeah, I'll give you another example uh one I can share because it's in thebook. So again, site like they had this good better best model and Iinterviewed johnny chang who is now at cuba johnny was like when I came in andI saw they had these three packages, but the only sort of the middle packageand that's the only like, like, I don't know why we have these three packageswhen we already sell the middle package and then there is shelf there. Right?So the thing you have to see is all the features that you saw at some point.Some features are not going to be used and they're consistently not being used.So that shelf where you sold him but nobody is using it yet. It causes debtfor your implementation steam because later down the road they may have toimplement it. So that's what he realized which is very unlike its inits situation to the the situation I discussed and then he said oh wait waitwe need to move this totally to a better pricing model different forcommercial enterprise, more modular. So we eliminate all of the shelf with andwe make sure we are pricing these like if you have I have three plans if we'realways going to pick the middle plan. So and that was their main market.Right? I believe the insides main market was mid market and that's wherethe pricing was the worst. That's oh my goodness. No way. Also this is like twoor three years ago. Yeah, totally. They probably fixed it. Yeah. That order.Yeah. But game sites, if you're listening then get on. Yeah. Yeah. Yeah.No exactly. No, I'm sure they fix it as well. No. That's crazy though. That'sawesome. There is some points you brought up about, you know even likemore money up front. What did you mean by that again? Because I think that'ssuch a crucial point for a lot of businesses is how do we get cash upfront? Is that possible? Yeah, exactly. Yeah. So the point is Let's say you sawa package for $20,000, right? And maybe...

...you were able to get 20,000 whatever.Yet. There were four things in. There are three things that In historicallywellbeing up sold all the time for much higher prices. Most companies in thevalley and this has happened after 2015 have gone through more of a sas growthmodern land and expand. Its less of, I'll tell you this big block ofsoftware and it's less of that and it's moving too, I'll tell you the smallthing and then you keep increasing your usage, right? That's fear the Valleyhas shifted to and is going. So now if you have this fixed thing and youprovided these features that you were gonna sell later, then you cannot goand sell these things later to the customer anymore. So if you really haveto be thoughtful about what the customer journey has been furthercustomers in terms of feature usage so that you can design something that'sgoing to maximize upset. There is a lot of research now that points out likebeyond the point beyond like around roughly 50 million. There are, there isan inflection curve where GTM now has to focus on existing customers toUpsell more products to existing customers as the biggest driver ofgrowth leading to I. P. O. Not new business. So that's the biggest part.And you said that was 15 million air or is that like about 50? Around 50 15.Okay. Yeah. Rough estimated there is a point in evolution companies beyondwhich you gotta start focusing on that upset path a lot more because it's Ibelieve it's like 3 to 4 times cheaper in terms of customer acquisition rate.Uh it is cheaper for it's cheaper and this is a pacific crest survey priceintelligently also talks about that all the time and before that you are morefocused on new business acquisition and new logo acquisition. If you look atthe valley, everybody is focused on new...

...local acquisition, nobody's solving theUpsell expansion volume of sell path. However, if you did that intelligentlyand I know of companies who have, you do not suffer anything during the covidpandemic because you intelligently kept charging more for usage for yourexisting customer base and you kept selling them more even when youcouldn't go up to the broader market during during a recession. So it's anincredibly powerful lever. Absolutely, wow. That's awesome. So what have youseen to speak to some of how powerful it can be? What have you seen fromcompanies when they reject the idea that pricing is complex and weshouldn't go through a step by step. But when they actually go through thestep by step, right. Undoubtedly they see their SPS increase their C dealvelocities increase. They see pricing adoption improved Associates teamactually starts to use it and they see the customer being actually haveregularly easier renewals, right? So if you, especially with this uh if themodel was wrong and you fix the model, it has so many cascading effects easier,renewal's easier contracts, no hassle negotiations upfront. It's easier tojustify our oh I better SPS better lower turn rate. Like it's everythinglike that's why I like there are many. So yeah, they're saying this is justlike one thing is not a very tiny thing to fix it, fixes so many other problemsin their business. If you do it right? That's huge. That's huge. You have mesold. Where do we start? Where do I begin? What's the first step? Whichwhat should I do? Right away And then and then what should I do after that?Yeah. I mean I think there are roughly like there's like a decision diagram Ifollow, but think of it as three or four steps. I think you consideryourself as a business owner or their product manager. I call it like P. P. P.It's just my framework. Think about your positioning first. Are you thepremium player? Are you a pricing you...

...know, are you commoditized price,competitor? Think about where you are in your customer segment and just makesure you know what you want your positioning to be 2nd. You come topackaging, right? Think about your customer segments. Do you have manycustomer segments? Bill has many packages per customer segment thatreally solve their problem then and then finally pick the right pricingvariable. Find something that maps to customer value, Right? So historicallythere used to be per seat pricing where it's a very standard model of softwarepricing that may not necessarily always map to value that a customer is getting.So the Valley now has the world to usage based pricing like the portfoliosof the world. So select whether it's a capability or usage based model. Right?So we looked at positioning, we looked at packaging, we looked at the type ofpricing variable. If you think about all listeners, step by step process,you solved most of the problems right there and then what you need to do isyou could do so a little bit of research on the price point itself,which is probably the least important problem here. But you can do someresearch using surveys and conjoint or what have you. And the final step yetthe longest step is pricing operations. You have to, if you have a bigger fieldsales team, then you have to build all of the materials sales, enablementmaterials pricing, calculator, CPU execution stuff. So first processstrategy, get it right in that order. If you get it right, it's very likelythat you won't get the operations peace wrong, but the operation peace willtake time. And that's where you involve your pricing of folks, right? That'swhere you know, all other parts of the business and say, hey, I've decidedthis is the structure I'm gonna follow. This is roughly the price points andthere is more like, you know, there's some more details to it, but it's asimple structure and now I want you...

