Impact Pricing Podcast

Ep107: The Secret to a Profitable SaaS Company with Maciej Kraus

Maciej Kraus is an experienced strategy executive with a broad operational background. He specializes in pricing and sales excellence in B2B, B2C, and retail markets. He worked both for leading multinationals as well as SMEs. He is also a guest lecturer at Stanford and LBS and an author of 2 books on Sales, Strategy, and Pricing. He is also an acknowledged sales coach and trainer, a certified business coach at the same time a TED speaker. 

In this episode, Maciej shares how companies should think more than monetization of their product and go after customer retention. He underscores how Pricing validates product-market price fit. As with SaaS Pricing, he points out that it is not about building cool marketing around the product but creating an intrinsic value in the product itself. He shares how one should not be scared to raise prices because for as long as you are winning your deals your price is not high enough.   

 

Why you have to check out today’s podcast:

  • Learn to understand how Pricing is the best validation for your product-market price fit and why you should not feel scared to raise your prices 
  • Find out why you should come from a mindset of not just acquiring but also keeping customers 
  • Find out what Pricing strategy you need to put in place now so that when COVID is over you are prepared that you only have to access and launch it right there and then 

“Raise your price by 5% increments. And just wait until you have 20% of your customers leaving you. And then it means that you got to the optimal price.”  

– Maciej Kraus 

 

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Topics Covered:

01:11 – How Maciej got started in Pricing 

01:36 – What got him stuck in Pricing 

02:02 – Emphasizing Pricing on the webpage 

03:14 – Pricing as a validation for your product-market fit 

03:32 – Not just a product-market fit but product market price fit 

03:57 – How do startups think of Pricing 

05:02 – Agreeing to what Stiving Value Table stands for 

05:12 – How does SaaS Pricing excite him 

06:10 – The intrinsic value you need to build in SaaS products 

07:42 – Mistakes that a lot of subscription businesses make 

12:26 – Understanding the value you deliver in a subscription business 

14:42 – What should you prepare and what pricing strategy should you need to roll out once COVID ends 

16:29 – His best pricing advice that can impact your business 

17:13 – The best test if you get Pricing or not 

18:10 – How to get your optimal price 

18:29 – Why you should raise your prices 

 

Key Takeaways:

“For me, Pricing is the best validation for your product-market fit. If you have to give away your product for free, what is it worth?” – Maciej Kraus  

“We both agree that you should quite often start with your Pricing, and then build a product around it.” – Maciej Kraus 

“I think what I really love about SaaS is that it’s not that you sell and forget, which quite often happens with just any other product. You have to build the value on the ground when you have a relationship with your customer.” – Maciej Kraus 

“I see quite often with the SaaS businesses they have this product kind of mindset; you just have to acquire customers. And this is the only thing you have to do. But actually, where the money for the SaaS model comes from is from that monetization and the retention.” – Maciej Kraus 

“When you are overwhelmed with those different options that you cannot see the difference, then probably most customers will say, my old car is still okay, so I don’t need a new one.” – Maciej Kraus 

“And this is where I spent quite some time these days working with companies on how to think about what should be our pricing strategy when the reality changes so that we are prepared and we just can press the button and launch it.” – Maciej Kraus 

“It’s easier to lower price than to increase it. That’s why it’s always better to start a bit too high than a bit too low.” – Maciej Kraus 

“Keep raising by 5%. Because what you hear is that ‘Okay, so I listened or I read a marketing book, I raised my prices and guess what — none of my customers left me. Usually, the answer is, so probably you still have a lot of room for price increases.” – Maciej Kraus 

Resources / People Mentioned: 

Connect with Maciej Kraus:

Connect with Mark Stiving:   

  • Email: mark@impactpricing.com
  • LinkedIn

 

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.) 

Maciej Kraus  

Raise your price by 5% increments. And just wait until you have 20% of your customers leaving you. And then it means that you got to the optimal price. 

[Intro] 

Mark Stiving 

Welcome to Impact Pricing, the podcast where we discuss pricing, value, and the undeniable relationship between them. I’m Mark Stiving. Today, our guest is Maciej Kraus. And here are three things you want to know about Maciej before we start, he has a PhD in Pricing. Now, like me, it’s really Marketing, but we like to say Pricing. And he actually said that to me, I love that. He spent a ton of time in consulting, including a stint at SKP and he’s run all of the major marathons twice. That gets me tired just thinking about it. Welcome, Maciej. 

Maciej Kraus   

It’s a great pleasure being here. 

