Griff Parry is the Founder and CEO of m3ter where he helps make it easy for SaaS companies to intelligently deploy and manage usage-based pricing. He’s led AWS’ go-to market strategy for games and gambling in EMEA, and his background includes entertainment at Sky TV and accounting at Ernst & Young. Griff was an extra in the movie “First Night” around 1993.
In this episode, Griff shares the work that they do at m3ter in helping customers deploy and manage usage-based pricing. He also discusses common pricing challenges, especially on doing a price change, emphasizing the importance of agility and transformation.
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Why you have to check out today’s podcast:
- Understand the importance of having the agility to change pricing models quickly and in different situations, especially as to why pricing is not a one-and-done thing
- Discover how m3ter helps SaaS companies make it easy to deploy and manage usage-based pricing
- Find out in which circumstance usage-based pricing works best as you learn about different pricing philosophies
“Particularly in these market conditions, I would suggest that you set yourself up so that you can customize pricing by customer, or do more of that. There is a lot of money you’ll be leaving on the table if you have a one-size-fits-all pricing strategy.”
– Griff Parry
Topics Covered:
01:49 – How Griff got into pricing
03:05 – What m3ter aims to solve in relation to usage-based pricing
05:06 – Delivering agility to the customers (why pricing is not a one-and-done thing)
08:57 – How m3ter helps customers find the right pricing model for the right situation
11:30 – Circumstances wherein you’d want to use usage-based pricing
14:45 – Pricing is an exchange of value between you and your customers
16:09 – Bill for overage over cap vs. renegotiate next year (tips on do’s and don’ts)
20:02 – Platform versus solution pricing (pricing philosophy of AWS and m3ter)
30:59 – Griff’s pricing advice
33:05 – Connect with Griff
Key Takeaways:
“Pricing is complicated; it involves lots of people. You need to bring them together so that they can plan and deploy those changes.” – Griff Parry
“Pricing is very definitely not one-and-done.” – Griff Parry
“To work out what you want to price, you have to look at what’s going on at the moment. You have to have ready access to data about what people are consuming and how they respond to pricing changes.” – Griff Parry
“Pricing is an exchange of value between you and your customers. If they understand that they should pay more because they’re using more or getting more value, that’s fantastic; that’s great for both parties.” – Griff Parry
People / Resources Mentioned:
- m3ter: https://www.m3ter.com
Connect with Griff Parry:
- Email: [email protected]
- LinkedIn: https://www.linkedin.com/in/griffinparry/
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.)
Griff Parry
Particularly in these market conditions, I would suggest that you set yourself up so that you can customize pricing by customer, or do more of that. There is a lot of money you’ll be leaving on the table if you have a one-size-fits-all pricing strategy.
Mark Stiving
Welcome to Impact Pricing, the podcast where we discuss pricing, value, and the data-driven relationship between them. I’m Mark Stiving and our guest today is Griff Parry. Here are three things you’d want to know about Griff before we start.
He is the Founder and CEO of m3ter, a SaaS company; we’re going to hear more about that. He’s led AWS’ go-to market strategy for games and gambling in EMEA; that sounds fun. His background includes entertainment at Sky TV and accounting at Ernst & Young. How did he get into pricing? We will find out. And by the way, he was an extra in the movie First Night around 1993. He’s now best friends with Richard Gere, by the way; not true. Welcome, Griff.
Griff Parry
Welcome. It’s been a long time since somebody’s talked about Ernst & Young as part of my career history, but I’m happy to address that.
Mark Stiving
Hey, you had it on LinkedIn, so I had to go look at it.
Griff Parry
I know. Right at the bottom.
Mark Stiving
And anybody who can move from accounting to something much more interesting – huge kudos.
Griff Parry
Thank you.
Mark Stiving
So how did you get into pricing?
Griff Parry
I basically had a startup. This is my second rodeo and I had a startup before, and we had to work out what our pricing was going to be. We deployed a variation on usage-based pricing at the time and it wasn’t very fashionable, but it worked for us. And so, I guess I started learning about it then. The origin story of our new business is that there are a lot of operational go-to market challenges associated with deploying usage-based pricing, and so and we learned quite a lot about them as we went along. And then we sold that business to Amazon and worked our own at AWS. They’re also usage-based pricing vendor, and what we saw is that they had all the same pricing challenges, and so we thought, there’s something in this; these are common pain points, and the universe needs a solution for them.
