Scott Miller is a senior advisor, an active speaker in North America and Europe, workshop facilitator, and a leading global expert in B2B pricing with a specialization in B2B & B2G software pricing (both large enterprise and start-ups). He works as a consultant, trainer, and coach on the topics of product and marketing strategy, as well as pricing and offer design.
In this episode, Scott talks about his pricing framework in transforming companies from perpetual to subscription and the different nuances of pricing and monetization that go with it.
Podcast: Play in new window | Download
Why you have to check out today’s podcast:
- Learn practical and sellable solutions transforming your clients from perpetual to subscription
- Know the challenges on shifting revenue model from perpetual to subscription
- Discover how to craft your pricing based on customer perceived value and what appeals to them
“Our world is becoming more about solution-based pricing where you have this combination of some hardware plus software plus some services. And so pricing teams are really struggling these days trying to figure out ’Well, how do I holistically price all of these components together?’”
– Scott Miller
Increase Your Pricing Knowledge: Become a Champions of Value INSIDER!
To sign up go to insider.championsofvalue.com.
Topics Covered:
01:16 – How Scott started in Pricing
03:07 – What is Software Pricing Framework
04:33 – Pricing as a process according to Scott
05:41 – The concept of transforming companies from perpetual licensing to subscription
07:20 – The hurdles SaaS companies have to deal with in transforming from perpetual to subscription
13:15 – How to set a successful pricing conversation with clients
16:17 – Handling clients objections about shifting from perpetual to subscription
14:33 – Strategies of migrating a client from perpetual to subscription
18:17 – The complexity of sales compensation when you go from perpetual to subscription
22:38 – The offer design process and the pricing metrics used when shifting from perpetual to subscription
27:29 – Scott’s pricing advice
Key Takeaways:
“Tell me how much we’re supposed to price a product and then we’ll know that it’s not about me being good at coming up with the price point or you coming up with a price point. It’s the process that you need to go through to come up with the right offer design.” – Scott Miller
“If you struggle articulating your value proposition then you’re going to struggle with the pricing strategy.” – Scott Miller
“As part of the process for offer design, when you’re thinking about, ‘How do I want to package our SaaS solution?’ One of the questions is going to be around. ‘What’s the right metrics that we want to use?’ The metrics that you want to have is it’s going be a good reflection of the value that your software delivers to a client.” – Scott Miller
“A lot of people do a lot of socialization internally and make sure everyone’s on board, but we leave out that client part and that’s a really valuable piece of information that a lot of folks neglect.” – Scott Miller
Resources / People Mentioned:
Connect With Scott Miller:
Connect with Mark Stiving:
- Email: [email protected]
Full Interview Transcript
(Note: This transcript was created using Temi, an AI transcription service. Please forgive any transcription or grammatical errors. We probably sounded better in real life.)
Mark Stiving: Hi, everybody, we recorded this podcast and we’re publishing it as well, during the coronavirus pandemic.
I’m personally tired of studying and talking about it and listening about it.
Instead, I really want to focus on something that makes me happy. And that’s pricing.
So I’m glad that you’re with me. But I do have a couple of requests before we jump into the episode. Number one, would you please stay safe. Wash your hands often try really, really hard not to transmit this to anybody else.
And number two, do something nice for somebody who’s less fortunate or in a tough situation. I’ve heard many different ideas. But the one I like the best that’s pretty consistent with what we tend to talk about here is if you have restaurants in town that you really like you’d like to frequent. Go buy gift cards. You’re essentially loaning them money, and boy, could they use that loan right now. And then cash or gift cards in later after this. pandemic is over with.
So hopefully you’ll do those two things. Now it’s time for the episode.
Scott Miller: And I find that our world is becoming more about solution-based pricing where you have this combination of some hardware plus software plus some services, and so pricing teams are really struggling these days trying to figure out, well, how do I holistically price all of these components together?
Mark Stiving: Welcome to Impact Pricing, the podcast where we discuss pricing, value, and the transformational relationship between them. I’m Mark Stiving, today our guest is Scott Miller. Here are three things you want to know about Scott before we start. First, he’s hopped back and forth between pricing, consulting and pricing practitioner, so he’s actually got some really interesting insights. He’s the author of the software pricing framework, which I’d love to know more about and the real reason I want to talk to him today is he’s been involved with transitions for companies who used to sell perpetual licenses and now they sell a subscription. Welcome, Scott.
