Impact Pricing Podcast

Ep129: What is So Interesting with Startup Pricing with Saima Khan

 

 

Saima Khan has 10+ years of experience creating pricing strategy and portfolios, revenue management, and business planning. She has 7+ years of experience in international markets as a leader and teammate. She is quick to adapt to change and able to work with different teams in difficult environments.

In this episode, Saima shares how you shouldn’t price low your products or services at the start as it is hard to increase prices later on, and it might be lower than the market’s perception. And she suggests pilot models you can use other than underpricing.

Why you have to check out today’s podcast:

  • Find out what these two essential factors to pitch when you work for startup companies as a pricing consultant
  • Learn about the tools used to test the pricing effectiveness of products in a startup company
  • Find out how to do pricing for newly launched products for a startup company

         

Always start your business with your customer. Where do they see the value? Focus on that when it comes to products, services, and pricing, and then look internally and see how you can be more relevant to your customers, how you can provide them the best value, and be agile about it. 

Saima Khan

      

Topics Covered:

01:45 – What got Saima into Pricing

02:30 – Why she stayed in Pricing

03:10 – The many skills involved in Pricing

03:52 – What’s the difference working for a big company versus consulting

05:16 – What companies in terms of size does she work with

05:52 – Why are there few Pricing consultants focusing on startups, and what is her way of working with startups

06:54 – What it looks like pricing for a startup

09:42 – Pitching both business model and pricing strategy to companies

12:36 – How she helps startup companies with smart pricing decisions based on value

14:08 – The biggest challenge startups face in terms of pricing

16:17 – Why you shouldn’t go for a low price when launching new products

19:22 – What creates lack of trust in the market

20:02 – Using tools to help clients understand their product’s value

22:49 – Her pricing advice that can significantly impact one’s business

     

Key Takeaways: 

“I think the most interesting part of startup pricing for me is, and I say this again, and again, is the link to the business model. Because for a startup, it’s very important to see how the startup is going to charge money, for what, and from who. And it applies to mostly all of the startups but a lot more to software products.” – Saima Khan

“When I work with startups, I don’t start with pricing, I start with the business model, and identifying which customer group is actually deriving the most benefit from your existing product and services, and how you can work or adjust your products and services portfolio to create more value, or that group of customers who you can monetize the most.” – Saima Khan

“You cannot monetize a product which has not been tried in the market. But the best way to do it is through a freemium model or a pilot model instead of underpricing. Because taking the price up is very hard because you establish the value of that product already.” – Saima Khan

“I guess we need to educate startups a little bit more on the element of pricing the value they bring because it’s natural that whenever you bring something very new to the market, you’re a little bit under-confident. And it’s natural to underprice your products and services.” – Saima Khan

      

People/Resources Mentioned: 

        

Connect with Saima Khan:

        

Connect with Mark Stiving:   

                          

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.)

Saima Khan 

Always start your business with your customer. Where do they see the value? Focus on that when it comes to products, services, and pricing, and then look internally and see how you can be more relevant to your customers and provide them with the best value and be agile about it.

[Intro]

Mark Stiving 

Today’s podcast is sponsored by Jennings Executive Search. I had a great conversation with John Jennings about the skills needed in different pricing roles. He and I think a lot alike. If you’re looking for a new pricing role, or if you’re trying to hire just the right pricing person, I strongly suggest you reach out to Jennings Executive Search. They specialize in placing pricing people, say that three times fast.

Mark Stiving

Welcome to Impact Pricing, the podcast where we discuss pricing, value, and the mathematical relationship between them. I’m Mark Stiving. Today, our guest is Saima Khan and here are three things you want to know about Saima before we start. She has two master’s degrees, and one of them is from Harvard. She’s earned her way to VP of Pricing at a large telecom company and recently shifted into consulting for pricing. That’ll be fun. And she’s lived in some very exotic places, including Pakistan, Thailand, Malaysia, and even Canada. Welcome, Saima.

Saima Khan 

Thank you, Mark. Thanks for the introduction.

