Mac Kremer leads the pricing strategy practice at K1 Investment Management. He is experienced in B2B SaaS investing and value creation work.
In this episode, Mac shares strategies for growing SaaS businesses through price increases, upsells, cross-sells, and increased usage. It discusses the complexities of implementing pricing systems and emphasizes the importance of flexibility and understanding your pricing model. Additionally, it highlights the need to educate sales teams on value-based selling to reduce discounting and improve sales effectiveness.
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Why you have to check out today’s podcast:
- Discover valuable strategies for growing SaaS businesses, including ways to expand, manage and track revenue streams effectively.
- Understand the complexities of implementing pricing systems in various-sized companies and find out solutions from simple tools to more sophisticated systems.
- Learn practical tips on communicating value to customers, helping sales teams to sell more effectively reducing the reliance on discounts.
“Sit down with whoever’s responsible for pricing, decide to set up a committee and a cadence and just start talking about it more and more.”
– Mac Kremer
Topics Covered:
01:35 – How Mac found himself in pricing
02:42 – Describing his role at a private equity firm as both an advisor and consultant
03:38 – Discussing the importance of customer conversations in understanding value propositions
05:47 – Explaining that value can also include benefits beyond profit
07:28 – Similarities and differences between B2B and B2C purchasing decisions
08:49 – Using ROI calculators and the ability of sales reps to contextualize ROI within the business’s specific goals
09:56 – How ownership of pricing in a company depends on its stage of development
14:01 – Importance of forecasting and budgeting for pricing activities
16:00 – Understanding the sources of revenue growth highlighting the four ways to grow a customer: Win, Keep, Grow
19:49 – What to focus on when it comes to net revenue retention
21:35 – Variety of pricing systems used and how it depends on the complexity of pricing models used
23:55 – The complexities of implementing and managing pricing systems as companies grow
25:57 – Helping salespeople understand and communicate value
29:06 – Mac’s best pricing advice
Key Takeaways:
“Customer conversations are so critical to understanding the value proposition of your solution, and where you kind of see your customer’s perceiving value before you even start to talk about price.” – Mac Kremer
“The best place to start when you’re having customer conversations is, you can go in and you can kind of engineer the true value calculator, the EVC, the economic value to the customer. But I think it’s also just understanding their perception of the value that they’re receiving. Because I think value comes in a lot of different forms, even outside of just profit.” – Mac Kremer
“A lot depends on the complexity of your pricing model when you go to think about what system we should be using?” – Mac Kremer
People/Resources Mentioned:
- Maxio: https://www.maxio.com
- Chargebee: https://www.chargebee.com
- Gainsight: https://www.gainsight.com
- NetSuite: https://www.netsuite.com/portal/home.shtmlSalesforce:https://www.salesforce.com
- Tableau: https://www.tableau.com
Connect with Mac Kremer:
- LinkedIn: https://www.linkedin.com/in/mac-kremer/
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.)
Mac Kremer
Sit down with whoever’s responsible for pricing, decide to set up a committee and a cadence and just start talking about it more and more.
[Intro / Ad]
Mark Stiving
Welcome to Impact Pricing, the podcast where we discuss pricing, value, and the critical relationship between them. I’m Mark Stiving, and our guest today is Mac Kremer. Here are three things you want to know about Mac before we start. He manages pricing strategies for K1 operations. He was in Large Law Pricing at LexisNexis. And oh my gosh, the most fascinating thing, he grew up without the internet. His parents just got the internet a month ago. So, I think he grew up in what… Alaska or something. Hey, welcome, Mac!
Mac Kremer
Great introduction. Basically, Alaska, Southeast Ohio and Alaska have a lot of similarities between them, the final frontier as you might call it. Yeah.
Mark Stiving
Yeah. It’s pretty amazing that there are places in Ohio that are like that, so that’s pretty wild.
Mac Kremer
Yeah.
Mark Stiving
Good.
