With over 20 years of software experience, Ryan Glushkoff provides pricing and product marketing expertise for business-to-business (B2B) software companies. This includes offer packaging, pricing, market research, and pricing strategy and organization.
Prior to founding Fraction8, Ryan cut his teeth in both the pre-sales and post-sales world for both mass-marketing and custom-enterprise software companies, which gives him a unique perspective on how SaaS companies need to price and market themselves for success.
In this episode, Ryan shares what important data set his qualitative and quantitative interviews and surveys uncover to arrive at a pricing decision.
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Why you have to check out today’s podcast:
- Find out the three types of competitive research you can use to understand your competitors’ offer structure so you come up with the right pricing decision
- Learn about what different companies are using in their pricing structure
- Find out what is of utmost reason for putting your price online
“Pricing is a team sport. All of those different groups need to be part of the decision. So, it’s incumbent upon the product team to steward the rest of the organization through that decision-making process.”
– Ryan Glushkoff
Topics Covered:
01:36 – What he does as a B2B technology pricing consultant
03:32 – Doing qualitative interviews and quantitative surveys
04:17 – Aha moments when it comes to clients saying what they claim customers value versus what customers say they value
05:16 – Important data points uncovered with qualitative and quantitative interviews
05:57 – What is competitive research and its different types
07:44 – Times when you consider pricing as part science and part art
08:46 – Going the same pricing metric as the competitor versus charging with better options
09:56 – Sharing his concern about using different pricing metrics
10:38 – Perpetual license of moving to SaaS
11:23 – Touching on usage-based pricing
12:43 – Outcome-based pricing being a version of user-based pricing
13:47 – PayPal and tollbooth pricing
14:41 – Are Lyft and Uber subscription-based companies
15:06 – Price structure of AWS and how it’s different from Uber
18:48 – Regularly buying diet Coke compared to subscription-based
19:37 – What he thinks of putting pricing online
21:42 – When it’s not proper to pricing online
23:28 – His thoughts to a recommendation of putting a price range versus none at all
24:35 – Which way to go — put price online or not
26:14 – When do companies miss part of their pricing research
26:44 – Where should pricing lives in a company
30:24 – How pricing is screaming for a center of excellence type of approach
31:58 – His best pricing advice that can have a great impact on one’s business
32:27 – Does he actually ask, ‘What are you willing to pay’
33:33 – Mark’s answer to Ryan’s question on why he asks, ‘What are you willing to pay’
Key Takeaways:
“Competitive research is something that is really good to know, but since every company has their own unique value proposition that they bring to market, just copying a competitor, you’re probably leaving something on the table by doing that, or you’re selling yourself short.” – Ryan Glushkoff
“If you’d ask which side of the fence I would come on, or land on for, whether to put your pricing online or not, I would err on the side of putting it online. The idea of maintaining positive control of the sales conversation is paramount. Especially if you do your homework and you’re confident in the research that you’ve done that informs the value of your solution, the price that people are willing to pay.” – Ryan Glushkoff
“I really think it [Pricing] should live in the product organization, because the product owner is really the CEO of the product; the product team has the deepest understanding of the problems that the buyer and the user are facing. They have the deepest understanding of how to go about solving those problems, through the features and capabilities that the solution is offering.” – Ryan Glushkoff
People/Resources Mentioned:
- PayPal: https://www.paypal.com/ph/home
- Lyft: https://www.lyft.com/
- Uber: https://www.uber.com/tw/en/
- AWS: https://aws.amazon.com/
Connect with Ryan Glushkoff:
- LinkedIn: https://www.linkedin.com/in/glushkoff/
- Email: [email protected]
Connect with Mark Stiving:
- LinkedIn: https://www.linkedin.com/in/stiving/
- Email: [email protected]
Full Interview Transcript
(Note: This transcript was created with an AI transcription service. Please forgive any transcription or grammatical errors. We probably sounded better in real life.)
Ryan Glushkoff
Pricing is a team sport. All of those different groups need to be part of the decision. So, it’s incumbent upon the product team to steward the rest of the organization through that decision-making process.
[Intro]
Mark Stiving
Welcome to Impact Pricing; the podcast where we discuss pricing, value, and the proportional relationship between them. I’m Mark Stiving, today our guest is Ryan Glushkoff. Here are three things you want to know about Ryan before we start. He is the founder of Fraction Eight, a pricing and product marketing consulting firm, focusing on B2B software firms. He was our guest on Episode 16. Took him two years to make it back. We won’t hold that against him. He just got his black belt in karate, so we’re not holding anything against him. Welcome, Ryan.
