Impact Pricing

The reason we even have this meme is because too often, companies think, ‘Oh, I need to go subscription.’ 

They want to transition from a traditional business model to a subscription business model.

And they often think of it as a payment plan. ‘Oh, I used to charge this. Now I'm going to charge this divided by 36 each month. And that gives me a three year payback.’

And even if the math works out, it's not the right way to think about it. 

“Subscribers buy benefits, not products, they don't take ownership.”

- Mark Stiving

What you want to think about is, what's the stream of benefits my customer gets when they buy my product, because what you really want is for them to get that stream of benefits month after month after month. 

They're happy paying you month after month after month, because they're getting those benefits. If you can think through clearly what are the benefits that you deliver, then you might be able to restructure your product so that you can deliver those benefits more visibly more easily more readily. 

And then you can think through what are the detriments of the way you sell your product today? And is there a way we could overcome some of those because we go for a subscription. We want easy detriment is instead of giving you all that money upfront, I get to pay you a month at a time. 

And by the way, if I don't like your product, if you're not delivering value to me, I get to churn out and I get to unsubscribe, so it gives buyers or customers the ability to try our products without committing huge amounts of money. 

So in the end, think about the benefits your buyers are getting. It isn't about selling our product because buyers are buying our benefits. 

We hope you enjoyed this memecast. If you see any of our memes that you'd like to move to the top of our memecast list, please let me know.

If you have any feedback, definitely send it. You can reach me at [email protected]. Now, go make an impact.

Connect with Mark Stiving: 

• Email: [email protected]
• LinkedIn

Arjun Patnaik is Head of Pricing & Commercial Finance at Pine Labs. He used to work at GE as an Audit Manager. 

In this episode, Arjun talks about how the role of pricing is richer in subscription businesses than any traditional business as it allows you to pull many pricing levers. He shares how triangulating the three important factors of knowing your value, communicating it, and figuring out people's willingness to pay drives the whole point of pricing. 

Why you have to check out today's podcast: 

• Learn to differentiate and understand how pricing works in a traditional versus subscription business
• Learn about the whole customer lifecycle and lifetime value in pricing subscription
• Find out the three pillars of subscription pricing where everything flows from there

“Don't undervalue yourself. Don't leave money on the table. Do the hard work. Don't just go for a cost-plus or competition-based pricing. Spend the time, talk to your customers, understand their value equation and willingness to pay. It's going to pay off. So, spend time, money, and effort on pricing, and it will pay you back.”  

- Arjun Patnaik 

Topics Covered: 

01:46 - Arjun's accidental entry into the world of pricing 

02:46 - What pricing for him is 

03:56 - What was GE's pricing approach, as he used to work there 

06:13 - How was it like for him moving from cost-plus pricing to value-based pricing 

08:51 - Why is the role of pricing much richer in subscription business than any regular sales business 

10:18 - What he thinks of subscription pricing 

14:11 - The business he was involved in at GE 

14:56 - Talking about businesses transitioning from traditional ones to subscription 

15:58 - His thoughts over Finance people being the wrong people to run pricing 

17:59 - The need to marry data and solid customer research 

Key Takeaways: 

"When I think about pricing, I need to think about the whole customer lifecycle, especially in my business, right? So, I need to think about, at what price is my sales team acquiring customers efficiently? So, at what price can I maximize productivity and lower the cost of acquisition? - Arjun Patnaik 

"Beyond just the core product that I'm selling, which I'm getting the recurring revenue for, how do I sell more services to this customer because it's much easier, you get a much larger bang for the buck, monetizing compared to acquiring." - Arjun Patnaik 

"I think that's why we need to marry data, which we have an abundance of, with solid customer research. Because if someone says the customer wants this versus that and they're not able to prove that, it just comes down to, like, a bit of faith, experience, and gut feel. But then I just believe in customer research, and there are so many tools in pricing to figure out what the price range is." - Arjun Patnaik 

Resource Mentioned: 

• GE: https://en.wikipedia.org/wiki/General_Electric

Connect with Arjun Patnaik: 

• LinkedIn: https://www.linkedin.com/in/arjun-patnaik-63abb56/

Connect with Mark Stiving:   

• Email: [email protected]
• LinkedIn: https://www.linkedin.com/in/stiving/

This is an Impact Pricing Blog published on May 12, 2021, turned into an audio podcast so you can listen on the go.