Mark Stiving   

You know it’ll be fun. How did you get into pricing? 

Maciej Kraus   

Actually, I always wanted to go into consulting. But first, for the nerds who want to consult someone should start just seeing how well-managed a company will look from the inside. I started with a multinational for a couple of years. I then moved to consulting and then I know like SKP was establishing their office in Warsaw, Poland. I joined them and yes, this is how it went. 

Mark Stiving   

Yeah. And then you stuck into pricing. Why is that? 

Maciej Kraus   

Because I think it’s fascinating. And I already have a couple of options just to quit and to do something else. But for some reason pricing is chasing me all the time. 

Mark Stiving   

Yeah, so you’re currently a partner at a company called Moven’s Capital, which is a VC firm. And it was interesting because when I looked at their web page, you actually emphasize pricing on the web page. 

Maciej Kraus   

Because it’s super important for startups. Now, I have two hats. One, I’m a partner with emphasize the VC and private equity. And second, I still do some consulting on the side for what we see quite often for the VC and for the startups is that…I don’t know if you heard Marc Andreessen, he once said that he knows one message that you would give to all the startups in the Silicon Valley, would be to raise your prices. And why is that? I’ve seen it so many times speaking to all those entrepreneurs, that they have this approach that they’re likely too hungry to eat. They think that if they start low, then everybody’s going to love their product, and then they can just raise the price. But as we both know, it never goes this way. The monetization strategy is one of the key success factors for a successful venture. 

Mark Stiving   

Yeah, in a startup company, if you can’t sell your product in the beginning, at a reasonable price, you don’t have a real product. 

Maciej Kraus   

Yeah, this is exactly what I mean. For me, pricing is the best validation for your product-market fit. If you have to give away your product for free. What is it worth?  

Mark Stiving   

I actually heard Kyle Poyar once say, it isn’t product market fit, it’s product market price fit. 

Maciej Kraus   

Yeah, exactly. I wrote an article on this one because I get this question so many times that I already know and bored answering it all over again. Really, it’s product price market fit. 

Mark Stiving   

Exactly. What do you think the biggest problem is, besides really low prices? Why do startups have really low prices? What’s the biggest problem we see in the startups? 

Maciej Kraus   

Well, I would say a couple of reasons. But probably one is that usually those guys, they have a technical background. They think that just doing pricing is unsavory, is detrimental to true technical innovation. And they feel like, this is not something that necessarily the smart guys do. Whereas I think we both agree that you should quite often start with your pricing, and then build a product around it. I don’t want to put it so far. But just to put the price element into the component when you build all those technical bells and whistles.  

Mark Stiving   

So, I created something I called the Stiving Value Table. And essentially, it links the problem that someone has to the value that they get of solving the problem. And if you could do all of that before you ever build a product, and there’s the problem. What’s the value of solving that problem? How much would somebody pay me and now we are going to build a reasonable solution? 

Maciej Kraus   

And that’s exactly the case. 

Mark Stiving   

Now, that’s pretty cool. And so, have you done mostly SaaS Pricing recently? Or for how long? 

Maciej Kraus   

I would say for the last, let’s say three years, I do a lot of SaaS. But it does not mean that what’s from the past, like retail and B2B, they don’t chase me any longer. So, they do. I’m really excited about the pricing, probably because it’s something new to me. And it excites me because it’s growing, there is so much kind of going on, so much innovation, when it comes to pricing, to the revenue cycles, to how you build your pipeline, all those things. And I’m really fascinated about it. 

Mark Stiving   

I got to say, I agree completely, probably two years ago, I jumped into the SaaS world. And as I’m studying it, I’m having ‘aha’ moment after ‘aha’ moment. It’s just so interesting to see what’s going on. So, I ended up writing a book that will come out later this year. But I’m just excited about the whole field. What do you think is most interesting and different about SaaS? 

Maciej Kraus   

I think what I really love about SaaS is that it’s not that you sell and forget, which quite often happens with just any other product, really. You have to build the value on the ground when you have the relationship with your customer. And I really love this concept. It’s not that you have to build some cool marketing around your product, it has to have the legacy, the intrinsic value built into what you do, otherwise, someone’s going to cancel. I think this is probably what excites me. Of course, just the fact that so many companies shift to subscription, it kind of proves that this is the model for the future. And the other looking from just one other comment is looking from the owners perspective, so that private equity or the VC, companies with SaaS models, they have way higher valuations.  