Mark Stiving 

Hey, how’d you get into pricing?

Saima Khan 

Yeah, that was just a pure accident. I started with finance and accounting, and I thought it was boring. And I worked with the marketing team on a pricing proposal, and I figured that I love it because pricing is such a good mix of finance, numbers, and analysis. And at the same time, marketing insights like brand and customer perception. I immediately loved it. I felt like it was made for me. So, I made the shift. I started in pricing in 2006. And I stayed ever since, happily ever after for me.

Mark Stiving 

I think the answer was implied in what you just gave. But why do you stay in pricing?

Saima Khan 

I guess, like you mentioned, it is the mix of marketing and analysis in numbers. I love numbers. And at the same time, I also like marketing strategies and working on product development. And when I’m working on pricing and looking at the portfolio, it gives me a very good overview and hands-on experience in all the three areas that I like working with. And I think pricing is very unique in that sense.

Mark Stiving 

Yeah, I love the sense that it feels like it should be mathematical. And in a lot of cases, it is. But it isn’t just mathematical. Right? There’s a ton of business and people skills. And it’s fascinating. It’s a great field.

Saima Khan 

Absolutely. I mean, when you’re working with sales teams and product teams, there’s a lot of negotiation going on. When you’re working with the brand team, you’re trying to align the pricing and brand message. And when you’re working with the finance team, you’re looking at numbers and doing the business case. So, there are so many skills involved here. And lately, I’ve started working with startups, as well, which is a lot more fascinating for me.

Mark Stiving 

Now, look, we’ll jump into that in just a second. I wanted to first ask you, can you compare working for a big company in pricing and now you’ve jumped into consulting? What’s different? How is your life different now?

Saima Khan 

Well, it’s very, very different. I think that when you’re working for a big company, it’s a progression, right? You set up a portfolio, and then you look at it again and again, you see market dynamics, and you’re doing portfolio extensions a lot of the time. When you are in consulting, it’s like a short project every time. I like it; it’s very exciting for me. It’s new; every time it’s a new company, it’s a new challenge. I do miss the fact sometimes that we don’t go as deep as you would in a big company. Because for example, in a big company, once you set a pricing strategy, you work on the pricing portfolio. You also get to see the launch, you also get to evaluate the post effects of that, and you also get to adjust again. It’s like a baby that you see grow, but you know, with consulting, it’s like you make the baby, but then you give it up for adoption.

Mark Stiving 

Yes. So, it’s a pretty fascinating way to look at it. I’ve heard the implementation pieces are a really big deal. So, when you’re working for a company being able to do implementation or the company sizes are different, you work with a really large telecom company. And so now, do you work mostly with large companies or small to medium-sized companies?

Saima Khan  

Mostly large companies. I’m also working with medium and small companies. So, the consulting firm strategic pricing management group that I’m working with is mostly working with bigger companies, sometimes medium-sized. But in my startup space, I’m obviously working with very small companies as well.

Mark Stiving 

I personally find working with small companies with entrepreneurs so much more fun, but they don’t have the money to pay us as much. So, it’s kind of we have to really like it if we’re going to do it.

Saima Khan 

Yeah, that is so true. It is one of the challenges. And that is why there are very few pricing consultants who focus on startups because startups primarily don’t have the budget or don’t understand how important pricing is for them. A lot of time, pricing is just like a bad thought. It’s not at the front. For me, the way I work with startups is generally through entrepreneurship centers. And these entrepreneurship centers are funded either through the government or have their own private entities, or I work with them through other organizations, like Tai; if you’ve heard of it, it’s a Silicon Valley organization. So, there are other organizations working within. I help startups; I work with them. And they connect me with startups. And that’s how I do it primarily.

Mark Stiving 

Nice. So, tell me about pricing for a startup. I think this sounds like a more fun topic than pricing for big companies. Why is pricing for startups interesting for you? What do you do?