Mac Kremer
I was just going to say, I mean, it’s the funniest thing, right? I’m a technology investor, yet I grew up without the internet, so you can imagine my fascination for software and technology is pretty vast, just because I didn’t have a ton of exposure to it when I was growing up.
Mark Stiving
Yeah, exactly. So how did you get into pricing?
Mac Kremer
Yeah, it’s a great question. So, obviously I started my career at LexisNexis. I was actually on the pricing team there. So I worked with some of the AMLA 100 accounts in Large Law, and we had just gone through a massive pricing and packaging project there, and I decided, hey, this is super interesting. I’d love to kind of be on the other end of this. Started to study pricing, had a bunch of friends who went into pricing consulting, decided that the best place to kind of learn and evolve in pricing would be working at a private equity firm that manages a portfolio of B2B SaaS companies. So I actually am an in-house kind of strategy consultant to some degree for software investors. So I work with a portfolio of 40 plus B2B software companies. And I help them with all their biggest strategic pricing questions.
Mark Stiving
I got to tell you, that sounds fascinating to me. The only reason I wasn’t a consultant growing up was because it seemed like it was too much work. Those guys work really, really hard, and so the idea of being at a private equity firm, it’s like, I’m sure you work harder than I did when I was growing up, but it isn’t like the grind of being a consultant.
Mac Kremer
Yeah, it’s a lot of fun. I get to play kind of both hats of like advisor slash consultant. So I get to work with our portfolio companies on all problems, big or small. So a lot of what we do is the market research that goes into understanding your pricing strategy, understanding value. But what’s a lot of fun about it is we invest across several different verticals of B2B SaaS. So I get to talk to customers that might be HVAC or plumbers that are using software solutions, or I might get to talk to trash haulers that are using software solutions or talk to sophisticated kinds of financial services buyers as well. So it’s a lot of fun because I get to have a lot of different types of conversations and solve a lot of different problems, but there’s definitely no shortage of pricing work.
Mark Stiving
Well, that’s a great place to kick off a conversation today. you’re out talking to your portfolio companies’ customers learning about value. So what kinds of conversations do you have with them?
Mac Kremer
Yeah, I mean, this is probably my favorite thing about what I do, right? At the end of the day, customer conversations are so critical to understanding the value proposition of your solution and where you kind of see your customer’s perceiving value before you even start to talk about price. The way I typically approach the conversation is really just opening it up with tell me about yourself, right? Like, what keeps you up at night type of conversation, but then getting into understanding like, what are the most critical purchasing criteria? Why did you go to market to look for a solution? What was the need in the use case? Walk me through your top five buying criteria. Once you understand those buying criteria, it’s about understanding, okay, what was the next best alternative? And none of this is, I think, particularly groundbreaking as I know some of these topics have been covered on your podcast before, but then it’s truly getting into that conversation of relative to the next best alternative.
Do you believe that you can quantify the value of the product that you bought? And if not, can you kind of give me a frame of reference for how price relative to performance is the product relative to the next best alternative? And I think at the end of the day, the key to all of the conversations is this one single word, and it’s the word perceived, right? Because there’s a lot of time especially in B2B SaaS, it’s not always super easy to quantify the value that a customer might be receiving. So you really need to understand the perception of price relative to the value that they’re receiving. so kind of your classic value mapping type exercise to understand where one particular software solution sits on a map of several different next best alternatives. What is the value that each customer is receiving relative to the price that they pay for it to understand where do we sit in the market and where do we go from here?
Mark Stiving
Yeah, I think that’s fascinating. But you said you’re mostly B2B, and one of the things I often say when I’m teaching B2B clients is, value in business is always measured in incremental profit. And so I would almost be desirous to say, look, I’m talking to a trash collector. How is it that my software helps them make more money? And if they weren’t able to quantify it, do we know how to quantify it? Do we know how to help them understand how much money we’re making them?