Scott Miller: Yeah, thanks Mark, for having me on the show today.
Mark Stiving: That’s going to be fun. How’d you get into pricing?
Scott Miller: You know, way back in 2000 when the first bubble happened. And they used to sell technology-based equipment and there are a lot of the sales folks getting tapped on the shoulder and, and getting let go. And I saw this opportunity on the operations team for pricers and at that point, it had a small interest in pricing and applied to the team. And lo and behold became a pricer. So I started off as a pricing analyst but with a good 10 plus years of a sales background as well.
Mark Stiving: Well that’s a great place to start.
Scott Miller: Yeah. And it gives you that visibility of, I think in a company if you’ve got more exposure to understanding the sales environment, understanding the operations environment, it’s a good compliment to each other.
Mark Stiving:
And I think the sales environment gives you a really strong empathy for the customer. So used to thinking about how does the customer think, which I think too many people in business don’t do that.
Scott Miller: I think so. And you know, not just empathy for the customer, but also empathy for the sales team as well. I think a lot of people that feel like internally with some teams, it can be a bit of a battle between pricers and sales and if only sales sold the way that we want them to sell. And then you have the finance team screaming. If only they sold and made their margins. And so I’ve lived in the worlds and have empathy for, you know, from an enablement perspective around pricing, you know, what the sales teams kind of need in terms of information and just kind of understanding their world a little bit as well. Kind of really helps execute pricing within a company.
Mark Stiving: So wait, wait, wait. You’re telling me that I can’t just blame sales all the time? That’s my go-to.
Scott Miller: And that’s an easy one. That’s an easy one. They’re an easy target, aren’t they?
Mark Stiving: Actually, I often teach companies, if you’re blaming sales, it means that you haven’t given them the confidence, the product and the tools to help them sell the value that you think you have.
Scott Miller: You bet. Yeah.
Mark Stiving: All right. I love that. First off, what is the software pricing framework? And we had a brief call, I like to tell people when I do this, we did have a brief call last week, but we didn’t go into any detail. So what is the software pricing framework?
Scott Miller: Yeah. So, what it does is, it takes a viewpoint that pricing is a process, right? And so, you know, when you first started talking to people about pricing, the first thought is, well, tell me how much we’re supposed to price a product and then we’ll know that it’s not, you know, it’s not about me being good at coming up with the price point or you coming up with a price point? It’s the process that you need to go through to come up with the right offer design. And so it takes this holistic end-to-end execution of pricing in terms of how do I come up with a value-based offer design leading to how do I make sure that I enable sales and our channel partners. And then ultimately, how do you go about executing that when it comes to doing our fees and deals and how do you make sure you can measure those results, as well. So it’s kind of this circular framework of best practices around offer design, enablement, and then ultimately execution.
Mark Stiving: You know, one of the biggest challenges that I think we have in the pricing world, I know I faced this all the time, is that people say, how do I price this? Right? I’ve got this thing, how do I put a price on it? And that’s just the very last step of pricing something. So it’s just, it’s like, you know, we have to go back about 10 steps and then we can get to where you want to be.
Scott Miller: You bet. Product teams coming up with a new product and you know, the first question they’ll ask is, is it $50,000 under 1,500? I don’t know. What do you think? I don’t have a crystal ball. You know, it’s not like a special crystal ball that we have as pricers, but again, you’ve got a process. So start from the beginning, you know, what’s the strategy that you’re trying to accomplish? What’re your objectives? Let’s talk about the value proposition and if you struggle articulating that while you’re going to struggle with the pricing strategy, then let’s start creating what’s the right packaging and metrics that you want to use as well, and then, you know, the last part is that financial analysis, the stress test and make sure that it makes sense and you can’t break your model.
Mark Stiving: Yep. Yeah. Okay. That was a great mini conversation. We’re going to have you back just so we can talk about that topic. Your first time, really, really want to talk about this concept of shifting or transforming companies from perpetual into subscription. So I assume you’ve done this in a software world. Have you done it in any other world as in hardware companies tried to do the same thing? Or are we just going to talk about software for now?
