Lisa Thompson has corporate experience that spans software/SaaS, industrial manufacturing, life sciences/healthcare, medtech, fintech, and B2B services. Together with clients, she delivers unique, actionable solutions tailored to their organizational needs and realities leading to profitable, sustainable revenue and growth.
In this episode, Lisa shares the importance of deeply understanding the economic value your product delivers to customers and aligning it with their buying processes, highlighting that many companies fall short in these areas. Through real-world examples, Lisa shows how uncovering the true drivers of customer satisfaction can transform pricing strategies and lead to stronger, more profitable relationships.
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Why you have to check out today’s podcast:
- Deep dive into the critical importance of understanding and quantifying the economic value your product delivers to customers so you gain actionable insights to refine your approach.
- Gain valuable guidance on structuring contracts, from incorporating escalators to aligning terms with customer needs, ensuring profitability and flexibility in volatile markets.
- Learn how to evaluate and select pricing metrics that truly reflect the value customers derive, unlocking hidden revenue opportunities.
“In the metric, understand how you currently charge customers. Not the price level, but the price metric. Double check to see if that aligns with whether they get high value or low value. If it doesn’t, we don’t necessarily have the right metric. There can be magic and a lot of money in getting the metric right.”
– Lisa Thompson
Topics Covered:
01:43 – How she ended up in pricing
03:44 – Why value-based pricing is not simply charging higher prices for more value
05:32 – Highlighting the nuances in pricing strategies, explaining ways to leverage value other than higher prices
11:39 – Sharing a lighthearted story about Tom Nagle’s amusing moments
13:37 – Emphasizing what many companies struggle to do with deal structuring
16:50 – Explaining why understanding the economic value of a product must come hand in hand with a deep knowledge of the customer’s buying process
23:02 – The need for long-term contracts to include appropriate escalators and de-escalators
26:54 – Why contract structures should align with how customers perceive and experience value
30:59 – Lisa’s best pricing advice
Key Takeaways:
“Just because value’s high, it doesn’t mean I can always get a high price for it.” – Lisa Thompson
“One of the things I want people to understand in our work is that getting a price premium or charging more than you used to charge isn’t the only way to get paid for adding more value.” – Lisa Thompson
“We know the value, but that’s not the same thing as knowing the buying process.” – Lisa Thompson
People/Resources Mentioned:
- Tom Nagle: https://impactpricing.com/podcast/604-insights-into-value-based-pricing-strategies-for-b2b-with-tom-nagle/
- Reed Holden: https://impactpricing.com/podcast/ep97-pricing-in-the-new-normal-with-reed-holden/
- Gilette: https://gillette.com
Connect with Lisa Thompson:
- LinkedIn: https://www.linkedin.com/in/lisa-spadafora-thompson/
- Email: [email protected]
Connect with Mark Stiving:
- LinkedIn: https://www.linkedin.com/in/stiving/
- Email: [email protected]
Full Interview Transcript
(Note: This transcript was created with an AI transcription service. Please forgive any transcription or grammatical errors. We probably sounded better in real life.)
Lisa Thompson
In the metric, understand how you currently charge customers. Not the price level, but the price metric. Double check to see if that aligns with whether they get high value or low value. If it doesn’t, we don’t necessarily have the right metric. There can be magic and a lot of money in getting the metric right.
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Mark Stiving
Welcome to Impact Pricing, the podcast where we discuss pricing, value, and the misunderstood relationship between them. I’m Mark Stiving and I run boot camps to help companies master context-driven pricing. Our guest today is the one and only Lisa Thompson. Here are three things you want to know about Lisa before we start. She’s the founder and CEO of Sturbridge Growth Partners. She has been in consulting for a very long time, and probably my favorite thing about her is that she’s been the right hand person to Tom Nagle for 30 years. Welcome, Lisa.
Lisa Thompson
Thank you, Mark. And thank you for telling everybody how old I am without telling everybody exactly how old I am.
Mark Stiving
What time did you start?
Lisa Thompson
I love that emphasis. I’m 55 and I started, yeah, when I was about 26, 27.
Mark Stiving
Nice. How’d you get into pricing?