Mac Kremer
Yeah, it’s a good point. I mean, I think typically what you find, depending on the buyer, and depending on the benefit that the software solution produces, there’s a lot of benefits outside of just kind of the profit that’s received, right? Even down to kind of like the opportunity cost or some of the kind of softer benefits that you might get. For example the software solution that works with trash haulers, one of the benefits of the solution is it’s just higher employee satisfaction. Right? Now, you could tie higher employee satisfaction to less turnover of employees, and that also kind of relates to profits. But at the end of the day, there’s a myriad of different benefits. And I think the best place to start when you’re having customer conversations is you can go in and you can kind of engineer the true value calculator, the EVC, the economic value to the customer. But I think it’s also just understanding their perception of the value that they’re receiving. Because I think value comes in a lot of different forms, even outside of just profit.
Mark Stiving
So, I certainly don’t disagree with that, but in my mind I’m thinking let’s talk about B2C for just a second, right? B2C, I think that buyers make decisions and I’m going to say the word emotionally, although it may not be emotions, but it’s without a value calculation because we don’t really know what value is. We’re not trying to maximize profit when I buy a new shirt, right? So there’s a whole bunch of things that are non-quantifiable in that decision process. And so I think if you shift to B2B, all of those things are still there, right? I’m still going to make a decision based on how I feel, how I think, what do I trust, who do I like? But in the end, I also need to justify it by saying something like here’s how much money I’m going to make, or here’s what the return is when I buy this.
Mac Kremer
Yeah, absolutely. And I mean, honestly Mark, I kind of think about this as this sales is so critical. Like the sales experience is so critical when you’re talking about B2B sales from that perspective of selling the value. I think that’s totally right, right? To be able to sell the value of a solution in B2B, it has to be very kind of numbers driven. The thing I always say is time savings is dead. Like time savings is not really a good indicator of the value that somebody’s going to receive in B2B. It needs to be tied to overall revenue or bottom line impact or something along those lines. But I do think that when you’re trying to assess how much is our product really worth, you have to take into consideration a lot of the psychological factors like you mentioned. And I think what you’ll find is in B2B, it doesn’t function wholly, I think, completely differently than B2C, than it might, some people might believe, but the sales process does look drastically different for B2B versus B2C. Because you need to really be able to kind of come to the table and talk about the impacts of your business from a top line, bottom line perspective. I think it’s really, really important.
Mark Stiving
Yeah, I think that’s fair. And I would say my experience is that B2B salespeople tend to do a really good job with the non-quantifiable side of the business. And they don’t do as good a job on the quantifiable side of the business, and which is probably where I spend most of my time on the quantifiable side, but I get the other side, right? I mean, it’s absolutely important and I don’t want to diminish it at all.
Mac Kremer
Yeah, I agree. And you can always build an ROI calculator, but it also takes the sales rep the ability to kind of talk through what the ROI calculator is saying, to really contextualize it in the frame of the business. And I think the interesting thing is what we’re seeing is there are so many software solutions out there that you could use. So you really have to be able to cut through the noise and delineate and differentiate why your software solution in particular is going to help you achieve your business goals and objectives. And I think the sales rep that can get down to the bottom of what those business goals and objectives are is going to be infinitely more successful selling the value than a sales rep that maybe can’t.
Mark Stiving
Yeah. I think that’s spot on. And the other thing that, what you just said prompts me to think is if I understand my product and I understand which business goals, which business problems I solve better than my competitors, then those are the customers I go look for, right? I’m not trying to sell to everybody. I want to sell to the people that have that problem.
Mac Kremer
Yeah. Focus is critical. Yeah, I agree.
Mark Stiving
So, I’m going to ask you the question that everybody is always curious about and how do you think about this with your 40 portfolio companies. Who should own pricing?