Scott Miller: No, no. In fact I find that the world has been changing where, especially in the hardware world, like what hardware product today doesn’t have some aspect of software that’s integrated with it now. And so a lot of product teams are really struggling. You know, the last 20 years I’ve been selling piece of hardware a certain way and all of a sudden they’ve got a software component. They’re scratching their heads trying to understand, well how do I sell these two together? And I find that our world is becoming more about a solution-based pricing where you have this combination of some hardware, plus software plus some services. And so pricing teams are really struggling these days trying to figure out, well, how do I holistically price all of these components together? And so when you think about SaaS, I mean SaaS, software as a service, I mean there’s a service component in there and so you need to figure out while all these other services that we’re doing, like how do I factor that into pricing with our base offer as well. So I think it’s all over the place, hardware plus software plus services.
Mark Stiving: Alright. By the way, I agree completely. Let’s just, for the sake of this conversation, let’s at least start by focusing only on SaaS. And the reason I want to do that is I think hardware companies have an extra hard challenge to them and that they’ve always done cost-plus pricing and they’ve always given away the software so they could sell more hardware. And so these are these two huge hurdles we have to get over with hardware companies, software companies don’t have those hurdles, so they’ve got enough hurdles as we go from perpetual to subscription anyway. What are some of those hurdles that they have to deal with the SaaS companies?
Scott Miller: Yeah, I think the SaaS, well, you know, especially when we’re talking about going from perpetual to SaaS, what I find in B2B, I think in today’s market, the expectation is that if you’re a new software company, automatically you should be a SaaS. I mean, that should be a to gate go to market approach, right? But it’s surprisingly a lot of the B2B companies, especially if the clients, if they have a complex architecture or it’s an ERP type one or you know, for example if it’s a banking software, there’s a good chance that a lot of these solutions are still on premise. So a lot of the B2B software firms these days are dealing with legacy clients that are still on prem and they’re still managing a variety of different versions for that on-premise. But at the same time, they’re trying to manage a portfolio where they’ve got a new SaaS offering as well. And so that creates this nuance and complexity of well how do we price new clients and then how do we take our old clients and migrate them over as well. And a lot of companies, when they first go through this process of coming up with SaaS subscription pricing, they’ll come up with one price and that’s their price that they want to use for both new clients and legacy on-premise clients. But the reality is, you look at it from two different pricing strategies, come up with a pricing strategy for new clients and then have a separate, it’s almost like the upgrade. I don’t know if you remember the old Microsoft upgrade licenses. If you already own something, you’ve got a bit of a discount to upgrade so you know what is that price or pricing strategy you want to migrate your old customers to the SaaS, as well.
[Insider Advertisement]:
Time out for a quick ad.
Our goal at Impact Pricing is to help you become a champion of pricing and value.
This will undoubtedly increase your impact at your company. It’ll help you get promoted and make your company more profitable.
And now we have an unbelievable offer to push you even further down that path. We just released our new insider program where you get access to all of our current and future courses.
If you just take the courses we currently have released that’s over $2,000 in value. The good news is we release courses that are really faster than one every two months. That’s faster than anybody’s been able to take them. At least so far.
You get access to everything for the low price of just $100 per month. That’s a small portion of the raise that may come with your next promotion.
To make this offer even more irresistible. We offer you your first month for only $5. Try a few courses, see what you learned that’s valuable. We are confident you’re going to want to stick around.
Oh, and did I mentioned you get access to office hours? One hour a week I get on zoom and answer questions from our insiders. Considering I charge $1,000 for one-hour pricing consultation that makes this a no brainer.
Go to insider.championsofvalue.com. To sign up to take advantage of our special $5 offer. Use the promo code ‘INSIDERNOW’.
This special offer will end at the end of April 2020. Join me and your colleagues as a Champion of Value Insider. I’ll see you on the inside
Mark Stiving: So a lot of those enterprise software companies though, they sold you the package, then they sold you the maintenance at 22% a year and that included all the upgrades. And so now the companies thinking that for 22% of what I paid originally, I’m going to have this forever running in my facility.
Scott Miller: Yeah.
Mark Stiving: And somehow we got to get them to shift to our subscription if we’re going to offer a subscription.