Saima Khan 

So, I think the most interesting part of startup pricing for me is, and I say this again, and again, is the link to the business model. Because for a startup, it’s very important to see how the startup is going to charge money, for what and from who. And it applies to mostly all the startups but a lot more to software products. So, think of a recent app like Bumble. Right? So, Bumble is a relatively new app. It’s a dating app; what do they charge for? Who is their primary customer at the moment? The primary customer is the end-user. And Bumble is charging for in-app purchases and also for premium features. So, it’s the end-user that is charged. But Bumble is also making money from advertising. But advertising is a small portion of the revenues right now, which means that advertisers are a smaller segment for them. It’s not the primary customer segment. But if you look at a bigger app like LinkedIn, they have challenged solutions. They have marketing solutions. They have premium subscriptions, and they have learning solutions. A lot of their revenue right now is coming from marketing solutions and talent solutions and not just premium subscriptions. So, it’s a time for Bumble to see that, you know, going forward when they have decided that they’re going to make the most money from the end-user. Do they want them to be the primary user? Or are they going to expand to other customer segments, as well? It’s important for startups because they’re still exploring who they are generating the most value for. And that should be the primary segment. If Bumble is generating most of value, in fact, economic benefit, or value, which can be monetized for advertisers, it might want to shift, you know, its focus from primarily end-users to the marketing agencies. So that’s very interesting with the startups. You know, when I work with them, I don’t start with pricing. I start with a business model, identify which customer group is actually deriving the most benefit from your existing product and services, and how you can work or adjust your products and services portfolio to create more value or that group of customers you can monetize the most.

Mark Stiving 

So, I dearly love that answer that you just gave. How do you pitch companies? Because if you walk in and say I’m a pricing expert, and then we walk in the door, and we don’t do pricing, what we really do is a business model definition; how do you pitch that to them?

Saima Khan 

I don’t pitch a business model alone. I pitch the business model and pricing strategy together. But then I start with a business model. And I end with the pricing strategy. So, it’s bought together because you’re right; I mean, if it’s just a business model, as a pricing consultant, you don’t add so much value. But the people I work with do appreciate it when we identify the business model and give them the right pricing strategy for their business, in terms of strategy, like, you know, what should it be? Or what kind of value can be a premium strategy to get fair value, good value? What kind of pricing strategy applies to your particular target segment? And what kind of pricing is good for your business? You know, is it subscription pricing? Is it freemium? Is it pilot, very important also for startups is the stage of the business they are at, you know, and what is the nature of their customers? Is it like going to be the innovators, early adopters, early majority, because that will also define what kind of pricing model is best for them? Sometimes, if it’s like innovators or early adopters, it’s a very new type of product. Once we have identified the business model, then we would say that, okay, we need to go based on some research, we need to go with a very simple business model; we don’t want to make it very complex. Let’s just do a simpler MVP. Let’s do a simple price structure. Let’s go try it out, maybe do a freemium, do a pilot. And then explore from primary market to decent markets, primary customer to secondary customers, a very simple pricing structure maybe to subscription tiers, or a more complicated business model with what the customers can digest.

Mark Stiving 

So let me jump back to the business model for a second. Because one of the things I love about this concept of helping people find business models and by the way, I think what I’m about to say is true in a lot of different areas in a company, but especially in business models, and that is, value should be driving your business model decision, right? Who gets the most value from your product? How much value do they get from your product? And yet, most companies, most people, big companies, small companies, I don’t really care, think about or understand what value really means to them in the marketplace and the customers’ minds. And we, as pricing people, start out saying, well, I have to understand value if I’m going to put a price on it. And we might be the only people in a company that truly understand value. Yeah, then it’s a matter of how do I get other people in the company to make smarter business model decisions or smarter product development decisions or smarter marketing decisions? And so, I find that fascinating.