Mac Kremer
yeah, that’s a good one. so I think when it comes down to who should own pricing, it really depends on where you’re kind of at in your journey, right? I think if you’re a small company, just getting started kind of breaking into finding product-market fit pricing is kind of an every person job in the sense, right? Because pricing really from that perspective is trying to sell, you have to bring revenue in the door, it’s the lifeblood of a startup. So pricing maybe is one of those topics that it takes kind of a committee of founders or whoever it is kind of working through deals and it’s more scrappy. As you kind of grow up and you find product market fit and you scale a little bit, I think it starts to shift a bit.
So if you’re a business, I think five to maybe $20 million in revenue, that’s the type of business where what you’re really looking for in terms of who owns pricing is more of a committee style of owning pricing, I think is the right answer. I think it’s hard to, in that stage, kind of just delegate one person since so many people have different responsibilities and things of that nature. I think it’s more of a committee style that could own pricing, but I think the cross-functional collaboration between your CEO, your product leader, whoever that product leader might be, it might be a co-founder still kind of at that stage. And a revenue leader is really important because you need to have your pulse on the finger. You need to have your finger on the pulse of the revenue engine, whether or not pricing is affecting it, but also your product leader as you’re kind of building and scaling new features and functionality.
They need to be really, really involved with pricing, I think. And then as you kind of scale 20 to a hundred million, I think it’s time to start thinking about there being a person within the business, kind of one person who’s the one throat to choke in terms of all things pricing related. It might be somebody in your product organization. Like, when product owns pricing. I think I’ve typically seen that be very successful because the product function usually has the best pulse on what the customers are saying, how are they thinking about value? But as you’re kind of building and delivering on a product roadmap, you’re also kind of thinking about how do we continue to price this and innovate, and are we truly capturing all of the value of which we are. So I think product is usually a good function that typically owns pricing.
Now, when you get into the hundred million plus in revenue, and I don’t go too far past that when you get into the hundred million plus in revenue, especially in B2B SaaS. I think it’s time to start thinking about hiring a pricing leader, maybe a director of pricing or somebody who kind of can sit in the product organization, but work cross-functionally and collaborate with a bunch of different functions to kind of be that person that’s really owning the pricing strategy from a holistic perspective. the reason I think that that’s kind of the threshold for that is usually by the time you get there, you might have a couple of segments, a couple of business units or something, the pricing problems become a little bit more complex because you probably build a pretty robust product roadmap at this point. So you’re kind of starting to think through how do we think about all the different pieces of the product and the roadmap and features and packaging, and you start to juggle a little bit more.
Mark Stiving
I got to say that was a pretty fabulous answer. if I were going to argue with any of them, it would be the earlier stages in the following sense. I tend to think the CEO owns pricing at the early stage. There could be a committee of people talking about it and discussing it and trying to figure it out. But in the end, it touches so many different departments that I don’t think anybody can make the decision except the CEO and if we’re going to go make a major change in the company, which pricing is not the price level, but oftentimes pricing strategies are pretty big changes in the company. The CEO has to say, yeah, this is what we’re going to do.
Mac Kremer
Yeah, that’s a good point. I think whoever owns the vision of the business in terms of future growth and projection, they should be the ones starting definitive pricing strategy, but yeah.
Mark Stiving
Yeah. And I like how when I asked the question, you instantly jumped to the size of the business as to who should own pricing, right? I mean, that was a really nice way to structure it. So, what about one of the things we had talked about that you said you wanted to talk about was forecasting and budgeting for pricing activities. So I’ve got to say, I’ve never thought about this as a topic. Why is this an interesting topic?
Mac Kremer
Yeah. I mean, I think it’s an important topic because typically where I’ve seen companies, in particular here where I’m talking, more so portfolio companies looking to do price increases back to their base or how they’re kind of thinking about their future of pricing. And I think this is a really important topic because you really need to set the expectation within your business. Like, what are we going to do from a pricing perspective year over year, and how are we going to achieve that? I think planning is one of the biggest misses in terms of not being able to execute on any sort of strategic change in pricing, whether it’s price level or it’s packaging or anything along those lines. So I think in one of the, actually along the lines of pricing ownership, I think one of the functions that sometimes gets left out of the party in terms of pricing is finance.