Mark Stiving
Okay, so I don’t disagree with that, but what do you see as the common pain points? How do I want to say this? There are lots of companies out there that do SaaS, billing, etc., and many of them say the words “usage-based pricing”.
Griff Parry
Yeah.
Mark Stiving
And so, what is it about usage-based pricing that you’re solving that’s really hard that I can’t get solved somewhere else?
Griff Parry
So if you’re doing it with simple pricing and low scale, you can solve your problems. The reason that you start using a vendor like m3ter is you’re beginning to be successful and operate at scale, and that’s when the problems begin to emerge for you.
So, as a piece of background, when I say usage-based pricing, I don’t just mean sort of quite extreme or pure versions of it like AWS or Snowflake. A lot of our businesses, actually, companies that have been deploying sort of more traditional subscription-based SaaS models who are beginning to add consumption based elements to it. So, for example, you have a subscription which gives you access to a feature tier, and what’s included is an allowance of usage, and if you exceed that allowance, then you pay more. That is a type of usage-based pricing.
Your question was about why it was complicated. Taking it down to the simplest, the problem that we solve is that you need to combine usage data with pricing configuration in order to calculate bills, and that’s difficult to do at scale and when you have a lot of SKUs. So, if you have a lot of products, you’re in a lot of geos, you have a lot of private pricing because you’ve got an active sales team, all of a sudden, you have a high degree of complexity. That becomes pretty overwhelming; it becomes impossible to do it in spreadsheets. So that’s what a vendor like me does. We basically adjust that usage, we apply pricing of any complexity, and we pump out usage and spend data to wherever it’s needed throughout the business.
Mark Stiving
Yeah, and if I want to add a little bit of the complexity to what you just said, then imagine that I’m actually tweaking my products regularly so I could see which features actually should go in the good, better, best offerings, and now, I’ve got to keep track of which customer has which feature set and how much are we charging for that, and it becomes a really big mess.
Griff Parry
It does. Like I said, this is something that you can cope with if you’re not being that successful, but when you’ve got hundreds of thousands of customers, it becomes much more difficult. And the fundamental problem that we’re solving for is actually delivering agility to our customers. You need to be able to plan and deploy different types of pricing quickly. You need various functions around the business – engineering, product, sales, marketing, finance. Pricing is complicated; it involves lots of people. You need to bring them together so that they can plan and deploy those changes. You need to manage the customer effectively, so you need to know how much they’re using and how much you’re charging for it so you can have informed, well time conversations with them. There’s just something missing in the stack which enables you to do all that stuff, and that’s the problem we look to solve.
Mark Stiving
I have to say, as a pricing person, I really appreciate what you said in terms of we deliver agility. I have worked for companies, and until you’re a pricing person, you don’t realize this is a problem. You sit back and you come up with the greatest new strategy; “Oh, we need to go do this.” And then you look inside the company, and we have systems all over the place that just say, “No, you can’t go do that.” We have to go change this and this and this, and it’s a huge pain in the dairy air. I used to work for a company that was only – I mean, let’s say it was 20-25 million company – it wasn’t that big, but it took six months to change price basis. The systems were that bad.
Griff Parry
Yeah. I think one of the problems is the assumptions the business make about how often you change pricing. So, people tend to assume that it’s a one-and-done exercise. Every, whatever it is, two years, we’ll consider our pricing, make some changes, and then leave it; but it’s not like that at all. It’s like if you’re going to be pricing well, it’s deeply iterative. And I don’t just mean about the top-level public rate card. It’s also you’re experimenting a lot in the dark, in private. Particularly if you’ve got a slightly bigger customer base, you’ll be doing private pricing deals with them, and they’ll all be slightly different. And as you do them, you learn a lot about what works for customers, a particular type. And over time, you’re beginning to optimize your pricing capture more and more of your true value. You’re making pricing changes all the time. It’s actually completely the opposite; it’s the opposite end of the spectrum with one-and-done. But if you haven’t anticipated that, you end up in a situation where you want to do lots of stuff, but you just can’t. Anyway, we like to solve that problem for people.