Read Full Article Here:  https://impactpricing.com/blog/a-question-about-pricing-models/

If you have any feedback, definitely send it. You can reach us at [email protected]. Now, go make an impact.

Connect with Mark Stiving: 

• Email: [email protected]
• LinkedIn

Customer Success is that department where we want to onboard

We want to make sure they're using their product, getting as much value out of our product as possible.

Because companies that use our product a lot are much less likely to churn out.

We think of customer success as reducing churn as a way to keep our customers then absolutely it is and it absolutely should be. 

“Customer Success creates real value that we can capture now in retention revenue, and someday in expansion revenue.”- Mark Stiving

But what really happens that's super valuable is the more we can teach our customers to use our product, the more value they get out of our product, the more likely they are to upgrade.

The more likely they are to stay if we raise their prices, the more they love us and we consider other products or the more they use our product, and they end up paying us more because of our pricing metric. 

Customer Success then not only helps us with retention, but it's probably even more value in expansion. 

We hope you enjoyed this memecast. If you see any of our memes that you'd like to move to the top of our memecast list, please let me know. If you have any feedback, definitely send it. You can reach me at [email protected]. Now, go make an impact.

Connect with Mark Stiving: 

• Email: [email protected]
• LinkedIn

Michael Hurwich is one of the foremost and sought after Pricing, Revenue & Strategy Management Consultants known around the world. Michael is a highly effective and energetic business leader with over 20 years of experience in Strategy, Revenue Optimization, Mergers & Acquisitions, New Product Development and reengineering business processes. Michael works closely with leadership from the C-Level to line management to develop and execute clearly defined pricing strategies. 

In this episode, Michael takes pizza as an example to explain pricing as there are commonalities shared by businesses when it comes to pricing strategies and tactics that resonate with the whole concept of pricing pizza. 

Why you have to check out today's podcast: 

• Learn how value and demand factors, not cost, help you increase price 
• Find out how you win customers and gain their loyalty
• Learn how to harmonize your pricing and the value that you deliver

“Definitely focus on demand, supply and demand issues. When something seems very busy, there's a tremendous opportunity to elevate your price, so long as you're delivering value in the marketplace.” 

 - Michael Hurwich 

Topics Covered: 

02:03 - Why talk about pizza 

03:29 - A variety of pizza suiting everyone’s preference on every location 

04:44 - Why are organizations leaving money on the table when pricing pizza 

08:07 - Pricing being all about value, the supply and demand 

11:36 - How do we avoid price transparency 

15:20 - What is price transparency and the goal of moving consumers to purchase more than they otherwise would have 

19:17 - Pricing and elasticity of demand 

22:03 - Talking about loss leader products 

24:03 - How to earn your customer’s loyalty 

26:56 - His best pricing that can greatly impact one’s business 

Key Takeaways: 

“The key is to really figure out how to move away and make the price a little less transparent and focus on the value and the demand of those products. It's all about supply and demand. And the stock market reflects that very well, as does Bitcoin.” - Michael Hurwich 

“It's really about moving customers to where you want them to end up at the end of the day. And it's incumbent upon vendors to drive purchasing behavior, not the other way around.” - Michael Hurwich 

“The goal is really to focus less on price and price points, focus more on value and increasing that value perception and differentiation.” - Michael Hurwich 

“In the pricing world, the important component of understanding price is also to evaluate and determine the elasticity of demand.” - Michael Hurwich 

“And one of the things that people, most consumers actually don't know, they typically don't know the individual price of a product. What they do know is how much they're willing to spend when they go out.” - Michael Hurwich 

“Better to sell the first slice at full ticket price, the second slice at half price, you're more than covering your costs, and also covering some incremental fixed overhead, at the same time, an extra sale. - Michael Hurwich 

Resources Mentioned: 