Ryan Glushkoff
Thanks, Mark. It’s a real pleasure to be back again.
Mark Stiving
I just love talking to you about pricing. So, it’s fun. If anybody wants to know how you got into pricing or why you stay in pricing, they can learn that from Episode 16. Because I’m sure I asked you those questions a long time ago.
Ryan Glushkoff
You did.
Mark Stiving
So, let’s just jump into some fun pricing topics and you would send me a few things that said, ‘Hey, here’s some stuff that I’m interested in, or we could talk about so, let’s do it.
Ryan Glushkoff
Let’s do it; jump in.
Mark Stiving
Let’s start with the qualitative and quantitative stuff that you’re doing on competitors and buyers. How are you doing that? What are you actually doing? Well, I guess first, what you should do is tell the audience what you do. And that way it’ll make more sense when we say, okay, here’s what you’re working on and how you’re doing it?
Ryan Glushkoff
Of course. So, I’m an independent pricing consultant, and I work with B2B technology companies of varying sizes. And usually, I create a custom-scope based on their needs to help them and usually that’s around helping them craft, that one-pager that you need to put in the hands of the, a quota-carrying sales rep to say, ‘Hey, this is how we price everything that we do, whether it’s products, services, hardware, you know, any part of their portfolio.’ Although usually, I focus on the software elements. Part of that work has some qualitative and quantitative elements. Qualitatively, I spend a lot of time talking to people, I don’t usually do focus groups because they fall victim to groupthink. But I usually focus on one-on-one conversations with buyers that are in the target addressable market to understand their motivations for coming into the market, the value that they expect to receive and having a solution. And, you know, I try to ask them quantitative questions as well to understand what their willingness to pay is for that solution. I feel like no buyer persona is really complete unless you have some numbers in there to address the pricing elements of what they’re expecting.
Mark Stiving
Yeah, I think the qualitative stuff is so fascinating. I think we often underplay it and then sometimes we overplay it, as in we’re going to pretend like it’s really the market, we underplay and that we don’t do it enough. People want to jump to the survey, and they don’t go out and ask the questions, and so it’s a yes or no question. I shouldn’t ask it this way. But do you ever find, do you ever ask your clients, ‘What do you think your customers are going to say, when I ask them what do they value, and then you go and talk to customers and find out what they value?
Ryan Glushkoff
I usually do that for both the qualitative interviews that I conduct as well as the quantitative surveys. I’m an engineer by trade way back when although don’t ask me to design a furnace or heat exchanger anymore. I think those days have passed. But I always go into these conversations, I treat them like a science experiment. So, it’s just kind of the way I think I always like to go in with some sort of hypothesis around what I think is going to happen. And usually, that’s informed partially by what the customer thinks they’re going to hear. And I try and validate that or invalidate that, from what I hear.
Mark Stiving
Okay, so now the hard question, how often is what the client said to you people value, what people actually tell you that they value?
Ryan Glushkoff
I would say, you know, I’d say half and half, there are definitely a lot of surprises, particularly with product features. I feel like there’s, especially in software, you know, I’ve seen a lot of product features, which companies think, oh, this is the most valuable thing that our customers want. But when you actually talk about it, or put it in a survey and measure, you know, that features, value, or relative willingness to pay, it’s often something that the customers don’t value or they think, yeah, it’s just kind of a table stakes feature that should be included for everyone. And you know, it’s so there’s a little bit of aha moment for companies that I work with.
Mark Stiving
Yeah, and I think the aha moments, the surprises, that’s where the fun is, right? That’s actually where the value is to what you do because you’re bringing back information that the client didn’t know, wasn’t using, was incorrect in. So, I think that’s where most of the value is, or a lot of the values that you’re bringing.
Ryan Glushkoff
And one of the, I’ll just add one more thing, when you discover those features that customers attach a lot of importance to, those are the features that can differentiate one plan versus another or justify an increase in price for one segment versus another. So those are really kind of some of the most important data points that can be uncovered through these regular conversations with buyers, whether they’re qualitative or quantitative.
Mark Stiving
Right. And so, they should be driving a lot of your decisions, the segmentation, the packaging, maybe even the pricing metrics decisions that you’re making. So very nice. What do you do in terms of collecting data on competitors? Because you mentioned that you do someone that and I’d love to hear?