Mark Stiving   

Now that’s a no brainer. So, I like to say or describe what you talked about in the following way. In a traditional business, people cared that you bought their product, they actually never cared if you used it. In a SaaS business, we actually care if you use the product because if you’re not using it and getting value from it, you’re going to churn out, you’re going to stop paying us, we don’t have a chance to get more money from you later in an expansion methodology. So, it’s a completely different mindset from I just have to win customers, do I actually have to win and keep and grow customers. 

Maciej Kraus   

You said something important because I see quite often with the SaaS businesses, they have this product mindset, you just have to acquire customers. And this is the only thing you have to do. But actually, where the money for the SaaS model comes from is from that monetization and the retention. It’s easy to give something to someone for free, you can acquire customers, you can get them in a way those marketing acquisition channels. But really, where the battle is how to make your customer use your product, and really get the value from what you deliver. And this is I think one of the key mistakes that a lot of subscription businesses make, they apply the same kind of product logic, as long as we sell it, and we get the customer on board, we are done. It’s totally opposite with SaaS, at least that’s my experience. 

Mark Stiving   

Yeah, and another observation I can make in that area is for traditional business or even for just winning a customer in the first place we care a ton about perceived value, what’s the value they perceive they’re going to get from our product? But once someone buys in and starts using our product, now it’s real value. Am I truly delivering value to that client to stay with us? I find that absolutely fascinating. Are you seeing many companies who say I want to go SaaS, but they don’t really rethink their business model? They’re just saying I’m going to change the way I do billing or pricing. Not really the best. 

Maciej Kraus   

Yeah. Recently, I was working for one of the car manufacturers. And this is where they got stuck. They thought that as long as we just split the total amount of money you have to pay for a car into monthly payments for the five years, we are done and then the thing is that you really have to change your whole sales process. How you communicate with the customers and all that stuff. I see many companies struggle with the SaaS business model implementation, I would say, especially when your core businesses are very much like the old-school-driven product. 

Mark Stiving   

Yeah, I think the hardware companies especially have this problem. They’ve got this big upfront cost. They want to try to make sure they capture their costs, it’s a real challenge for them. 

Maciej Kraus   

Yeah, exactly. 

Mark Stiving   

If all you’re going to do is split up the payments for a car company, what’s the difference between a subscription and a lease? It’s like the same thing or financing the car. 

Maciej Kraus   

And I think this is the question that based on my experience with (especially car dealers) is that they cannot explain it so that they really don’t know what is the difference, and then customers get confused. When you are overwhelmed with those different options that you cannot see the difference, then probably most customers will say my old car is still okay, so I don’t need a new one. 

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Mark Stiving   

I haven’t studied a lot of the companies but I’ve looked at Porsche’s subscription program a little bit. They offer things like we’re going to cover all the maintenance and you can swap your car whenever you want. And there’s a whole bunch of advantages to subscribing to a car that you don’t get if you buy one and finance it or if you lease it. I think companies, we can move away from cars, but I think companies have to rethink what’s the business? What’s the benefit the customer is trying to get? And how do I deliver more that benefit on a periodic basis? To my customers? 

Maciej Kraus   

Exactly, and then you also have to understand yet what is the value you deliver and especially for Porsche, there are probably a couple of things I cannot disclose, but what probably might turn out is that what you really value is just the ownership part. You want to have the feeling that I own a 911. It’s not that I can drive it. But it’s just mine, my precious, you know? It might be that the subscription model might work better with some other brands, let’s say. 

Mark Stiving   

I think that’s true. And that some people, let’s say we’re going to talk about a 911. Some people really want to own it. Some people just want to drive it and look cool driving it and swap it out.  This is segmentation, there’s nothing at all wrong with offering both options. 

Maciej Kraus   

Absolutely. So beautiful. 

Mark Stiving   

Another thing when I asked you, what are you passionate about you said COVID pricing? I’d love to hear your thoughts. You know, the very beginning, I just got so tired of talking about COVID. But nowadays, hopefully, we’re coming to the end of the whole pandemic with the vaccines that are out. What should companies be doing now? And what do you think is going to happen in the future?  

Maciej Kraus   

I know that there’s been a lot said about pricing and COVID, and how to adjust your pricing for the COVID. But what I see with the companies that approach me is that they kind of conceptually get it, but they don’t know how to apply it in their life. They’re not swift enough to make any changes. This is what I’ve seen over those months. But now the other question that they ask themselves is hopefully this whole thing is going to get over. But how do we prepare for when it’s done? What do we want to do with our pricing? And this is where I spent quite some time these days, working with companies on how to think about what should be our pricing strategy when the reality change so that we are prepared and we just can press the button and launch it. 