• McDonalds: https://en.wikipedia.org/wiki/McDonald%27s
• Burger King: https://www.bk.com/
• Wendy’s: https://www.wendys.com/
• Schneider: https://www.se.com/us/en/
• Pepsi: https://www.pepsi.com/en-us/
• Coca Cola: https://www.coca-colacompany.com/
• Win Keep Grow: How to Price and Package to Accelerate Your Subscription Business by Mark Stiving: https://www.amazon.com/Win-Keep-Grow-Accelerate-Subscription/dp/1631954784

Connect with Michael Hurwich: 

• LinkedIn: https://www.linkedin.com/in/michael-n-hurwich-6292109/

Connect with Mark Stiving:   

• Email: [email protected]
• LinkedIn: https://www.linkedin.com/in/stiving/

This is an article published on April 21, 2021, turned into an audio podcast so you can listen on the go.

Read Full Article Here:  https://impactpricing.com/blog/a-question-about-pricing-models/

If you have any feedback, definitely send it. You can reach us at [email protected]. Now, go make an impact.

Connect with Mark Stiving: 

• Email: [email protected]
• LinkedIn

If we can continue to win customers, we're growing a business a lot, like a traditional business would where they constantly have to win customers. And the good news is, if we keep them, then we start the beginning of each year out with a whole bunch of customers we already have. 

“How to grow a subscription business? Step one, win another customer. Step two, keep that customer. Step three, grow that customer. Step three is crucial but often ignored.”- Mark Stiving

But the best companies figure out ways to grow individual customers. What this means is, can we find ways data customers who paid us $1 last year to pay us more than $1 this year. And there are several techniques that you can use, you can certainly raise their prices, if you have a subscription-type business, you can upsell them into another package, you can cross-sell them into something that's similar. 

Or if we've chosen a good pricing metric, we can help them use more of our product, which means they're good at getting more value, and they're paying us more money. There are lots of different ways that we can grow a customer. The key is way too many companies completely ignore this. 

And we ignore this because we don't really have to deal with it. If you're not winning new customers, you can tell that's a problem. And if you're turning customers out, you can tell that's a problem. But there's nobody watching, are you growing your customers and claiming it's a problem? 

If you're not? Well, I'll claim it's a problem. If you do not figure out how to do it, you'll grow much much faster. 

We hope you enjoyed this memecast. If you see any of our memes that you'd like to move to the top of our memecast list, please let me know. If you have any feedback, definitely send it. You can reach me at [email protected]. Now, go make an impact.

Connect with Mark Stiving: 

• Email: [email protected]
• LinkedIn

Jose Mirabal is an advisor and expert in negotiation and pricing strategies. He has more than 350 projects carried out in 27 industries. His clients include multinational companies, governments, regional organizations, foundations, and non-profit companies.

He is also the CEO of MIRABAL Pricing Services, a consulting firm specializing in price strategies and negotiation. He is the author of the Value-Based Pricing Framework ©. He has given more than 160 talks, workshops, and seminars in 13 countries.

He graduated from Cornell University with postgraduate studies in California Coast, Stanford, and Adolfo Ibañez.

In this episode, Jose underscores the common thing all CEOs share -- being pricing leaders. To him, an even greater need to have a strong grasp of pricing and knowing and recognizing value. That's why he also shares the reason why he started Pricing Institute and what it does.

Why you have to check out today's podcast:

• Find out a pricing standpoint on value-based pricing as opposed to cost-plus pricing, so you find solutions to business problems from a pricing perspective founded on value
• Discover what value configuration is, so you focus on what the client gets and provide options for them, so you get the right pricing for everyone
• Find out the different dimensions you need to work around to make up value, so you back it up with the right pricing strategy

"Read about need-based segmentation. Just read it. How could you do need-based segmentation in your business? That's number one. The second thing, if you're going to do competitive analysis, do competitive analysis from a value standpoint."