Saima Khan 

Yeah, absolutely. It requires a bit of training from my end because when you’re working with startups, you are educating them on the pricing concepts. And like you mentioned, a lot of time explaining value. And since then, I have worked more with startups who are in the B2B space. I talk a lot about proven outcomes and the differential advantage that they have over their competitors. And I also teach them because, you know, all startups are growth-oriented, and they just want to grab the sales and tend to underprice the product. So, there’s always training and discussion on, you know, it’s great to be growth-oriented. And you cannot monetize a product that has not been tried in the market. But the best way to do it is through a freemium model or a pilot model instead of underpricing. Because taking the price up is very hard, you know, because you already establish the value of that product. And it might be lower than what the customer perceived initially. So, it’s a lot of back and forth. And you know, a lot of education and training when you’re working with startups, but it’s worth it.

Mark Stiving 

Well, it’s a lot more fun because they listen to us. They know that there’s a lot to learn, that they don’t know, they don’t think they know everything going in. So, I think it’s pretty fascinating. What do you think the biggest problem is that entrepreneurs face or startups face in this world of pricing?

Saima Khan 

I think that the biggest challenge is the one that they don’t know, which is that pricing is normally an afterthought for a lot of businesses. I have not seen many, but I have seen a few examples where like I just mentioned, some startups want to sell, because they want to bring customers on board. They underprice the product, hoping that the costs go down. And, of course, not all entrepreneurs have done very good business projections. When we launch the product, costs, they don’t come down, and they think that the operations are inefficient, which is why we are incurring losses, and they have to shut down the business. When in fact, it was sub-optimal pricing that led to lower revenues. And that is why it didn’t work out. So, I guess we need to probably educate startups a little bit more on the element of pricing the value they bring because it’s natural that whenever you bring something very new to the market, you’re a little bit under-confident. And it’s natural to, you know, try to underprice your products and services. So that’s the challenge.

Mark Stiving 

Yeah, so I hope you don’t mind; I’m going to disagree with you for just a second. Right? So, I’m not sure that it matters if I go to market and go to market with too low of a price. Right. And I think of it in the following sense. If you’re Apple, and you announce a new iPhone, and you underpriced it, it is really hard to raise the price because everybody in the world knows the price of that Apple, of that iPhone, right? If you’re a new startup, and you come out at, you know, $10 a month where it should have been $50 a month, you go in a bunch of customers, and they tell you, oh my god, this is the best thing ever. I love this. And then you raise the prices to $50 for new customers that come in; they even knew you were pricing at $10. Right? So, it’s totally okay. I raise the prices on those current customers, but I’m not so worried about those.

Saima Khan 

I tend to agree and disagree with you. I agree with you. I mean, there are customers where it really doesn’t matter, especially if you’re launching on a small scale, and you only have read our customers, right, you launch something very cheap for them. They are like for a big firm; they are what you would call your research respondents. So, these are your pilot users; you ask them for your input, you improve the product because normally at this stage that you’re talking about, the product is also not final. It’s normally either an MVP or initial version of the product, which is going to be refined. So, at that stage, I think it’s okay, you can price it anything, it can be premium, or it can be a lower-priced product. But as you expand, and you start having revenues, and you start becoming profitable, that’s when it’s more important to have a price benchmark. There are certain businesses where, you know, a supplier might come to you initially, just because you were low-cost, you know. So, I have seen some technical products there, there was an AI-based infrastructure, I forget the name, but I worked with an AI product, which was being used for diagnostics. And they were going to a supplier who was using another similar product. But this one was cheaper. So, they went with this supplier because of the price. And you can imagine what happens later, when they raise the price. You know, the focus, instead of focusing on the value that you’re bringing to the client, focusing on the features that you were developing down the roadmap, you’re now focusing on price and beginning with, you know, a price competition, and that’s how you enter the market. And it’s not bad. I mean, a lot of startups do that. They bring a better alternative, which is cheaper, but your costs have to be low. And this, in my opinion, it’s not a good proposition to start a big business with. It can be one of the differentiators, but not the primary product that you know, just because my price is low, I’m going to bring this.