Scott Miller: Yeah. How do you do that?
Mark Stiving: Well, I know what I advise clients, but what do you do?
Scott Miller: And I’ll tell you the teams that are ill prepared, the go-to that I noticed in the marketplace is, let’s say you installed something about the client 20 years ago and they’ve been paying annual maintenance and let’s say their maintenances, let’s say $50,000 that they’re paying. So they invest, maybe they paid a big lump sum way back when, but with subscription in your SaaS offering, if you were to sell it to a new client, let’s say it’d be like four or $500,000. A lot of companies have been doing is they’ve been saying, well, you know what, you’re paying $50,000 today.
Why don’t you come over to our new platform anyway and we’ll just charge you the $50,000? I mean, they go to the easiest possible pricing conversation with the client and what they haven’t done is they’ve totally neglected all the value add that you’re providing with software as a service. And it’s a kind of bang my head on the wall when I hear that case of like, well, whatever you were being the main sport, that’s what you’re going to pay going forward for SaaS.
I mean, you haven’t had any like what’s the value of SaaS? I mean, you look at what you’re doing as a company, like you’re bearing the burden of all the hardware on the back end doing all the cybersecurity, which is major, doing all the middleware maintenance, doing, you know, the hatches and whatnot. I mean, that’s the conversation needed with clients, when you upgrade clients from old to new and the other, the second part is that usually when you build SaaS, you know, that is your chance to really create a new wow product. And most of the clients that are on-prem, you know, some of them are like one or two major versions behind. In the SaaS, you know, that’s your new user interface, your new customer experience.
You’ve got a lot of new innovation built into it. I mean that’s the other part of the value add sell is you’re dealing with old software. It’s keeping you behind, you’re being less competitive in the marketplace by using that, with SaaS you get everything, all the latest and greatest. We can get you up and running fairly quickly, but it’s not going to be a $50,000 a year. And so what I found with one particular team as they had this fit is like the price anchor, right? They had the $50,000 in their mind.
Mark Stiving: This was from the sales side. The salespeople had a price anchor.
Scott Miller: Yeah, both. Yeah. Both parties. Like the client. Every time they had a meeting, the client would bring up $50,000. The salespeople had it in their head that, you know, we’ve got to try and do something in the context of 50 so the strategy, we did a bit of role-playing with the team who said, okay, from now on, any presentations you go into the client with, don’t even talk about $50,000 don’t bring it up.
It’s not even relevant anymore. And so leave it to the client to kind of bring it up and we’ll go through some objection handling how you deal with that. But the whole conversation now is all about the value of the SaaS. Don’t even talk about price yet. Like just go on and just get them excited about this new product. And that was the pitch. And so they went in and the next two client meetings they had was all just about the new value of the new software offering and what it provided. And then they had the conversation around pricing, but they had set the stage for a successful pricing conversation.
So where originally they were just going to do the $50,000 migration at the end, they actually got $350,000 per year because they broke through that price anchor. And that’s the approach you got to take when you want to get from on-prem to this SaaS.
Mark Stiving: Yeah. And a price anchor is a psychological thing that we should be able to beat that up any day if we have enough value. If we understand the value, if we understand how the client’s going to perceive value, you could get by a price anchor.
Scott Miller: Yeah, I agree. And I think one of the things that some people are afraid of as well as, what if the client says we’re happy with our current software, and we don’t want to migrate over. I mean the other options you have is to say, well, we’re not, you know, your maintenance support, we’re no longer servicing that software anymore.
And sometimes companies will have to make that hard-gut decision and say it’s going into sunset mode, one of the terms or we’re going to EOL it. And you know, a lot of cases, if you’re dealing with bigger clients that are, they have their own compliance, what do you call it, compliance policies in place where some will say, well, we have to have software that’s under a maintenance agreement. We can’t have software. Like, especially like a bank or a government for example, they can’t have software that’s not under a maintenance contract. So if you say it’s EOL, we’re not doing anymore, you’re kind of, you know, you started off with the carrot and now you’re using a stick to say upgrade with us as well.
Mark Stiving: Yup. The other thing I love to do with clients like that is I’ll give them a price increase schedule. Every year your price goes up by this much, you know, in five years you’re paying us $500,000 anyway just to do the maintenance. So your choice, when do you want to go?