- Jose Mirabal

Topics Covered:

01:43 - How a talk with some CEOs started his Pricing career

04:09 - What he has found out about pricing through the years of his consulting career

05:37 - Everybody's focusing on the costs but forgetting the value part

07:48 - Why did he create Pricing Institute

11:17 - Tactics he is teaching

14:48 - Why to him the whole concept of value is sort of missing everywhere

16:38 - What he thinks on why most companies don't know how to identify value

22:49 - Not only do they not know value, they also don't recognize it

26:41 - How to do competitive analysis from a value standpoint

25:53 - Jose's piece of pricing advice that can significantly impact your business

Key Takeaways:

"If I want to improve the pricing of one of my customers, the first thing I need to do is that relationship of value between my customers' products, and the clients' needs in the market and how those two things talk when I contextualize them and put them against other competitors." - Jose Mirabal

"When I think of pricing, I look at first value configuration because Warren Buffett said, price is what you pay, but value is what you get. So, let's focus first on what the client is getting, or how we can improve the number of options and expand the width and the range of options that we can offer clients, just like a restaurant." - Jose Mirabal

"I want my clients to come in. And regardless of what they want, always have the right option for them. And I think when you have that, that's the same thing as having the right price for everybody." - Jose Mirabal

"Most companies, most professionals, specifically, most investors, if not all of them, most CEOs do not challenge their pricing. What happens is that they end up perpetuating all bad pricing habits." - Jose Mirabal

"Nobody really realizes that the only way your value or the value you offer will actually work is by how well you capture that value backed by your pricing strategy." - Jose Mirabal

Resources/People Mentioned:

• The 1% Windfall: How Successful Companies Use Price to Profit and Grow by Rafi Mohammed: https://www.amazon.com/1-Windfall-Successful-Companies-Profit/dp/0061684325
• Rafi Mohammed: https://www.pricingforprofit.com/rafi-mohammed/
• Vistage: https://www.vistage.com/
• Amazon: https://en.wikipedia.org/wiki/Amazon_(company)
• Uber: https://www.uber.com/tw/en/
• Netflix: https://www.netflix.com
• Airbnb: https://www.airbnb.com/

Connect with Jose Mirabal:

• Website: https://pricing.institute/
• LinkedIn: https://www.linkedin.com/in/jrmirabal/

Connect with Mark Stiving: 

• Email: [email protected]
• LinkedIn: https://www.linkedin.com/in/stiving/

This is an article published on March 31, 2021, turned into an audio podcast so you can listen on the go.

Read Full Article Here:  https://impactpricing.com/blog/pricing-is-not-driven-by-supply-and-demand/ 

If you have any feedback, definitely send it. You can reach us at [email protected]. Now, go make an impact.

Connect with Mark Stiving: 

• Email: [email protected]
• LinkedIn

Everybody has a pricing metric. But so few companies actually think about it. Think about when we bought cars, we would buy a car. And that's a pricing metric. The pricing metric is what is it that you charge for as a company. 

So McDonald's charges for hamburgers, so a hamburger is a pricing metric. In the old days of software, I remember going to Fry's Electronics and pulling a shrink-wrapped box off the shelf with Microsoft Office in it. 

“All companies use pricing metrics. Some companies consciously make the decision.”

- Mark Stiving

And so the pricing metric was that box, they were selling me the box and the contents inside it. Nowadays, though, especially in the world of SaaS, and cloud-based SaaS, we have tons and tons of different things that we could possibly choose for, choose to charge for, for example, maybe we charged by the user, which is what Salesforce certainly popularized in the subscription business.

We could sell by the gigabyte of storage, we could sell by the number of clicks, we could sell by the number of downloads, we could sell by the number of emails, there are so many different things that we could sell our products based on. 

And what I find fascinating is when we moved to cloud-based SaaS, many of these companies had to think through this, they had to say, Okay, what makes sense for us, although way too many of them still just default to users when it's probably not the best choice. 

But now, go back to a traditional company. Now that we understand that we get to choose what we want to charge for, is there a way that we could choose something that more closely ties to the value our customers receive?

And one of my favorite examples of that was a comedy theater in Spain, where they had video cameras on the seat in front of you, and they charged based on the number of laughs. 

That's pretty awesome. 

The real point is, spend a few minutes, think about your pricing metric back maybe spend a few hours, but your pricing metric in a traditional business, you have the ability, the potential to change industries. 

Just look at what Netflix did to Blockbuster. 

We hope you enjoyed this memecast. If you see any of our memes that you'd like to move to the top of our memecast list, please let me know. If you have any feedback, definitely send it. You can reach me at [email protected]. Now, go make an impact.

Connect with Mark Stiving: 

• Email: [email protected]
• LinkedIn