Ryan Glushkoff
Yeah, so competitive research, I typically break down into three different types of research. One is strict capability research. So, what features does one competitor have versus another? The second type is, really, sales competitive research, where you’re trying to uncover, you know, what are those tidbits that we need to arm the sales team with in order to win an opportunity against this specific competitor? So, I think, you know, a long time ago, you know, you taught me from one of your classes, you know, the weakness and strength approach, and I still use that to this day. And then the third type of research, which is where I do I spend, probably most of my competitive research time is understanding the offering structure of competitors, specifically. So, things like, you know, what is their pricing metric? How many plans do they have? What do they charge? What plans do they offer? What’s included in the plans? What’s not included in the plans? What are the contract terms that they offer, and really kind of getting an understanding of, hey, what is the architecture of that offer structure look like? And usually, when I do this for clients, I advise them that a competitor’s research is ‘look but don’t touch.’ Competitive research is something that it’s really good to know, but since every company has their own unique value prop that they bring to market, just copying a competitor, you know, you’re probably leaving something on the table by doing that, or you’re selling yourself short.
Mark Stiving
Yeah, first off, there’s no… odds are really good, that competitor didn’t know what they were doing when they put their pricing together. So, copying them makes no sense whatsoever. But we do want to understand it in terms of look, our buyers are making a choice between our competitors, products and our products. So, we want to make sure that they make the right choice.
Ryan Glushkoff
And that is an important point, too. So, even though you want to, you know, be totally different from your competitors, and really kind of set yourself apart, at the same time when a buyer is considering, you know, you versus the competitor, you have to make that comparison relatively easy for them. So, for example, if all of your competitors are using per-user pricing, but you’ve done the research that, hey, you know, maybe we have a better option than per-user pricing, maybe we should be charging based on storage space, or video views. If everyone else is charging per-user, and you don’t, that could have an adverse effect that you’re not intending on yourselves. So, that’s something to consider as well, you know. This is kind of where pricing is part science, but it’s also part art, you know.
Mark Stiving
Part art. So, what do you usually tell clients in that case? I’ve got my opinion, but I’d love to hear yours. Do you say, even though it’s better per storage, we really ought to be going the same way our competition is because our buyers have to make decisions.
Ryan Glushkoff
It’s a conversation with the customer, I usually wait to have that conversation until I have the data on hand that, you know, backs up what I’m saying, understanding that, you know, hey, the competitor, here’s how the competitors’ price, but also showing, you know, if I have data that shows, hey, I’m going to, you know, a nice graph of willingness to pay on the y axis with whatever that new potential value metric is on the bottom. If there’s a really steep relationship, a steep proportional relationship between those two variables that clearly shows, hey, different segments are willing to pay different prices, and we can build our packages around this, then that’s a discussion. You know, to me, that’s a conversation that has a lot of pros and cons to it. It’s not as simple as just looking at the numbers and saying, yeah, we’re going to shift our whole business around this.
Mark Stiving
So, that makes a lot of sense. One of the things I usually think about and talk about when I’m talking to someone about these types of issues is, what if you did both? What if you offered both, right? So, think about buying a car, I could go buy a car, I could go lease a car, and even today, I could subscribe to a car, right? It’s okay to have more than one pricing metric as long as you can make it make sense to your marketplace.
Ryan Glushkoff
Yep, that’s definitely an option. The only concern that I have with that kind of approach is, you know, some companies, you’re spreading focus a little thinly across the organization and spreading scale, your ability to scale a little too thinly. So, which you may gain in, you know, in terms of market size, and really addressable market by offering, you know, different approaches, you may lose the benefits of scale. So, it’s a little bit of, you gain a little bit, you may lose some as well.
Mark Stiving
Yeah, there’s always trade-offs. As we complicate things, we confuse our own internal operations oftentimes,
Ryan Glushkoff
Yeah. And I think one, like whenever you see that a lot, actually now is some legacy software providers who are working to move to software-as-a-service only, they still want to hang on to, you know, an old model of perpetual license, perhaps. And I think the economics are clear, you know, SaaS is more lucrative. But, how do you navigate that conversation with the company, it’s not as easy as saying, hey, you should just move to SaaS.