Sometimes I think your CFO, it’s easy to kind of come to them with this big strategy and say, okay, we’re going to go do this thing. But I think it’s really up to the CFO or your VP of FPand A to sit down and say, is this really the best thing for the business in terms of strategically what kind of benefit we’re going to receive from doing X, Y, or Z? Whether that’s price level adjustments or even packaging or something along those lines. But the reason I throw it in there is because I can’t tell you how many times we’ve maybe looked at a budget where they’re not allocating anything to price increases or pricing is not a line item on the budget, just kind of all gets lumped in together with upsell or expansion revenue.
And I think what’s tricky about that is how do you know if it’s working or not, right? Like I think the ability to plan and set a goal and a target for what we look to achieve in pricing helps you measure against it so much better in the future. And I think it’s one of those things that sometimes you don’t always think about it. I had a CEO tell me one time pricing is something they think about on a Friday afternoon. but pricing should be something that’s measurable. It’s a part of your budget, it’s a part of your planning and your process, because it truly is one of your best growth levers as a business. SoI like to advise that you’re kind of looking at pricing six months to a year in advance of what you think you can do next year, but you’re always constantly optimizing and iterating on it.
Mark Stiving
Yeah. My second book was called Win Keep Grow which is all about SaaS businesses, right? And what I take away from what you just said is the grow part of Win Keep Grow. How do I run my expansion business? And one of the things, I’m not going to remember all of them, I don’t think off the top of my head, I might. One of the things I think about is there are four different ways we can grow a customer so we can get expansion revenue. so real quickly, those four raising prices, upsell, cross sell and usage, right? And one of the things that I always recommend is, are you monitoring all four of those, right? Are you monitoring as you get revenue in, did this revenue come from a price increase? Did it come from an upsell? Did it come from a cross sell? Did it come from increased usage or did it come from a new customer? And so you could articulate where each chunk of revenue comes from. And now once you’ve done that, you can put in plans things to say, hey, look, upsell is important to us, what are we going to do to move upsell? So yeah, I think that’s what you just said.
Mac Kremer
Yeah. Effectively, right? And I think it’s important from like an FP and A planning exercise or forecasting exercise, because each of those affects your business a little bit differently, right? Upsell might not be pure EBITDA to the bottom line, but price increases have a little bit of a different effect in terms of cash on the business. And I think the more in tune the entire business is on what is our plan for each of those levers in terms of grow, you’re just much more likely to execute on it because everybody’s on the same page.
Mark Stiving
Yeah. So when I first saw budgeting for pricing, I was like, well, I don’t have to pay money for pricing because it’s money coming in the door.
Mac Kremer
Yeah. That’s a good tagline. I mean, I’d love to ask you, Mark, I actually read the book, Win Keep Grow, and I think it’s a great book. in terms of really understanding the different levers you can pull as a business and how you should be thinking about value and kind of monetizing value in terms of the grow category and the four camps that you just gave me. Like, how do you think about the balance between the four of those? Like how much should you be kind of thinking about price increase versus upsell and expansion? Or does it just depend?
Mark Stiving
Well, certainly the answer, the answer to every question is, it depends. So the question becomes what does it depend on? And I would say price increases. We should always have a steady state of price increases going right? Constantly. When we’re first launching a product, we’re probably not raising prices quite yet. And all of those others grow totally irrelevant to us, right? We’ve got to focus on how do we win new customers, how do we keep the customers we have? but once we start to build that customer base, now the question is where does that expansion revenue come from? So, first and foremost, I would like to see it come from usage. So usage says we pick the right pricing metric, and if we pick the right pricing metric and our customers are being successful and their business is growing, we’re making more money, right?