Lisa Thompson
That was interesting. So I was an MBA student finishing up at a Babson college, and I went to Babson because I thought I wanted to start my own business and then promptly realized, what is the problem in the world I’m trying to solve. I’m not sure I know what I would start. So I found this little ad in the Boston Globe newspaper. Remember those things when we used to get jobs from the newspaper? I don’t even know if my kids know what a newspaper is. And there was a really interesting ad for a company called Strategic Pricing Group. And when I told people that I was interested in interviewing there, they said, ‘Pricing! That sounds so boring and like a bean counter and consulting. Doesn’t everybody just work a million hours a week?’ And I went and interviewed with them anyway because there was something in the ad that drew me to it. And after I met with the people in the firm, there were probably about 10 people there. I might have met with half of them, and then met with Tom Nagle and that sort of locked it in for me. That’s how it was.
Mark Stiving
Nice. What a great start to this career. So, was Reed Holden there at the time?
Lisa Thompson
He was, yeah. Reed and Tom were… Reed was president and Tom was CEO.
Mark Stiving
Nice. Yeah. Two gentlemen that I appreciate a lot. Same with what they’ve done in this field. Excellent. Yeah. I don’t know if the listeners know this, but I always ask my guest and when I do in the beginning, I say we discuss pricing, value, and the blank relationship between them. And my guest gets to fill that out nowadays. I did the first hundred or 200 of them and then I ran out of things to say. So I would just ask my guest. And Lisa said, misunderstood. And I got to know why. So why do you think the relationship between pricing and value is misunderstood?
Lisa Thompson
Because when we talk about value-based pricing, and by we, I mean like any of us talking about value-based pricing in the business world, the average business leader thinks that if you are offering quote unquote more value, you can charge a higher price. And that value-based pricing is all about just trying to get price premiums. But it’s not, value-based pricing or strategic pricing is equally so about recognizing when you don’t offer a lot of value to a particular segment or a particular customer. And then you have a choice there to serve them or not serve them, to serve them and increase value to them or potentially to lower price or find out some other way that you’re going to differentiate yourself. So the same way people have this, particularly in business to business markets, an erroneous idea that price and quantity, price and volume are so closely linked. The same is true with price and value. Just because value’s high, it doesn’t mean I can always get a high price for it.
Mark Stiving
Okay. I’m going to have to push back on that just a little bit because I’m not sure that you used the words that made sense to me. By the way, I buy a hundred percent, we have two different customers. One gets a lot of value, one doesn’t give very much value. Guess which one we charge more to, the one that gets a lot of value. Right? And I can’t imagine why we would ever be delivering a lot of value and not charging for it. I mean, I could think of reasons why we don’t, but in general, we charge more when we deliver more value, we charge less to people who get less value. Is that not true?
Lisa Thompson
So, generally speaking, I don’t think anybody could argue, myself included, with that statement that you just made. But one of the things I want people to understand in our work is that getting a price premium or charging more than you used to charge isn’t the only way to get paid for adding more value. So in some cases, I may quote unquote get paid because many of my customers I’ve been serving do not sign contracts. And I might be getting paid by having somebody sign a three-year contract with me, or maybe all my clients sign one-year contracts and maybe I get people to move to five-year contracts. Perhaps I have a small share of someone’s wallet right now and I want a larger share. That’s another way potentially to get paid. So it’s not always just this very direct relationship. So I go in with the starting point with the sentence you said, ‘If you generally get more value, you are going to pay more for something and vice versa.’ But there’s so much nuance to that when you get in there that it’s not always the case. Would you like me to give you an example?
Mark Stiving
Sure.
Lisa Thompson
One, I was working in the distribution space and we had, prior to the advent of these scalable, these technologies that we have that make so many businesses scalable today, this was almost 30 years ago, and I was dealing with a distributor who had a very interesting and very rare combination of both a competitive advantage from a differentiation perspective and a competitive advantage from a cost perspective. And they were delivering higher value, charging a bit less for it and cleaning up in terms of length of contract, share of market, et cetera. So at the end of the day, the total contribution dollars they were bringing into that business were quite large and quite sustainable for a certain period of time. So that’s what I mean about, there’s nuances once you get in there. Could they have charged more to some of their customers? Yes. But they might not necessarily have made as much money as they did with the strategy we came up with.