Mark Stiving
Yeah. And I think what’s fascinating is you know, let’s go back to the hardware world for a second. In hardware, it takes me a year to build something, and so I’m not changing it quickly, and I know it’s exactly what I have, and if I put a price on it and never change it, who cares?
Griff Parry
Yes.
Mark Stiving
In the software world or the SaaS world, I can add a new feature, I can take a feature away, I can tweak things constantly to figure out what truly resonates with my marketplace. And if I’m going to be doing that, I need to be flexible, not only in the product development, the product delivery, the marketing, but the pricing and the billing part.
Griff Parry
Yeah, absolutely. And it’s not just that pricing is different for each customer. It’s pricing is different for a particular customer through their lifecycle, and also depending on the conditions. And so, we’re seeing this an awful lot at the moment. Times are tough out there; there are some making headwinds. And pricing is a lever you can deploy to release churn potential, flexibly respond to your customers’ requirement that they can see better value from your product.
So again, pricing is very definitely not one-and-done. I guess that’s all we’re emphatically agreeing on.
Mark Stiving
So do you or your company help your customers figure out what are the right pricing models for the right situation?
Griff Parry
That’s an interesting question. I would start off by saying, for the most part, we like to work with people who know what they want to do. So, if someone is considering whether they should start deploying usage-based pricing, we’ll probably encourage them to work that out and then come back to us when they’ve got a firm view of what they want to do. But if somebody is deploying usage-based pricing and they want to optimize it, then we provide an awful lot of help and assistance, because you are basing those changes on data. So, you’re looking for patterns, and fundamentally, we’re a data infrastructure business. You’re looking for patterns, and so, we provide that back.
At the moment, we do provide a bunch of specialist reporting and specialist metrics for usage-based pricing businesses that help them spot what is working and what isn’t working. And we have the ambition for the future to do much sexier and more exciting stuff while we’re actually delivering pricing recommendations for specific customers. I emphasize we haven’t got there yet; that’s the plan for the future. But yeah, to work out what you want to price, you have to look at what’s going on at the moment. You have to have ready access to data about what people are consuming and how they respond to pricing changes. And yes, that’s definitely part of what we provide.
Mark Stiving
So, let me ask some hard – maybe they’re hard, maybe they’re easy – questions on different models.
Griff Parry
Yes.
Mark Stiving
By the way, I make fun of usage-based pricing in a way because it’s no different than buying a McDonald’s hamburger, right? McDonald’s sells hamburgers in usage-based pricing.
Griff Parry
Yeah. Usage-based pricing is not new.
Mark Stiving
Yes.
Griff Parry
Absolutely not. What’s new, in my world at least, is the application of usage-based pricing to software, because we’re particularly focused on software companies. Look, if you do logistics or you do utilities or telco, I mean, there’s always been usage-based pricing from the very beginning. So yeah, I’m not pretending this is a brand new thing. I’m just working hard to deploy it effectively in software circumstances.
Mark Stiving
Totally with you. Okay, so now, what are the circumstances under which I want to use pure usage-based pricing? So, let’s say it’s by the click or by the email or by the download and I’m going to charge you for each one of those versus creating a good, better, best package and saying you get 100 of them in the good and 500 in the better and 10,000 in the best.
Griff Parry
There are definitely certain sectors where usage-based pricing makes a lot of sense on a cost basis because you have to defray your costs of provision. So, you see businesses lower in the stack, there are variable costs of them supporting their customers’ usage. AWS is a classic example; Snowflake is a classic example. And that very strongly lends you to usage-based pricing because it allows the vendor to control their margins. So that’s an obvious case where you would do it.
And then right at the other end of the spectrum, if you’re close to revenues or outcomes, you see lots of usage-based pricing there. Sometimes, people might say that that’s actually outcome-based pricing rather than consumption-based pricing, but what you need is a business. The infrastructure needed in business is the same. It’s a brilliant place to be in. If the value that your customers get from using your product can be measured based on the outcome they achieve, brilliant. And then you should charge it.
So those extremes, you see a lot of it. In the middle, it’s not always the best choice. There are, very definitely, businesses that should be charging based on seat because the unit of value is a person. But there’s also lots of cases where you should use some usage-based elements, often in combination with those more traditional subscription approaches.