So that’s just easy money without any work whatsoever. and then the other two that I think matter early on are we should be thinking about how do we start doing price increases? We want to train our customers to expect price increases. And upsell is hard because we have to have crafted the product portfolio, right? So that we essentially have people in our good package and ready to go to our better package or in our better package ready to go to our best package. And if we haven’t yet crafted that product portfolio, which oftentimes we don’t, when we first launch a product, it’s one product, take it all, which is okay, right? We’re trying to get more that product-market fit and prove everything. Now it’s time to start figuring out how we craft those packages so that we can really get the difference as our customers are getting more value from our product. And cross sell by far is the last thing you care about, by far, right? That essentially says, hey, we’re going to come up with a new product that our current customers would like. It’s like, yeah, let’s not worry about that yet. Let’s worry about making them love what we have today.
Mac Kremer
Yeah. And I think there’s been a big shift in B2B SaaS, just going back to the forecasting thing again, around this concept of net revenue retention, right? The concept of like, are we healthily growing our customers organically even outside of new product development and things like that. Like, can we continue to get our customers so sticky that they continue to buy more, pay more and essentially for the product because they’re constantly getting more value from the product. So your point around usage and I think price increases. I totally agree with that.
Mark Stiving
Yeah. I think the other thing that happens is when we first launched products and we’re fighting for that product- market fit, I don’t mind having relatively low prices at that stage. Because what I really want is a bunch of customers that I can go talk to and learn what they use and where the value is and what’s happening. But that doesn’t mean that the next customer has to be that low priced, right? So I can win customers at higher prices without raising prices on my current customers in the short term. And it’s totally an okay way to win a business or to grow a business.
Mac Kremer
Yeah. Completely agree. And obviously it, again, comes into the weighting of time relative to resources that you could commit when you’re sending a new product to the market. There’s a lot of enablement that goes into that and things like that around how do you close the sale of that versus kind of the low hanging fruit is to get people to use more of what they love to use.
Mark Stiving
Yeah, exactly. Right. And if I can get them to pay me more, then we’re making more money.
Mac Kremer
Exactly right.
Mark Stiving
Yep. And it’s so much easier for us. You deal with companies of all different sizes because you’ve got those 40 different portfolio companies. How do you think about pricing systems in those, I mean, I’ll bet you have some companies using Excel. I bet you have other companies using something much more sophisticated.
Mac Kremer
Yeah, I love that question. So obviously as you think about the price advantage, the classic kind of book on pricing infrastructure is kind of the key leg of the stool in terms of standing up any sort of pricing strategy. But infrastructure comes in all different shapes and sizes and you name it, you already kind of hit the nail on the head in terms of we have some companies who are using Excel. And then as they kind of grow a little bit, maybe they’re using a hodgepodge of different solutions to get them to their ultimate pricing answer. And then you have some solutions that are using more complex systems like maybe a Maxio or Chargebee or something along those lines that are actually helping them figure out how they’re kind of monetizing their customers maybe billing platform or something in the lines of like a CPQ type tool that’s helping them make sure that they’re adhering to certain price levels and counting discount.
One of the challenges I think in general, or at least one of the biggest lessons learned, is that there’s really no silver bullet system out there that kind of helps you manage pricing end to end. It’s going to take a mix of multiple different solutions. I’ve seen some really interesting innovations and even using tools like Gainsight for example, pulling the data out of Gainsight to understand the health of your customers, but also using Gainsight to communicate to your customers. and then trying to connect that overall to your Salesforce instance and then your NetSuite instance to track the entire process end to end. where I’ve definitely noticed it’s no silver bullet is getting the data out in terms of tracking and reporting. I haven’t really other than some Tableau dashboards and maybe some basic setups and NetSuite and things like that, never easy to track the effects of pricing, all in all.