Mark Stiving
Right. Right. So, one of the things that you’d say, let’s talk about is the pros and cons of user pricing? And have you done much research or looked into this thing called usage-based pricing? Because I’ve been a little confused, or contrarian or something on this topic.
Ryan Glushkoff
I have done a little bit of research on usage-based pricing. I’ve touched on it with a couple of clients, you know, not as much as I would like to know. So, my, you know, I’ve actually spent more time helping companies that have existing per-user pricing. And migrating to using a pricing metric other than per-user, per user is kind of the most common one.
Mark Stiving
In almost any other metric you move to, feels to me like it’s probably usage-based pricing.
Ryan Glushkoff
It can be. Yes, especially if you’re, you know, I’ll go back to the example I gave before, you know, if you determine that customers are willing to pay more based on the number of video views they use in your product, if your Vimeo, for example, or YouTube, then that obviously, you know, makes sense. And that I guess, now that I think about it, you’re correct, that is kind of a form of usage-based pricing.
Mark Stiving
Yeah, so it feels to me that as these people are talking about usage-based pricing, it feels like what they’re really saying is pricing metric that’s not users.
Ryan Glushkoff
That’s correct. Yeah. I think that’s a fair description.
Mark Stiving
I guess there’s one other pricing metric you could have, and we could call that outcome-based. So, some people do outcome-based, maybe that’s a version of usage anyway.
Ryan Glushkoff
Yeah, it’s outcome-based, it could be a version of user-based pricing. Outcome-based is even a little bit harder, I would say, because you’re trying to, you know, you’re trying to accurately measure the value that they’re getting out of a software solution. I almost think that’s kind of the PSD resistance of pricing. Because, you know, you’re coming from, you’re completing the argument full circle. But you know, that’s a harder one. I don’t I’m not aware of any companies that have really, truly figured that out yet.
Mark Stiving
Would you consider PayPal outcome-based? So, the fact that you’re going to take a percent of every piece of revenue that goes through. I personally would love to pay PayPal a million dollars.
Ryan Glushkoff
You know, I think of PayPal, I don’t think that that is, I think of more of that as kind of tollbooth pricing almost. You know, you’re passing a gateway, and I’m giving you a little bit of a very small slice of the pie, you know, every time it passes through a specific gate. So, I think of those as a little bit different. You know, those are pretty common, where you see, you know, companies taking a percentage of payments. And there’s lots of companies that do that. Yes, hundreds, hundreds of percents.
Mark Stiving
So, the thing I like about PayPal, or a company like that, is they’re at least saying, look, the more money you make, you know, then I’m just going to take a little piece of it. So, I want you to go make a ton of money, or I think other people who are taking a piece, it doesn’t feel like it’s part of the revenue stream. It feels like they’re just taking out of the revenue stream. So, what do you think of companies like Uber and Lyft in that they’re not really subscription-based companies, but they’re certainly recurring revenue and you would think of them almost like you would think of a subscription-based company. You’re allowed to disagree with me if it’s okay.
Ryan Glushkoff
I don’t think they’re, I don’t think of them as a subscription-based company. I think of them as a kind of more of a per-use pricing structure. You know, they’re kind of in their own category. To me, I honestly don’t even know how to describe it.
Mark Stiving
Okay, so let’s continue down the gray area path. How about AWS?
Ryan Glushkoff
AWS, I would put squarely in the usage-based pricing because you’re paying for access to a server, you’re paying access for bandwidth, you’re paying access for CPU, or memory cores or, you know, whatever have you, you know, they have lots of options in the infrastructure as a service space, you know, same thing. And I put AWS very similar to Azure for Microsoft, or, you know, Google Cloud.
Mark Stiving
Now, how is that not identical to Uber? Oh, man, I’m making you think this is awesome.
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Ryan Glushkoff
In infrastructure, when companies contract with an infrastructure provider, they’re contracting for, you know, a specific rate structure that is pre-determined in advance based on volumes. The same is not true with the company like Uber or Lyft where it’s more based on real-time supply and demand. There are this many cabs and many cars available in my area, therefore the price is x whereas in AWS, you know, there’s their horizontal tiers that says, you know, hey, I’m going to use this much memory, I’m going to be charged this rate in advance. And I think those are different.