So, one thing that I would raise is like an intensity of value. You could have a seat-based product where one seat could be using it like an order of magnitude or two orders of magnitude more than another seat. And in those circumstances, usage-based pricing gives you an ability to effectively price differentiate between your customers. So people who are using it an awful lot, it seems fair to them if you say, “Look, you’ve got an allowance, but if you exceed it, we’re going to charge you overages.” And so, you’re paying more, but that’s because you use it more compared to someone else.
The tailwind for my business is the growing adoption of usage-based pricing, but that doesn’t mean that I think everything should be usage based pricing. But you can spot circumstances in which it’s a good fit.
Mark Stiving
Right. I think that it makes sense for most companies. It’s almost like a price segmentation technique that you can use for usage-based pricing. So if you’re using per-seat pricing today, it’s almost certain that some people who use your product to get more value than other people who use your product.
Griff Parry
Yes.
Mark Stiving
And so the question becomes, how do you capture more of the value from the people who get more value from you?
Griff Parry
Yeah, and I think that’s in a very positive way; that’s often what’s happening. It’s about capturing true value.
Mark Stiving
Yeah.
Griff Parry
So, if some of your customers are using more and getting more value, then you should be able to charge them all for it, and consumption-based elements are a way of achieving that.
Mark Stiving
Yeah. The example I often think of, even though they don’t do this, is www.salesforce.com, because we all think about www.salesforce.com. And having a salesperson have access to salesforce is really valuable to a company, and having a sales admin have access is valuable, but not as valuable. And so, how do you do price segmentation among those two different people? It could be usage and usage of certain characteristics.
Griff Parry
I think they do do this, but the usage is based on the ancillary products, the layer on top of the core seat, so it’s slightly by stealth. The danger is always that it sounds like you’re being crafty, but you’re not. This is value-based pricing. Pricing is an exchange of value between you and your customers. If they understand that they should pay more because they’re using more or getting more value, that’s fantastic; that’s great for both parties. That’s the sort of positive.
The other thing that you spot a lot is seats aren’t a great way of pricing if there is growing automation. So, I think that’s one of the key drivers of this trend towards usage-based pricing; it’s that there’s more and more automation. It’s more and more of a machine talking to a machine rather than a person using it. In which case, the idea of the seat doesn’t really work. So, if you’re an API-based business, let’s say you’re doing for detection, for example, the concept of seats just doesn’t work in those circumstances. What you’re consuming is based on how many projects you want to do, which has got nothing to do with how many human beings you’ve got in your team.
Mark Stiving
Yeah, I think that’s spot on. Okay, next question for you.
Griff Parry
Okay.
Mark Stiving
How do I choose between am I going to bill you for overage over your cap or am I just going to renegotiate next year?
Griff Parry
I think that you may want to do one or both depending on the customer and where you are. And that’s again, one of the things that helps us acquire customers. So, you deploy usage-based pricing, but then you have to start managing your customers and dealing with their reasonable objections, and so, you need a lot of flexibility and agility associated with that management of the customer as well.
To your particular example, different people have different views on best practice. I think often, it’s a good idea to waive the average but move them up to a higher level of commitment; that’s perfect. Or increase the level of equipment, but also increase the level of discount for an overage. So, you’re not punishing them. From their point of view, you’re not punishing them for their greater usage. You’re actually rewarding them for it, because on a unit-per-unit basis, the price is going down.
But you need to avoid the potential pratfall of really annoying your customer and causing a potential churn event; and just slapping them with a big bill when they inadvertently use more of your product than they intended to is generally not a very good idea. But there’s also a key point here about timing – that if you can see a customer’s usage approaching that threshold, you shouldn’t wait until they exceed it. You should reach out to them and go, “Did you know you’re approaching this threshold? Before you hit it, let’s work out what we want to do. It’s fantastic that you’re using more and more of the product. I want you to get the best value you can from it. Let’s talk about this different pricing construct where you’re committing more for a greater discount.” It’s a great conversation.
The other extreme, where it’s really bad – you don’t reach out to them at all and you just deliver them a bill, which gives them incredible sticker shock after the event.
So again, that knowledge of how much people are using and spending needs to be everywhere in the business.
Mark Stiving
Yeah, and how close they are to their limits. I love the idea of reaching out early. You’re building the relationship. You’re building out what the game plan looks like. I’m also a fan of essentially just ignoring it. So, if the renewal comes up in a month and you’re going to be 10% over, don’t care. When it’s time for the renewal, I’m going to let you know you’re 10% over. Next year, we’re going to this new plan.