Scott Miller: A good one too. A good tactic. I think Oracle is actually, you’ll see in their contracts, they start bumping it up like 10% a year. But you’re right. That’s a good strategy.
Mark Stiving: Yeah. Yeah. Well, you don’t want to leave a good client high and dry. Yeah, come on! Right. And so I often recommend to people once you go SaaS to stop developing the existing product, right? So new capabilities come out, new concepts come out, you just say no, that it doesn’t go on the old platform. Yeah. It just goes on in the new platform.
Scott Miller: Yeah. And I in a lot of cases for B2B too, you know, one of value adds that people have done in the past with the on premise scenarios, under the perpetual licenses, they did a lot of customization too, that’s one of the angst that a lot of clients have as well. You know, you’re meeting 98% of our requirements. If I go onto your SaaS, you’re only really meeting like 85 or 90%. So sometimes they have to do some workarounds as well. And so that’s another part of them, you know, for the sales dialogue when you go through kind of possible objections is how are you plan to handle that, especially with those clients that have everything they need, you know?
But then again, obviously if your new product unit, SaaS product is above and beyond and value, then obviously they don’t have everything they need. But more than what I found just based on experiences with old legacy systems, they’ve already created a lot of workarounds in bandaid solutions to try and get to the product that they actually need today.
And so, you know, there are cases where they’ll download something into Excel, somebody has a macro that does something with all the data, spends it, slices it, they re-upload it into their old system again. I mean there’s all these workarounds that they’ve had to do on the back end to make adjustments. And so the new SaaS offering addresses all of those as well. So that’s kind of like the, you know, for overcoming objections like find, ask them about all the workarounds and the band aid solutions that they’ve done to try to modernize their old system at the most cost-effective approach that they can.
Mark Stiving: Yeah, those are great examples. Fantastic. Let’s talk about salespeople. Since you used to be a salesperson, sales compensation feels really hard when you’re going from perpetual to subscription.
Scott Miller: Yup. You bet.
Mark Stiving: Because you know best, you know, I divided my perpetual price by three, for an annual price. So, now one of my pan my salesperson on.
Scott Miller: I’ve seen some rules of thumb, but there’s no magic formula. But you have to make it incentive enough that you know, some companies what they do is they take the approach of, you know, before you were only making a lump sum commission upfront for the perpetual license, but now every year you’re going to be getting a percent because now the company gets a recurring fee, you get a recurring fee.
So everybody kind of participates in the way that we’ve changed our revenue model. But in that case, I’m sales folks, you know, they want the lump sum payment. You know, maybe it was higher than what they’d get under a SaaS model. You know, some companies will have this migration period where there is some subscription, but you’re in your back pocket you can still sell under a term license or perpetual license, but make sure that the salesperson doesn’t get as much commission that way as well.
Yeah, I don’t have a magic recipe for it, but it’s an exercise that teams definitely have to go through. And part of the enablement process, and you know, I remember there was this one meeting we had and we had created this whole revised pricing strategy and it was the sales summit. And so this was the opportunity to talk to sales and get them excited about the new SaaS offering, educate them in terms of the new pricing and the value story.
And as soon as the meeting started and we talked about SaaS and whatnot, one salesperson stood up right away and said, this isn’t gonna work. What’s my compensation going to be and didn’t care about anything else other than all you got to tell me is how I’m going to get paid. And that’s all I need to really focus on. Which was kind of like an unfortunate, a way to start off a meeting, but it was one of those to-do’s, right? Nope. Figured it out and it was on the list. And because of that, you could just see the salespeople were disconnected from the conversation because they didn’t know how they were going to get paid using the new model.
Mark Stiving: It is on the top of every salesperson’s mind. There is no doubt how are they going to get paid. In a way, I like the idea of allowing the salesperson to make a commission on renewals. So you guys are nice. But on the other hand, I don’t want them to get complacent and happy with renewal income. I’m a fan of pick a number of three years, you can have renewal income for three years and then that goes away.