But I think, yeah, you see all different types of different flavors and it’s hard to give one single recommendation, here’s what the system should look like, or here’s what the silver bullet is, because there really isn’t one. And the other thing I consider, I’d say that I’ve learned over the years of doing this is it depends on your, your revenue model, right? So if it’s a usage-based pricing model, then you’re really going to have to get a certain system in place to make sure you can track the usage. You have the right telemetry, the customer sees the transparency of the pricing model. But if it’s a seat-based pricing model, right? Like some of the functions within Salesforce can help you get there pretty much 90% of the way. So a lot of it depends on the complexity of your pricing model when you go to think about what system should we be using?
Mark Stiving
Yeah. I think the system’s question is so hard to figure out in so many different ways. And what’s funny is as you get bigger, then you have more need for a system and as soon as you put a system in, it actually puts constraints around what you can do for your next pricing strategy. Our system can’t do that. It’s like, yes, but look at how much money we’re going to make.
Mac Kremer
Yeah. I mean, even as simple as wanting to consolidate SKUs or chain SKUs, it’s the difference between bundling and packaging, right? Bundling as a collection of SKUs, packaging is kind of consolidating SKUs to one SKU. Even something along those lines. Like it takes some major consideration sometimes on the back end of the systems because you have to go in and reoptimize how sales reps are quoting The other thing that sometimes can get missed and as a consultant it’s fun to get recommendations, but the nice thing is I get to stick around after the recommendation and a lot of times I get to see kind of the messiness of, well, we told you you should go to this package and we should just put it in your CPQ and this, that, and the other. But then the thing that sometimes gets missed is the people aspect of the systems too, is that people have to learn the systems again and kind of learn how to quote and stuff. And the last thing you want to do is slow your sales reps down by creating something that is so prohibited by the systems that it adds an extra, however many cycles to your sales cycle time.
Mark Stiving
Yeah. That’s another huge difference between your role and a consultant. And that is you get to make recommendations, but then you can’t leave.
Mac Kremer
Right. Exactly. Yeah. I get to see the fruits of my labor or if maybe sometimes it’s not always as ripe as it should be.
Mark Stiving
Yeah, exactly. Hey, how much do you get involved with helping salespeople? so I think of it this way. You’re out talking to customers, you are learning about value, and you’re probably learning about value differently than the way your salespeople do. Because I know salespeople tend not to think about value the way I think about value. So how much do you get involved with helping salespeople learn what value truly means?
Mac Kremer
Well, and the kind of steps of executing on any sort of pricing strategy, I think this is like step number one. The awesome part, I think about my job, or one of the parts that I love the most about my job is we go through all this kind of market research and we learn so much. And I think the initial like instinct is that sales reps are going to reject the issue of changing pricing, or sales reps don’t want to raise prices, all this kind of stuff. But I’m always really pleasantly surprised when you open up the research and you just kind of tell sales reps like, this is what the customer said. You can really build a true sense of belief within the sales team that like, our product is as valuable as we say it is, and the price is just reflective of the value.
And I think that the important part of the conversation is like, look, we’re not raising prices just to drive EBITDA margins here. Like, we’re not setting price levels or repackaging just to go out and get more money from our customers. You start the conversation with here’s all the value that they’re getting, and then you layer a pricing conversation on top of it, and sales reps are really receptive to it. I think value-based selling is just one of the most important things that we can honestly offer in terms of helping implement pricing strategies. Because at the end of the day, they’re on the front lines, they’re the ones having these conversations. And what you really want to do is instill confidence in them that like, hey, this is really worth it. But it’s also like the little tips and tricks along the way of like, when do I introduce pricing as a topic, right?
Like, how do I communicate this to the customer and how do I kind of think about this? And if you can collect all those little tidbits in the research of like, how people want to be talked to in the sales process, how do you truly build a consultative sales program that’s going to make them feel trusted with the sales rep, that the price is truly reflective of the value that they’re going to receive. and honestly, that’s probably my favorite part of the job because it’s cool to see how much further these sales reps can go and how much less objection they get in the pricing conversations just by truly hitting on all of the key points that the customer is looking for.