Mark Stiving
Okay, so I’ll buy that a hundred percent. Oftentimes and as you were talking through that, what was coming to mind to me was we often do negotiations with our clients. And, I don’t know about you, but I always say we don’t give anything until we get something, right? So we do the gives and the gets. And so in a way what you’re saying is, ‘Hey, I’ll give you a lower price, but this is what I’m going to get in exchange. I’m going to get a five-year contract. I’m going to get a bigger share of the wallet or a bigger piece of the total market there.’ So I’m a hundred percent behind all that.
Lisa Thompson
And you used it as an example in the negotiation, and that’s very true, agree with everything you said there, but in some cases it might be a proactive go-to market strategy. It might not just be that you are negotiating with someone and you’re using these give-get trade-offs, but it might be that you make a choice to go to market in a way that has you charging a lot less than you might if you were using some other kind of strategy.
Mark Stiving
Yep. Understood. And in the tech space, oftentimes people come out with really revolutionary products. And the idea there is, ‘Look, I’m delivering a better product at a 10th of the price’. Of course you’re going to switch. And it’s a way to just dominate the entire marketplace, right? Just to change the entire market.
Lisa Thompson
So, yeah, we see that strategically. Oh, I’m sorry, say that one more time.
Mark Stiving
I was just saying we see that strategically because if I came out with a product that’s 10X better than what’s in the market today, theoretically I should be able to charge more than what’s in the market today. But if I do that at a cost structure that’s lower than the market and I bring it out at a price that’s lower than the market, then, we just change the entire marketplace. We change the entire industry.
Lisa Thompson
Yeah. And theoretically, as you said in there, that’s the operative word that you said in there because people come out with innovations all the time and theoretically, they can charge more, but they don’t get more because there is perhaps something else impeding, like the value might be there, but perhaps they’ve created the value for customers in the nonprofit space who lack the budget, actually. Like, they might say, this value’s incredible, but we literally don’t have the funding to do it. Right? So people come out with whizzbang things all the time that might deliver 20X the value and they only charge 5X more than the competition, but the market isn’t ready for it yet. And people’s budgets haven’t caught up. And it could be that they’re not good at selling the value. That’s always a possibility, for sure. But it also just could be that the market is not there from a budgetary perspective yet, even though the value might be there.
Mark Stiving
Yep. I could buy that. I mean, I would say that a Maserati is really valuable, but I’m not buying one. I can’t.
Lisa Thompson
I’d have to sell my house and live in it. Yeah.
Mark Stiving
So, totally with you. Okay, now we dove quickly into ‘misunderstood’ and it was a fascinating conversation, but I really wanted to start with a Nagle story. Since you are like Nagle’s best friend. One of three, could you just share with us a fun Nagle story and then we’ll move on to pricing again?
Lisa Thompson
Okay. There are so many fun Nagle stories, so we’re talking really fun. They don’t have to be related to pricing per se.
Mark Stiving
Anything at all.
Lisa Thompson
Yeah. So when we used to travel together, we’d be at an airport and if Tom had been sitting for a long period of time, he would try to stretch and we would be waiting at the gate for our flight. And Tom’s really tall, he’s like six four or something, and he would do yoga and stretching, like while we were at the gate waiting for the flight and you could see people reading a book or something and just peeking over as he would be like doing Shavasana or downward dog or something in his yoga pose. And his other famous one in airports was if we were going to be late for a flight, he would turn to his colleagues who he was with and say, alright, we’re going to have to run for this flight. We all have different length legs. So it’s every consultant for himself. Go! He would do that. He would invariably beat us all A, because of how long his legs were, but B, when he would say that we would stand there just belly laughing and would take a couple minutes to get over it. So he always wins.
Mark Stiving
Nice. And so when he’s doing yoga in the airport, was he oblivious to what other people were thinking?
Lisa Thompson
He doesn’t care.
Mark Stiving
Yes. He doesn’t care. Nice. Okay, I was going to ask, you had given me several different things that we could talk about in the world of pricing. And so one of the things that you said… Hey, let’s talk about contract or deal structures. And so before I ask some specific questions, what do you think of deal structures? What’s something interesting that we should be thinking about?