Mark Stiving
So, the fact that we haven’t pre-established the rate, essentially, the rates change based on supply and demand for Uber and Lyft. Yeah. Okay, I can see that I have to think through why I would think that matters. Because what I love thinking about, all these is, it helps me think through decisions that companies have to make. And when I think of Uber, and I think of somebody who lives in New York City and takes Uber to work every single day, right, so this is a recurring revenue stream, and I want them to be happy and I want to keep them as a client and maybe I could grow them as a client and use them for other stuff. So, I almost treat it just like I would a subscription, even though it’s not a subscription. But then I give you another example that I hate. And that is why I used to drink Diet Coke. So is that just like recurring revenue, where I would go buy Diet Coke once a week and it’s just, there’s all these gray areas.
Ryan Glushkoff
But when you buy Diet Coke, you go to the store and you’re going to pay whatever rate it happens to be listed at in the store. And that’s different from saying, hey, I’m going to pay for a weekly subscription to coke and I’m going to get you know 12 cans for you know five bucks every week and that’s what I’m going to pay. So those are two different approaches though to feeding your habit.
Mark Stiving
Yeah, I think that if they had the subscriptions back then I probably would have subscribed.
Ryan Glushkoff
Your health is probably better for now.
Mark Stiving
Okay, so another question, another topic you put on your list which I thought is a fascinating one. Do we put our pricing online or not? Right? What do you think about that?
Ryan Glushkoff
Tough one. I think like any pricing decision there are pros and cons. Personally, as a price consultant, I love it when customers put their price or companies put their pricing online because it makes it so much easier to do research. You know, I think there are some reasons to put pricing online. First of all, price is just part of the buying decision. And if you as the vendor want to be part of that buying decision, you got to have the price online. So, the buyers have that input to the conversation.
Mark Stiving
And one thing that’s interesting is price is always part of the buying decision, right? It’s probably the only attribute that is always there.
Ryan Glushkoff
So, and that kind of feeds into the second one, too, is, why would you see that responsibility to a competitor? Or even your buyer’s own assumptions? People make up stories in their heads all the time around, you know, why someone else is doing something else might not be true, maybe true. But why would you see that responsibility to someone else other than yourself? I just don’t understand that.
Mark Stiving
My first assumption if I don’t see a price, is, it’s too expensive for me.
Ryan Glushkoff
That’s an example. That’s an example right there that, you know, you just made, you just, you know, created that narrative in your head might be true, might not be, but why did a vendor let you do that they shouldn’t, they should take active control of the conversation. And when a company takes active control of the conversation, and you put your pricing online, they have the opportunity then to couple that pricing with other assets that help justify it. Maybe it’s a pure evidence testimonial video, or maybe they’re just going to be super aggressive and say, hey, we know you’re, you know, considering this vendor. But we also know you’re probably considering vendor B, so let me show you how our pricing compares to vendor B. So, you can do those kinds of things when you put the pricing online.
Mark Stiving
Yeah. So, can you justify why I would not want to put my pricing online?
Ryan Glushkoff
I feel like in some cases, if you’re running a business, where you’re selling through multiple different distribution channels, maybe you’re selling through a bar, but you also have your own internal sales teams, or you know, you’re selling into different verticals, through different bars, there can be conflict between those channels when you put pricing online. I’ve run into this firsthand, in the health benefits space, where you’ve got, you know, different brokers who have different relationships. And you know, it can get messy when, you know, maybe the price that one broker is getting is different from the price that another broker is getting. I think another example of where it’s not appropriate to put pricing online, sometimes, certain solutions are very custom. And those customers expect kind of a customized VIP treatment of scoping out that solution and giving you a custom price. If that’s the buyer experience that you as a vendor wants to deliver, then putting your pricing online doesn’t really serve that purpose. And it’s better to not put it online.
Mark Stiving
So let me address both of those. If I may, first one is on the custom, I agree completely, that’s the one that I think of a lot is, it’s too complicated, you’re not going to able to configure your own system, you really need someone to hold your hand to figure out what you need and how it’s going to work. And, in that case, what I usually recommend is to put a price range in there. And I don’t care if it’s a huge range, right? It’s somewhere between 100,000 and a million dollars. But at least now someone can look at it and say yeah, I’m probably closer to the top, I’m probably closer to the bottom, they can get a feel for the pricing, as opposed to, I have no idea what this is going to cost me.
Ryan Glushkoff
So, let me ask you this question. If you have, in software, software is not usually a commodity just because every piece of software is just a little bit different from the other. When you have a product that is a commodity what would you do with putting prices online? Would that affect your decision?