Griff Parry
Absolutely, because you’re allowing the customer to build habit, so there’s no consequence in the short-term because you’re not charging them for it. So they think this is great, using more and more and more and more, but you will hit a renewal, at which point you can go, “Well, you’re using more than you were before, so you should commit more,” and they pay more. Fantastic. But you’ve never had a moment where you’ve betrayed their trust or you’ve surprised them, or there’s been a negative event. That’s been a succession of very positive events and a renewal where they pay more and they feel great about it.
Mark Stiving
Yeah, awesome. Okay Griff, I want to ask you a question that I don’t have a strong answer too yet, and so this means it’s a hard question.
Griff Parry
Okay, ready.
Mark Stiving
And you are uniquely positioned to answer this.
Griff Parry
Oh.
Mark Stiving
So, in your current business, you are selling a solution to people.
Griff Parry
Yes.
Mark Stiving
Meaning you could actually figure out how much money are you going to help me make by the problems that I have that you solve. And so, we could go through the whole value-based pricing, understanding the value to a customer, here’s the solution. And so now the customer says, “Oh my God, I’m going to make another million dollars because I’m using your solution. Great! You can charge me based on that.” On the other hand, you used to work for AWS, and at AWS, it’s essentially just a platform where so many different people could do so many different things. Some people could make a million dollars a second, and some people are going to make $100,000 for the year. And you’re like, how do I think about pricing those two different platform versus a solution?
Griff Parry
I think this is partly a question about philosophy. I’ve been out of AWS for two or three years now, so it might have changed, but they see themselves as a platform provider where people pay based on what they use. And so obviously, they manage their customers by allowing them to make commitments in return for discounts and all that kind of thing. But generally, it’s a pretty pure form of usage-based pricing. You use this much, you pay that much. AWS, don’t really, at least historically, haven’t really wanted to get near the outcome. They’re selling infrastructure.
Mark Stiving
Can I ask you a quick question? When I see AWS pricing, it almost feels to me like they’re thinking cost-plus pricing. Do you think that’s true or not?
Griff Parry
I mean, there’s a nuanced answer to that, but I think broadly, that is how they think, because they’re selling infrastructure and they’re doing it at scale, and they always want their prices to go down as their scale increases. So, they’re basically saying, “Right, you use this. As our customer, you appreciate that we’ve got a bunch of gray boxes in a data center somewhere, and we need to pay for them, and you realize that there’s a fair value exchange. You’ll pay us, and we’ll use that money to defray the cost of the boxes in the data center.”
I’m sure if somebody from AWS were here, they would say that it’s much more complicated than that. But I do think broadly, that is what they’re doing. And as they grow and scale, they generate more and more and more profit, but also they can deliver cheaper and cheaper prices to their customers. It’s a good business, particularly as it continues to scale, and it’s amazing how fast they’re growing.
Mark Stiving
Yeah. Okay, so back to platform versus solution pricing.
Griff Parry
So, we are still quite a long way towards the AWS scale of things. Unsurprisingly, we also charge on the basis of usage ourselves, and it’s basically on the amount of measurements you make and the amount of API calls you make in and out. And so the value that you generate from those measurements and those API calls can vary quite a lot, but that’s none of our business, for the infrastructure side of our business. That’s that core metering and rating platform.
That said, what we get really excited about is using the data that we’re ingesting to deliver really fantastic value-adding decisioning software to you. This is where we help you forecast your usage and your revenues and help you identify the optimum pricing for a particular customer. At that point, then I think we can start pricing based on outcome and it’ll feel appropriate to the customer, and it’ll be a great opportunity for us because that’s one of the purest forms of value-based pricing.
But what I’m distinguishing is between the two different parts of our business. The infrastructure part of our business you have to charge as infrastructure, which is quite like AWS. For the decisioning software part of our business, which is mostly for the future, that we can charge for based on outcome because we have demonstrable impact on bottom line outcomes for the customer.
Mark Stiving
Yeah, I find it interesting; I’m sitting here thinking. I find it interesting that you think you have to charge your infrastructure as a platform. And I say that because you could be selling to one company who is selling apps on an iPhone or something, and you could be selling to another company or you’d be selling to www.salesforce.com and making them billions of dollars and the value of the transaction to them is hugely different.