...guys to operationalize it and tell mehow to do it. And then you can negotiate, you can delegate to it tosome other team. But as the product manager or as the business owner, youmade the important calls first, that's all I'm asking you to do. Just take theimportant calls for your product. Mm That's so good. Obviously this willrange based on internal dynamics and everything. The time commitment. Butwhat would you say is a typical someone should budget when they're saying OK,you know, redo pricing. Usually the redo pricing conversation is like, weneed to redo pricing like this week and it's almost crazy pressure and and theymay make the wrong decisions. Whatever. How long would you say? Typically thatprocess should from beginning to end and go through, all those steps shouldtake right. If you are somewhat of a well runs established business, I wouldsay it would take about a month or six weeks to come up with the structure andthen probably a couple of months or more for operational. Izing it. Now youcan operationalize it in a manual fashion uh and do it faster. But tomake the right decisions is going to take at least a month to six weeks,that minimum. Right? I don't think you can do it in a week but it is possibleyou could do it in a week if you're coming out with a brand new productthat nobody's ever seen. Right at that point, you just have a hypothesis. Sure.But for a functioning company that's I probably say that's the minimum, peopledo tend to fall in like if you go to a consultant they will take more timebecause they want to do things properly and they want to charge by the r Idon't think you need that. The other problem is operationalizedoperationalization. Be a little careful if you don't need to do the whole hogof a lot of automation don't because the C. P. Q. Step of implementingthings in Salesforce is where there is the biggest failure rate and if youthink that is all going to be automated and it's going to be the most wellfunctioning thing is never going to be...

...that way. And it is not that evenestablished companies so that's just the pitfall that you probably need towatch out for wow. That's such good advice man. That's so good. Is thereanything that you would want a big what's the big takeaway that you'd wantour listeners to walk away with? The biggest takeaway is a stone fear. Youknow one is just think holistically about your product GTM right but Ithink it's part of your product GTM it's not separate it's part ofmarketing, I would love for product managers to have ownership about itbecause it's their product and it's just a simple step by step framework.Just think logically about the steps. It's not very complex, it's not math,mathematical, everyone can do it. Don't fear it, it's good advice. That's greatadvice, man, There's so much you've unpacked in this episode. I meanthere's I know we're just scratching the surface and it's hard to, even ifyou can go so deep into this, and so you've been working on this, what's thename of your book again, for all listeners? Yeah, yeah. Thanks. So, thebook I'm writing on this is called Price to scare price to scale. What agreat name. It's awesome. And then and when is that going to be available? UhI'm hoping sometime in january. So this month. Sweet, that's right around thecorner. That's awesome. We're in january, That's fantastic. So eitherthis month or next would still be huge. What? So for all the listeners, if theywant to go and check out the book, where would they go and check out yourbook, yep. So it's, my website is aged cumin dot com. You can just land on mywebsite and navigate to the pricing book or if you want to go directly tothe book, it's a G Komen dot com forward slash pricing dash book. That'sawesome, man, that's great, definitely check out that book, I would say,reserve it now or rather make sure you subscribe through through that link now.So then as soon as the book drops, you...

...can get that, um I definitely begetting, going to be getting a copy. This topic is so huge and comes up somuch. Obviously I'm more on this. Not obviously, but for those who don't know,I'm more on the sales side. Usually the conversations and when you'recommunicating it from a sales point of people like, oh, you should be ablesell anything or sell any price. It's like, no, you don't understand whenyou're communicating, there's only so far you can be asked before. You'relike, I honestly have no idea and the client knows it. Like they know withouta doubt that you're just making up reasons and they're going to ask,they're gonna be like, why are we paying for this? If I thought you saidyou'd probably be using that for the first couple months, why are we goingto pay for this now? Can't we just pay for this? And so those conversationshappen with good pricing, you're arming your sales team with the best weaponsthey could possibly have totally, totally huge. Yeah, we, I mean, I thinksales people are often given the short end of the stick and expected to besuperman and you know, it was like, hey, you have a product, you know, you're abag sales person if you can't sell it, but it's not the case like we make somany mistakes before we set up, send a sales person out there. I think, youknow, I think there's a little more empathy is needed because you know, seeat the end of the day they're going to maximize the valuation of theirbusiness. Yeah, big time. Big time. And then all the up cells and everythingelse makes so much sense. G this was awesome. Thank you so much for being onthe show if people want to connect with you personally. Um is it best toconnect with you on linked in? What's your preferred social platform? Yeah,linden is perfect. Okay, awesome. Great. Well I'm sure we'll have all the linksin the show notes and everything, but thank you so much for joining us uh indiscussing pricing and I cannot wait to read your book when it comes out.Thanks josh. Thanks for having me appreciate it, awesome man. For the longest time I was askingpeople to leave a review of GDP growth...

...in apple podcasts but I realized thatwas kind of stupid because leaving a review is way harder than just leavinga simple rating. So I'm changing my tune a bit. Instead of asking you toleave a review, I'm just gonna ask you to go to be be growth in apple podcasts,scroll down until you see the ratings and reviews section and just tap thenumber of stars you want to give us no review necessary. Super easy and Ipromise it will help us out a ton. If you want a copy of my book, Contentbased networking, just shoot me a text after you leave the rating And I'llsend one your way, Text me at 4074 and I know 3, 3 to eight.

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