Lisa Thompson
So when I think about deal structuring, I find that it’s one of the two most poorly executed pieces of what my clients do before we come in. One is truly understanding the value economically that their product and service delivers inside a particular customer’s system business processes. That’s one. I would say that there are probably three. The other one is getting the metrics…
Mark Stiving
Can I pause you for just a second?
Lisa Thompson
Sure.
Mark Stiving
We could talk for an hour about that one topic. I think companies do such a horrible job at understanding value and the way they deliver value to their customers. It’s amazing.
Lisa Thompson
I agree. We frequently know every…
Mark Stiving
Go ahead, continue. I didn’t mean to interrupt.
Lisa Thompson
Oh no, please. We frequently know everything about our product relative to the competitor’s product, but not how the differences matter economically from a process perspective, how they impact ways of working within the customer system. So I definitely agree on that. I imagine we’ll probably come back to metrics, which is one of the other ones, getting the metrics right. But from a deal structure, it’s definitely one of the top two, top three things at the most that most companies I would say are not doing well. And the essence of the deal structure is really understanding what are the things that are most important to this customer at this point in time with their buying process, with the people who are involved with the output they’re looking for, and how is that intersected with how I deliver those things and finding what I always call the hook in the deal that is like the thing that’s going to tie, you and the customer. And you’ve really found the linchpin of it. And most people don’t know that. Like, if I say, how are you really going to win this deal? A lot of people will just say, we got to have the best price. Some people will say, we got to have the best value proposition, but then it’s like, what is the value proposition? And we might spew something that’s in our marketing literature, but that’s not the hook, that’s not the heart of what it really is going to take to win. And a lot of people they don’t know because they don’t know the buying center. Like who’s involved, who’s playing what roles, the buying process, who makes what decision, at what point and where do you fall out, et cetera.
Mark Stiving
By the way, I love what you just said, it sounds almost exactly the same thing, is not knowing the value we deliver to the customer. Give me an example of where it’s different if you can think of something.
Lisa Thompson
Yeah. So not knowing the value, or let me flip it. You could understand what the economic value is of your service to a particular customer, but that doesn’t mean you know how buying decisions in their business get made. And that could be sort of a critical issue. So you might know the value, but what if you are communicating that value to a user who does not have an influential role in the decision making process? So we know the value, but that’s not the same thing as knowing the buying process.
Mark Stiving
Yes. Okay. So an example I often use is if I was selling a piece of medical equipment to a hospital. And I’m selling it to a doctor, the doctor doesn’t care about the economic value. The doctor cares about how many lives I am going to save? Right? The hospital administrator cares a ton about the economic value. And so who are the personas, who’s making which decisions, what really matters? But the doctor’s the one who’s going to help us figure out the economic value, even though he is not the one who cares.
Lisa Thompson
Yeah. And the doctor may be, usually part of that. The hospital administrator will be part of it. Someone who might actually be a user of the piece of equipment. Let’s say it’s a radiologist, for example, or a radiology tech is using it. So all of these different pieces of the buying center are going to touch it in different ways. So for example, say with a medical example. This is a slightly different one, but I worked with a company that made nutritional products for hospitals, nursing homes, and home care. Think of it like a meal in a can or meal in a bag if somebody couldn’t eat a regular meal themselves. And we would hear from that client time and time again, what really differentiates us, the value is really in the sales rep. They love our salespeople. And we would say, okay, that’s interesting. Glad they love your salespeople. Hard pressed to think you have a corner on the market of good, smart, nice salespeople, right? I think a lot of other companies and your primary competitor probably have the same thing. So we got to go underneath what’s going on and we interview customers, and even some of the customers, people at the customer would say the same thing.
I would say finally to one of them, I’m just not buying this because you are under so much budget pressure and you’re telling me you’re paying more for this because you love the sales rep. So we start to get underneath what’s really happening, what’s going on. And what we found out at the time was because we had far more coverage than our competitors sales reps had when our sales rep was in a rural area and Mrs. Jones was getting discharged from the hospital who was giving her product in the can A and she’s got to come to the nursing home now and they don’t have product A on their shelf and they’re in the middle of nowhere. I’m not in downtown New York, I’m not in Boston, I’m not in LA with a ton of hospitals right near me. And I had to wait a while to really get the product, the sales rep lived down the street and would bring a case of it to tide you over. And that’s what they really loved. So now you understand what they really loved was the same day delivery when they couldn’t get it anywhere else. And if a monkey was bringing that to them, they would’ve been happy. You know? The client didn’t understand the value, the customer didn’t even really understand the value until one nursing home administrator took the time to go through with us all of our questions about what the salesperson was really doing.