Griff Parry
We have some very real-life experience of this because our previous business was a couple of infrastructure business focused on the video games sector, which is why I went on to that job at AWS, being the BD lead for games. And the intensity of usage of that infrastructure depended a huge amount on the genre of the game. So although we charged principally based on player, the amount that our customer, the game maker, was making per player depended a huge amount on the genre of the game. So you have core strategy games that had fewer players that were very heavy users of the platform, and at the other end you had Facebook games which are very light users of the platform but with tens of millions of players. So it was a challenge for us. But ultimately, I think you’re anchored by what is understood to be fair by the customer. And if you’re discriminating against one kind of customer based on stuff that’s not really got anything to do with you, I think you’re on slightly shaky ground.
Mark Stiving
I’m going to have to disagree with you here because we do this all the time, right? When someone pays for a first-class airplane ticket, that has something to do with the customer, it doesn’t really have anything to do with the business. We do so much price discrimination or price segmentation that we see it everywhere.
Griff Parry
There’s no problem with the idea of price discrimination, but to use your airplane analogy, it’s like a price of a first-class ticket is the same to me whether I’m just going on a holiday and enjoying a week in the sun or I’m traveling to do a big business deal which will make me a billion dollars. So, I think that would be the better analogy. It’s like if the airline started to charge you for your seat based on the utility you gained from traveling to another place, I think customers would go foul on that, and I think that’s a better analogy.
Mark Stiving
So they actually do that in some ways, right?
Griff Parry
Okay.
Mark Stiving
Because they raise prices as you get closer to the departure date, because people taking vacations plan them farther in advance, and so they know the difference between taking a holiday and doing a business trip.
Griff Parry
That’s fair enough. I agree with that. I will concede that. I will concede.
Mark Stiving
The whole point is we see it all the time. Now, I’ll make a different argument for you in why you don’t want to do what you do, and why you want to continue to do what you’re doing. And that is if you triple your price to some company who makes more money because they have a better application, then a competitor is going to come in and charge the same price you do today, instead of the 3x price, and you lose that customer. So, competition could be holding your prices at a specific level if it’s truly infrastructure, and everybody looks at it that way.
Griff Parry
True, but there are other ways. Again, we’re having a good conversation about pricing here, but there are other ways of doing it. You can charge different amounts for the same product if it includes things that are particularly important for one category of user who’s prepared to spend more. So, the classic example is if you’re selling to enterprise customers, for example, they need SSO. So, you make that exclusively part of basically the enterprise package, which you charge quite a lot more for. And I think that’s a perfectly acceptable way of price discriminating between different groups, and it would be seen as fair by the customer. But again, that’s different from me working out what the customer is using my stuff to do and charging them more based on how effectively they’re doing it. I can charge for bricks. Yeah.
Mark Stiving
I love this conversation. So, here’s what we do. And by the way, I’m going to go coach you after we get off this call, okay?
Griff Parry
Okay, sounds good.
Mark Stiving
No. So, here’s what we do. We look at the customers who we think get a ton of value from our product. We look at the customers who we think don’t get a ton of value from our product. We look at what’s different in their usages, given the fact that you understand usage probably way better than I do. And then we say, “Oh, we charge more for this usage because that’s what these people are using it more for.”
So if I go back to your gaming example, you’ve got the one where you’ve got millions of people using it and it’s very light use, and you got the one with a few people using it and it’s really heavy use. We now understand usage, we start to charge for different usage, and now we’re fairly more of the value our customers are getting.
Griff Parry
Fair enough. As long as you can distinguish between those different types of usage.
Mark Stiving
Yup.
Griff Parry
You need to be able to apply labels to them, because if it’s all the same usage, just being used to do different things, that’s difficult. But if it’s identifiably different types of usage, I agree, absolutely, what you’re saying. Yeah, you’re winning this, Mark.
Mark Stiving
I’m not trying to. I love to learn. Because with AWS, I have the hardest time with. I can’t get my arms around AWS. And I think it’s because it’s such a platform; it’s really not providing a solution.