Mark Stiving   

And so what’s the new thing? What are they going to go launch? 

Maciej Kraus   

It depends on the industry. But I think a lot of businesses that I work now with, need to just convince customers to start purchasing. Because especially for the industries that were really heavily affected with the virus, what we’re trying to think of is how to launch those activation activities, so that we get those all that got hibernated, or they just cut back on their spending, so that we get them back on track. 

Mark Stiving   

Yes. And so, I could see, I guess my perspective if I were to think about COVID pricing in the beginning, the real question is what changed in your demand? Or do you have more people buying because you’re selling toilet paper and Zoom or fewer people buying because you’re a restaurant, and no one can go out in public and say we’re watching what your demand looks like? And then we look at the new normal coming, what is demand going to look like then? 

Maciej Kraus   

Yeah. 

Mark Stiving   

What changes should we be making? 

Maciej Kraus   

I’m recently working for a hospitality business. Obviously, they were very heavily affected with the virus. But what they’re thinking is, yeah we want to be ready when all the restrictions get just cancelled. So, how do we get back on track as quickly as possible? 

Mark Stiving   

Yep, absolutely. Absolutely. Maciej, this has been a lot of fun. Can I ask the final question that I always ask? What’s one piece of pricing advice that you would give our listeners that you think would have a big impact on their business? 

Maciej Kraus   

I usually say it’s easier to lower price than to increase it. That’s why it’s always better to start a bit too high than a bit too low. We know if someone asked me for a single pricing advice. 

Mark Stiving  

Yeah. So, can I push back on that for a second? Because I always tell people, that’s a myth. And here’s why — because the only people who care are people who know your prices. There’s nothing wrong with saying, ‘Hey, I’m going to increase prices tomorrow on all new customers, because they didn’t know what my old price was anyway.’ So, it’s just no big deal. Now, raising prices on existing customers in a SaaS business, that’s tricky. I’m with you on that. 

Maciej Kraus   

Yeah, but it’s more like, this is the kind of answer I give to people who are not involved in pricing. If you just heard there is this kind of thing. Give me this one-minute pricing advice. So, this is usually what I say. And I’ve seen most people agree. It’s also for me a test whether you get pricing or not.  

Mark Stiving   

Yeah, the thing I love about it as a piece of advice is the biggest problem a lot of people have is, they don’t charge enough. That’s one of those platitudes that it’s easy to agree with, it’s easier to lower prices than to raise prices. And everybody nods their head and goes, ‘Yeah, yeah, yeah, that’s right.’ Maybe that’s a motivation to charge a higher price. That’s awesome. I don’t have any qualms at all about that. 

Maciej Kraus   

Yeah, so this is what usually I say. And also, I can give you another let’s say, one-minute pricing advice.  

Mark Stiving   

Please go ahead.  

Maciej Kraus   

And I really love it. Just raise your price by 5% increments. And just wait until you have 20% of your customers leaving you. And then it means that you’ve got to the optimal price. 

Mark Stiving   

Oh, keep raising your price by 5% at a time. 

Maciej Kraus   

Yeah, exactly. Keep raising by 5%. Usually, what you hear is that ‘Okay, I listened or I read, you a marketing book, I raised my prices and guess what?  None of my customers left me.’ Usually the answer is you probably still have a lot of room for price increases. It’s like increasing as long as you’ve got 20% of your coming customers telling no, we will not sign up or will not buy your product because of the price. That means that you are probably somewhere around your sweet spot. 

Mark Stiving   

Yep. So, a really nice way of saying that is if you win all the deals, your price isn’t high enough? 

Maciej Kraus   

Yeah. This is a bit like a paraphrase. 

Mark Stiving   

Yeah, you got to lose some. Maciej, thank you so much for your time today. If anybody wants to contact you, how can they do that? 

Maciej Kraus   

Well, these days, it’s easy to reach out to people. So just LinkedIn, email, go to my company’s website. I think if you want to reach out, you’re going to do it.  

Mark Stiving   

Excellent. And we’ll have your LinkedIn link on our show notes. So, it’ll be easy.  

Maciej Kraus   

Excellent.  

Mark Stiving 

All right, Episode 107 is all done. Now, listeners, I’m pretty sad that we haven’t gotten a new review in a while. So, would you please help out by leaving a review on whatever platform you use? That can be Apple podcast, Stitcher, Podchaser. There’s many of them out there. And finally, if you have any questions or comments about this podcast or about pricing in general, feel free to email me mark@impactpricing.com. Now, go make an impact! 

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