Mark Stiving
Yeah. I think that’s a fabulous example. But I am going to come back to the point that says they didn’t understand the value, right? It always comes down to, probably not, but it almost always comes down to what’s the value that we’re delivering, right?
Lisa Thompson
Definitely. Or at least they couldn’t articulate what it was.
Mark Stiving
Yeah. I think that’s probably most common is that they know it, but they don’t know it. They can’t say it.
Lisa Thompson
Yeah. And sometimes they don’t want to say it because many of them know they’re going to be negotiating with you. So why am I going to tell this guy, ‘Oh my gosh, this is delivering $25 million a year to us.’ But in other cases they really don’t know it because they don’t take time to quantify it. And while they might know their system, they don’t necessarily know how to quantify the value of your product on their system. You know your product, that’s why the salesperson has to get to know their system as well as possible so the two come together.
Mark Stiving
Yeah. Awesome example. Okay, so I’m going to ask you a couple specific questions about contracts, if I may.
Lisa Thompson
Yes.
Mark Stiving
What are your thoughts on contract lengths? Because I heard you earlier say maybe we can get them to go from a one-year to a five-year contract and I often coach my clients, I like month-to-month contracts. Yeah. So, I want to hear you talk about this.
Lisa Thompson
Yeah. So a couple things. First, I’ll caveat with the vast majority of what I do is in business to business markets, vast majority. and a lot of times we’re selling big high-ticket price items. So that’s one thing. But the second thing I’ll say is that long-term contracts have gotten a bad rep since the pandemic, right? There’s been a lot of interesting things that have come up from a long-term contract perspective because people would say, ‘I had all these long-term contracts and then my raw materials prices went through the roof and I couldn’t charge the customer anymore for it.’ Okay? The problem with that is not the length of the contract. The problem there is, you didn’t have the appropriate escalators and de-escalators. And speaking of Tom Nagle before, he and I did at the, I think we were still in lockdown during the pandemic might have just come out of it, and we were talking about the money that had been poured into the economy to sustain people who couldn’t work for the times that they were outta business.
And Tom and I were sitting there hosting this webinar. We did the same webinar three times so we could invite all our clients and friends and whoever to join. And we talked about having escalators and Dees escalators in the contract because we have seen this movie before in the 1970s. And we can’t just release a whole bunch of money into the system and think we aren’t going to pay for it one way or the other. So inflation’s coming, so we said to people, ‘You got to start building escalators into your contracts.’ And I literally had clients who I’ve worked with off and on for years, texting me during this thing and being like, ‘Lisa, are you and Tom out of your minds? Like, what? Why would you think we’re going to have inflation? Why do you think this is a problem?’ And I will tell you almost all of my work about six months later was helping clients who may or may not have heard our advice, even though we did the webinar, we posted it on LinkedIn, we wrote about it about people who didn’t heed the advice and then took forever to try to get the price increases, all based on crazy increases in raw materials that were very well justified to go through all these bureaucratic, messy red tape in their system. And by the time they went to raise prices some of the raw material prices had not only stabilized, but some were coming down and it was just crazy. But that wasn’t a problem of having a long-term contract. It was a problem of not having the right mechanisms in the contract.
Mark Stiving
Okay. And so what would a good escalator look like for you? And I’ll give you, for instance a lot of my clients have had a 3% per year inflation adjustment, right? And then we have 9% per year, and they’re way behind the curve. So, I personally am a huge fan of month-to-month. I get to raise the price when I want to. You get to quit when you want to. Nobody ever quits.
Lisa Thompson
Well, when you talk about month-to-month, though. Tell me, Mark, like, what types of services are you talking about selling? Are you saying your own service?
Mark Stiving
Oh, no, no, no. It’s almost always B2B. My clients are almost always B2B clients. Okay. Now, it’s not ERP type stuff. It’s not huge dollar type stuff, but it’s still selling B2B. Now, the month-to-month is harder to do if you’ve got large implementation costs. I get it. Right? So we want some kind of contract to say, ‘Look, we’re going to cover our implementation.’ I mean, we’re kind of implying recurring revenue or subscription type businesses here for a second. I’m a huge fan of putting my company at risk and saying, ‘Am I delivering enough value this month that you’re going to pay me next month?’