Griff Parry
But they would say – I’m sure that they would say, this is very fair and straightforward. Like, you’re using compute resource and you’re paying x for it, and you could have a large variety of users are all paying the same x, but they’re using the compute resource to do completely different things. So, some people might be bitcoin mining and other people might be basing mobile video games based on it. So, the value that they’re extracting from that compute is completely different based on the use. But AWS says that’s none of our business. We just say this is how much you charge. We charge for compute, come along and use it. And then those of you who make more money out of that usage than others, you keep all that upside.
Mark Stiving
I understand. Here’s what I’m going to differ with you on, but I understand completely and I do agree. I don’t think they say “it’s none of our business”. I think what they say is “we don’t have the ability to figure it out, so therefore we’re going to charge a flat rate to everybody.”
Griff Parry
Fair enough. That’s a very good argument, okay. And there are ways where they can distinguish. So maybe you have a particular instance type which is used for very high value functions, sort of like graphics processing or whatever it is. They can charge more for that because they know the likely user of that instance is going to be generating more value from it. Again, I’m going to accept that as well.
Mark Stiving
No, because I know what Amazon does on the retail side, and trust me, they do price segmentation as much as they possibly can.
Griff Parry
Yeah, absolutely.
Mark Stiving
So, it isn’t a matter of it’s none of their business. They want everything to be their business.
Griff, I am enjoying this conversation so much, but we have to wrap this up. Can I ask you the final question, wide open?
Griff Parry
Okay, yeah.
Mark Stiving
What’s one piece of pricing advice you’d give our listeners that you think could have a big impact on their business?
Griff Parry
Particularly in these market conditions, I would suggest that you set yourself up so that you can customize pricing by customer or do more of that, which is kind of aligned to a lot of the conversation, that there is a lot of money you’ll be leaving on the table if you have a one-size-fits-all pricing strategy. So, particularly if you’re in B2B, have the ability to price differently for different customers.
Mark Stiving
Well, I couldn’t agree with that any more. If you have a direct sales force, you are already negotiating prices with your customers.
Griff Parry
Yes, absolutely.
Mark Stiving
So the question is, are we just going to negotiate price levels, or maybe it makes sense to negotiate price models.
Griff Parry
Absolutely.
Griff Parry
And salespeople are creative, empathetic people. They understand what matters to customers and they have very good ideas about how you might change the way the model works to deliver better value to the customer and in turn better value to you as a vendor. So yeah, you should be listening to your sales teams. But the problem that most companies have is they’re not set up with that agility to make the changes. And so, you get frustrated sales teams going, “Oh, if only we could do this, we could close this deal more quickly or renew at a higher amount, and we just can’t.” That’s one of the things that makes it, that we try to solve.
Mark Stiving
Yeah, and that brings us back to that word that you used earlier in the conversation that I loved and that’s agility, right? Do we have the agility to change pricing models quickly and in many different situations?
Griff Parry
So the two words that I end up using all the time, which sounds a bit weird given that I’ve talked about an infrastructure business, is one is agility and the other is transformation. When companies are learning to exercise pricing muscle better, they are generally going through a pretty significant transformation where all those various functions within the business engineering, product, sales, marketing and finance, they’re all learning to work together more effectively to design and deploy pricing changes. So yes, agility and transformation.
Mark Stiving
Nice. Griff, thank you so much for your time today. If anyone wants to contact you, how can they do that?
Griff Parry
They can email me at [email protected], and m3ter is m-3-t-e-r.
Mark Stiving
Excellent. And to our listeners, thank you so much for your time today. If you enjoyed this, would you please leave us a rating and a review? You always hear me tell you that it’s hard to figure out how to leave a rating or a review, so this is your challenge; go figure it out. And if you want help, go to www.ratethispodcast.com/impactpricing; they will hold your hand.
And finally, speaking of recommendations, J. Weber left an Amazon review about my second book, “Win Keep Grow”. He titled it: Concise advice on how to set up a subscription model and grow it.
“Win, Keep, Grow has become the core of our go to market strategy with my company’s software. The advice in this book is practical and straightforward.”
Thank you, Mr. Weber. The check is in the mail.
And finally, if you have any questions or comments about the podcast or pricing in general, feel free to email me, [email protected].
Now, go make an impact.
Tags: Accelerate Your Subscription Business, ask a pricing expert, pricing metrics, pricing strategy