Mark Stiving 

Yeah. So, I definitely agree, I am not a fan of using price as a competitive lever. Right? I think we ought to be selling value, we have to have better products than our competitors or do better things. We ought to be building things that don’t have competition, right? We’re solving problems that haven’t been solved in the marketplace yet. So, I think all of that is right. So, my only concern is that pricing when you first launch your product isn’t as important as we start to gain traction. Now it starts to become more important, because now it matters. Are we going to be profitable, not profitable? And I think in the end, it comes down to do future customers know what price we charged before? And if the answer is no, then it really doesn’t matter so much.

Saima Khan 

Yeah, it really doesn’t matter so much. Also, your relationship with the customer. If you started off with a bigger client and you’re charging them something, you want to keep the relationship more in B2B context. And then if you go out in the market and change the price if you lower the price, it’s a problem for your first customer who we were maybe charging high, because it’s also important, like, you know, yes, you can change the price, but you don’t want to start up they do this sometimes, but you should not make too many changes. It creates a lack of trust in the market.

Mark Stiving 

Yeah, I would agree. So how do you help entrepreneurs figure out the value of their products?

Saima Khan 

I normally teach them. And I teach them simpler research tools, because, for big companies, it’s very easy. We have a market research agency at the back end. And you know, we’re working with them. And we’re doing this expensive research across markets and helping them develop value-based propositions. For startups, they don’t have that kind of money. So, I teach them about tools which they can use on their own. And thankfully, today, we have a lot of DIY tools, which entrepreneurs can use themselves. And that includes sophisticated would like conjoined because we have a lot of web tools. Now, anybody can search, contract research tools on the web, and they can find it. So, I teach entrepreneurs how to find it and how to use it. It’s not that complicated; then I also preach A/B testing. Depending on the product, it works more in the consumer market. But it’s possible, I just ask them to be careful with the local regulations, because you don’t want to be pushing two price points in the market for the same product at the same time. But if you do it one week, after another, or with a small gap, or with slightly different product features, you can test different bundles in the market and different pricing in the market to see what works and what does not work. And then I think freemium is also a very good tool. It’s primarily used to get traction in the market. But I think it can also be used as a tool to understand pricing, especially in B2B space. For example, you have an enterprise software, you want to sell it to a B2B customer, you can give them a trial of freemium in which the customer and you can decide on which features they want to use, and then close the pricing. You know, there could be negotiations and budget discussions during that period. And then you end up figuring out the right price for that product based on the value you’re delivering to that client.

Mark Stiving 

Yeah, I think it’s interesting because companies don’t understand the value they deliver even though they build products, all excited, saying everybody’s going to want this, everybody’s going to love this and use it. But they didn’t really understand. And the other side of that is customers don’t really understand the value they’re going to get from our products. And so, it takes some type of coordinated effort between the two of us to truly learn what that value looks like. Yeah, absolutely. So, the trial makes a lot of sense in that respect. Nice. So, I know we’re running out of time. But the final question for you. What’s one piece of pricing advice you would give our listeners that you think would have a big impact on their business?

Saima Khan 

Well, if there’s just one word, it would be looking for value and something that we always preach that go for an outside-in approach, not inside-out. So always start your business with your customer. Where do they see the value? Focus on that when it comes to products, services, and pricing, and then look internally and see how you can be more relevant to your customers and provide them with the best value and be agile about it. In today’s world, it’s very competitive working down to be part of solutions and pricing; being agile is the key to success.

Mark Stiving 

Nice. Making small, quick changes, learning what works. Absolutely. Nice. Saima, thank you so much for your time today. If anybody wants to contact you, how can they do that?

Saima Khan 

You can find me on LinkedIn with my name, S A I M A K H A N, and you can get in touch with me through LinkedIn.

Mark Stiving 

Okay, and obviously, that’ll be in the show notes, as well. Episode Number 129 all done. Nice. Thank you for listening. If you enjoyed this, would you please give us a rating and a review? And if you have any questions or comments about this podcast or pricing in general, feel free to email me at mark@impactpricing.com. Now, go make an impact!

Mark Stiving

Thanks again to Jennings Executive Search for sponsoring our podcasts. If you’re looking to hire someone in pricing, I suggest you contact someone who knows pricing people. Contact Jennings Executive Search!

 

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