Lisa Thompson
Yeah. I believe in that concept, the issue where it gets challenging is, can the customer see value on a month-to-month basis? On a week-to-week basis? What does customer value in use look like? And so that’s one challenge. So for example, like you said, you could have something with a large upfront implementation. You’ve got clients who do customized orders for people. Maybe they’re making big solar energy related pieces of equipment, and you got to get an order in like a year in advance, for example. And you can’t be sort of, you’ve got to know you’re going to have some sort of contract with them thereafter. However, a lot of the time people don’t want to sign up for a longer term contract. Because they’ll say, okay, maybe they went low on the capital expense and they’re really going to ring me on the ongoing purchases. That’s another problem with not necessarily the length of a contract necessarily, but a problem with how it’s structured. Like ever since Gillette came out with this razor blade analogy and everybody in the world quotes it, ‘It’s like, that’s not the right model for your business. That was the right model for Gillette’s business. That is not the right model for your business. And let’s find out what it is and why.’
Mark Stiving
And HP printers, it’s the right model for HP printers with printers and ink. When you buy ink, it costs as much as the printer did.
Lisa Thompson
Yeah, it could now, for when I buy a printer, it does. Now, if I am going to buy a whole bunch of those printers, because I work for a company with 4,000 employees, I may not pay for the printer or the ink. Perhaps I have a three year deal where HP says to me, we are going to meet all of your printing needs for this flat fee. Now, you can’t do that with every customer, but that gets into the issue we talked about a little related to metrics before. It’s like, how do different customers get different value in use and how do you find a metric that aligns with how they get value?
Mark Stiving
Okay, Lisa, I got to tell you, we are one out of three topics down and we’re out of time.
Lisa Thompson
Oh, I didn’t know I had three topics.
Mark Stiving
We did.
Lisa Thompson
But what were the other two?
Mark Stiving
Pricing metrics and strategy, it’s transaction analysis for lunch.
Lisa Thompson
Gotcha.
Mark Stiving
But here’s what I would love to do.
Lisa Thompson
I just did a lot of topics.
Mark Stiving
Oh, we did. We did a lot. We covered a lot. I’d love to have you back on, but we do have to wrap it up for today. And I will ask you the final question that I always ask, what’s one piece of pricing advice you’d give our listeners that you think could have a big impact on their business?
Lisa Thompson
I would say, in the metric, understand how you currently charge customers. Not the price level, but the price metric and double check to see if that aligns with the goes up and down with whether they get high value or low value. If it doesn’t, we don’t necessarily have the right metric. And there can be magic and a lot of money in getting the metric right. So start by, just find out for yourself if it even looks aligned. Like if I’m doing it, if I’m selling software as a service, am I charging by seat? Okay, am I doing that because that’s just the standard industry acceptance, or does the value really grow the more people have the software? And if you’re not sure that’s true, you probably have some opportunity with your metric.
Mark Stiving
You have no idea how much I want to dive into that conversation with you. It was brilliant. But by the way, I agree with you completely. But that’s for another day. Okay, Lisa, thank you so much for your time today. If anybody wants to contact you, how can they do that?
Lisa Thompson
So to find me on LinkedIn, it would be Lisa Spadafora Thompson. If you don’t put the Spadafora in there, you’ll never find me. And it’s just like it, sounds S-P-A-D-A-F-O-R-A or email [email protected].
Mark Stiving
Excellent. And we will be sure to put links in the show notes so it’ll be easy for people to find.
Lisa Thompson
That’s great.
Mark Stiving
To our listeners, thank you so much for your time. If you enjoyed this, would you please leave us a rating and a review? A roodoodoodle left me an awesome review, says:
‘Mark Stiving is well known in the price space as a thought leader and visionary. This podcast serves as an important platform for pricing professionals to learn about trends, strategies, and tactics that affect companies across many industries.’
All I could say is the check is in the mail. Thank you so much. And finally, if you have any questions or comments about the podcast or if your company needs help getting paid for its true value, please email me, [email protected]. Now, go make an impact!
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