Mark Stiving
So, if it’s a commodity, it’s not custom, so therefore I would absolutely have my pricing online. One of my favorite things though, as I hate the idea that we even think of ourselves as a commodity. And I often use gold as my favorite example. Go to a couple different online gold vendors and buy a coin, a gold coin and you’re going to find they’re different prices. So, that’s a commodity, why in the world would they be charging different prices for the exact same thing and it’s whatever services they offer, however they captured you as a customer, the relationship they have with you, have you bought from them before, there’s a million different things that are going on there. And it isn’t truly a commodity even though it’s a commodity, right? So, I would always, it’s a commodity I’m putting my price online.
Ryan Glushkoff
In general, I’d say if you’d asked which side of the fence I would come on, or land on for you to know whether to put your pricing online or not, I would err on the side of putting it online. To me, the idea of maintaining positive control of the sales conversation is paramount. Especially if you do your homework and you’re confident in the research that you’ve done that informs the value of your solution, the price that people are willing to pay. If you’ve done that homework, putting the price online should not seem like a big lift.
Mark Stiving
Especially if you figured out how to communicate that value next to your price. So just doing the price up, sometimes it’s a little risky or questionable. But if you can communicate value, there’s no reason not to.
Ryan Glushkoff
That’s right.
Mark Stiving
So, all right, what do you want to talk about next. Oh, I did want to bring up, you brought up channel pricing for why you may not channel conflicts, for why you may not want to put your prices online. And what I often think of is that as the manufacturer or the supplier of the product, I think it’s our responsibility to put up the list price, to put up the highest price we possibly are ever going to sell at. And never charge something lower than any of my channel partners would ever charge. And so, I feel like that’s a responsibility. Now I have seen circumstances where channel partners get upset because they know they could get more than what we put on our website. And in that case, I think what we ought to do is raise our prices so that the channel partner can get more.
Ryan Glushkoff
I agree with everything you just said. And I was almost going to complete your sentence as you were saying it in that if a channel partner wants to charge more, that’s an indication that the company hasn’t done their homework appropriately. That there is, they’ve clearly missed some part of their pricing research.
Mark Stiving
Yeah. Nice. Okay, so I think we probably have time for one more topic. I’m having a blast, though. Where do you think pricing should live in an organization? And by the way, what size organization do you typically work with? So, what are we thinking of here?
Ryan Glushkoff
I usually work with, I’d say medium to larger organizations, organizations that typically have found product-market fit for their product, they’re funded. And they’re really just looking to scale their operations, those are typically the kinds of companies that I’ll do pricing work with, because their problem is more urgent because they’ve typically got a team of sales reps that’s clamoring for, hey, give me the price list, because I want to start moving units for you. Now, typically, where pricing lives, in an organization, you know, I think I’ve evolved over time on this. And you know, part of that evolution, I think, is due to listening to your, you know, to you on your podcast, over the years. But you know, I think it really should live in the product organization. I’ve definitely worked with a lot of companies, some of which live in marketing, some of which are in finance. But I really think it should live in the product organization because the product owner is really the CEO of the product, the product team has the deepest understanding of the problems that the buyer and the user are facing, they have the deepest understanding of how to go about solving those problems, through the features and capabilities that the solution is, is offering. But that said, though, I would say the product management team typically lacks pricing expertise, which is a little bit of, talking about the size, but you know, I really think that’s where it should live. I don’t think it should live in marketing, per se, although marketing does have probably the deepest understanding of the buyer and their motivations. I think finance obviously understands the economics of the company, but they don’t truly understand value at their core, and sales, you know, they’re too invested in the buying process, to know what works and what doesn’t for the benefit of the company as a whole. So really kind of the best party is product. But that said, pricing is a team sport. All of those different groups need to be part of the decision. So, it’s incumbent upon the product team to steward the rest of the organization through that decision-making process.