Mark Stiving
Yeah. What’s fascinating is when you do that well, you don’t even have to raise prices, you just reduce discounting.
Mac Kremer
Yeah, exactly right. Yeah. It’s crazy to see it too, right? And I think, and instantly you want to go towards something like the systems component of reducing discounting, but sometimes you don’t even have to do that, right? Just giving the sales reps the belief, you’ll be surprised at how they kind of think about it or how they sell it a little bit differently, especially at some of the smaller growth businesses, right? Where sales reps have been taught, like sell it all costs. It’s really fun when you go in and you start to say, hey, look, we’ve got a lot of customers now. We have a lot of referenceability in the market. Everybody knows who our product is and what it does. You can go in and be really confident in your sales process and your pitch and approach, and it’s cool to see it kind of shift a little bit in terms of how they think about it.
Mark Stiving
Yeah, I used to talk to rooms full of product managers for a while and I would always ask the question dear salespeople, ever discount, right? And every hand goes up. And I would always follow that up with, well, if your salespeople are discounting too much too often, it’s because you haven’t given them the tools to be confident they can win deals at your prices.
Mac Kremer
Bingo.
Mark Stiving
Yeah. And it’s like, look, it’s a team sport, guys.
Mac Kremer
Yeah.
Mark Stiving
Hey, Mac, this is so much fun. but we’re going to have to start to wrap it up. Final question, what is the one piece of pricing advice you’d give our listeners that you think could have a big impact on their business?
Mac Kremer
Yeah, that’s a great question. I think the one piece of advice that I could give really is, it’s going to sound cheesy or maybe not as packed as I wish it would, but just, I mean, get started. I think really just start to sit down and think about it. Like, I think something that you can do tomorrow is get all your business leaders together, depending on what type of setting you’re in. Get all the people that you’re kind of working with and sit down and just talk about it, right? Open it up, say, have we thought about doing this? Have we thought about our pricing over the last six months? Like, do we think our price levels are correct? Is there something we can do with packaging? I think open up the conversation and just really start to think about it and think about how you can tweak and evaluate.
There’s probably a lot of general rules of thumb out there. You should really be evaluating your price levels kind of every month, taking the data in and looking at how it’s progressing over time. I think making more major pricing tweaks every six months or so. I think it’s all kind of relative, depending on the scale of your business and how fast you’re growing. But I think generally, like don’t make pricing a back burner topic. I see it happen so many times and it truly is one of the biggest levers for your business. So I think really what I’d say is sit down with whoever’s in your business, who should be semi responsible for pricing, decide to set up a committee and a cadence and just start talking about it more and more. and I think you’ll be pleasantly surprised at how much you kind of just learn by having the conversation with people. Hey, do we think we’re too cheap? Or do we think we’re expensive? You might hear some different responses. And I think the biggest piece of advice I can give is just to get started.
Mark Stiving
So to paraphrase, Nike, just do something.
Mac Kremer
Exactly. Yep. Just do it. That’s right.
Mark Stiving
Mac, great answer. And thank you so much for your time today. If anybody wants to contact you, how can they do that?
Mac Kremer
Yeah, I’d say reach out to me on LinkedIn Mackenzie Kremer, I got my full name on LinkedIn, so that way I know you found me by looking for me, not just by pulling my name back and typing it in. Yeah, just connect with me on LinkedIn. I’m more than happy to have conversations and follow ups on anything that we talked about today. But it was a pleasure being on, Mark. I really appreciate you giving me the chance to chat with you.
Mark Stiving
Oh, it was fun. We loved having you. And so to our listeners, thank you for your time today. If you enjoyed this, would you please leave us a rating and a review? And if you have any questions or comments about the podcast or pricing, feel free to email me, [email protected]. Now, go make an impact!
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