Mark Stiving
Now that was a great answer. Let me add a little nuance to my thinking on that. And that is we could have a very tactical pricing. So, who is it that’s managing the price book? And how often do we change it? And how are we getting it out? And I’m totally okay with that being part of finance or sales ops or anything because that isn’t really setting the prices or negotiating the prices. That’s really saying, look, let’s just go do the execution of what we’ve already agreed to. And then there’s the strategic side that says, okay, how do we actually put a price and how are we going to manage the price and are we going to communicate the price, and there’s so much going on. I think you’re spot on, and that the product manager would be the perfect place if they understood pricing. And that’s the key problem is, they know the value of the product better than anybody else. And yet they don’t know pricing So, it’s a fascinating problem. The solution I like in big companies that I see often is they have a pricing department and I actually don’t care where they report to. They act as an internal consultant that goes around and works with product managers, product marketers, sales teams, and they find the low-hanging fruit on how we can fix pricing issues going on inside the company. And I like that solution a lot.
Ryan Glushkoff
That’s a good point that pricing is almost screaming for a center of excellence type approach like that, where there is an internal group of experts that’s kind of loaned out on an ad hoc basis and as needed to the various parts of the organization that are needed the most. And it is hard to translate, you know, that $100,000 worth of value that your solution may deliver in a given year? How do you translate that into that $20,000 deal size that you may get? How do you convert that $20,000 deal size into a pricing metric that can capture the various market segments? How do you know which features are monetizable? And which ones are not? Yep. So, I think that’s a good way to look at it.
Mark Stiving
Yeah, and those are all hard questions. I don’t expect product managers to know. So, I’m not making fun of them by saying they’re not pricing experts at all. I’m just saying, look, those are all hard decisions that people like you and I have thought a lot about to try to figure out how you learn this stuff. How do you figure it out? So, nice. Ryan, we’re going to have to wrap this up. This has been so much fun. Thank you for your time. If anybody wants to contact you, how can they do that?
Ryan Glushkoff
LinkedIn is the best way. I’m pretty, I think I’m the only Ryan Glushkoff on LinkedIn. So, I’m pretty easy to find.
Mark Stiving
Alright, and I’m sure we’ll have your URL in our show notes. Episode 142, is all done. Oh, wait, I didn’t ask the big question. Ryan, what’s one piece of pricing advice you give our listeners that you think could have a big impact on their business?
Ryan Glushkoff
Ask your customers what they’re willing to pay.
Mark Stiving
You don’t really mean that. You don’t really mean that.
Ryan Glushkoff
I do mean that. But I want them to, but I’ll give them a range. But I’ll ask them what they’re willing to pay in exchange for whatever value that I’m going to provide for them. But I feel like most companies when they’re doing individual interviews with customers, they don’t ask that question enough.
Mark Stiving
So, do you actually ask, what are you willing to pay?
Ryan Glushkoff
I will, in qualitative conversations, and one-on-one interviews. I’ll have a pretty lengthy conversation about the value, I’ll ask them to describe it qualitatively, I’ll ask them to describe it quantitatively in terms of you know, which variables they use to describe the value, and then I’ll follow it up with now that they kind of their brain is swimming in the value, I’ll ask them, okay, keeping that value in mind, what’s an acceptable amount for you to pay for that value? What’s a reasonable amount? And sometimes I’ll even pull out, you know, the Van Westendorp approach of asking them, okay, you know, what’s a price that you think is starting to get expensive? What price is just out of the question is that you wouldn’t consider what price is too cheap, they wouldn’t consider it. And if a company is having enough conversations with their buyers on a regular basis, eventually you’re going to get a pretty decent data set, that’s going to give you a pretty informed view of, you know, what’s a reasonable willingness to pay?
Mark Stiving
Okay, so I’m 100%…
Ryan Glushkoff
Let me turn the table on you. Why did you question?
Mark Stiving
That’s I’m 100% with you on the Van Westendorp. Anytime I’ve ever seen someone asked the question, how much would you pay? It feels like the person answering is trying to gain the answer to the question. Also, if I give him a big number, that they’re going to charge me a lot, so I should give him a little number. And so, I made up a question that I love the acts exactly like that. But it isn’t that question. And what I usually ask is, what do you think other people like you would be willing to pay for this? And it just takes a little bit of that gamesmanship out of their answer. And that’s why I was reacting. It’s like No, no.
Ryan Glushkoff
I understand that. That’s a good point to take. It makes it less personal. So, they can be a little more truthful in their answer. Well, I may try that. I love talking to you. I always learned something.
Mark Stiving
So, this is great. This is great. Okay, now I’m going to wrap the show. Episode 142 is all done. Thank you for listening. If you enjoyed this, would you please leave us a rating and a review? And finally, if you have any questions or comments about the podcast or pricing in general, feel free to email me at [email protected]. Now, go make an impact!