Scott Miller: And in terms of incentives, you know, again, you know, there’s no magic recipe. I think each company’s going to have to evaluate how they pay their salespeople today and then do some modeling around, well how does this new price structure get tied into incentives going forward? And make sure that, you know, obviously from a sales perspective, you don’t want to look at it and say, well, I’m losing 20% of what it could have made under the old model. I mean, you have to have some parallel nets in the two of them, but you have to have enough for them to successfully be able to sell.
What you’re looking for in the SaaS. So if your objectives are, well, let’s have a base platform of SaaS and we want a lot of upsells over the recurring years, but we’ve got to put a focus on those objectives and say, well, not only do I want when you sell new acquisitions, but you’re in charge of upsells as well, and we’re going to incentivize you for on those upsells.
Mark Stiving: Yeah, no, that’s a great idea. What about systems, right? So you think about billing systems, accounting systems, it’s really easy, but by the way, I noticed you used to be an accountant.
Scott Miller: Well that that was part of my early career was getting an accounting designation and didn’t really want to be a true, doing taxes and all that, but then you had management accounting, which I thought was quite interesting. So that in some, in pricing kind of fit in with management accounting to a certain degree. So that’s why,
Mark Stiving: Yeah. If you believe in cost-plus pricing, it fits in really well.
Scott Miller: So the software decided to cost that 20% and you’re good. It makes all of our lives easy, doesn’t it?
Mark Stiving: Yeah, exactly. So what about these billing systems? You see a bunch of new companies or charge a fine. These guys come up because companies don’t know how to bill for something other than, hey, you bought it from me. Thank you for the check.
Scott Miller: Yeah. Yeah. And are you talking about like if you have, if you structured your pricing a certain way in your system,
Mark Stiving: Salesforce, Salesforce and per-user pricing.
Scott Miller: Yeah.
Mark Stiving: It a great example of, you know, companies, well, Salesforce started that way so they probably didn’t have a problem. But if a company shifted to that, they would probably have a big issue that says, well, how do I now send a monthly bill out to, or keep track of who’s paid or how many users do they have? Or there’s a bunch of stuff going on.
Scott Miller: Yeah. So like as part of the process for offer designer, when you’re thinking about how do I want a package our SaaS solution, you know, one of those questions is going to be around what’s the right metrics that we want to use. And I will say, you know, the metrics that you want to have is it’s gotta be a good reflection of the value that your software delivers to a client. And one quick example, that I’ll try to answer a question, you know, there’s one company and they did a lot of, not just my genius submitted experience plan in that company’s software would analyze it and try to detect errors or even fraud.
And so there’s a bit of an AI in there and, but their metric that they were using was a per user. And they were really, and I think a lot of times by default, just because in the B2C world, you know, when we sign up for Spotify or sign up for Netflix, you have kind of like a, a per-user type model with those firms. Right?
But for B2B per user isn’t always the best metric. And they knew that they were losing a lot of money on it and like companies they sold to, they’d always say, well, maybe we’ll just take three licenses instead of five. So there was a way for them to indirectly negotiate their price down, but they switched it over to a per transaction metric instead.
And so if it was a, let’s say, a claim coming from a doctor’s office versus a claim coming from a hospital, I mean they had to differentiate prices based on the type of claim that came in as well. So from the billing perspective, well one, it was a better reflection of the value that they were doing. They would analyze the action. And so that metric meant a lot more. So from a billing perspective though, then there’s the question of can we even go for it?
Like number one, can we, do we have something that could report what’s coming in? And number two, can we, are we able to bill based on that metric alone? And sometimes you can come up with the best packaging and metric model for your SaaS solution, but to build your capabilities in house, to be able to track it, report it, measure it, and bill for it, you know, the IT team go back and say, well we can do that. It’s going to take nine months. And so even though you have this brand new strategy, it’s going to take you almost like a year before you can actually put it in a market as well. So maybe you have a temporary short term solution until you can get there as well.
Mark Stiving: Yeah. So, Scott, I love the conversation on how do you choose a pricing metric. One of the things that I find fascinating about that whole pricing metrics concept is in the world of SaaS and in particular B2B SaaS, but in the world of SaaS, there isn’t an obvious pricing metric. So we often think of per user because everybody thinks that way. But once you start digging down and you start thinking hard, there are other really cool ones. But what I really love about this concept is take it out of SaaS for a second and think about anything. And you could say, well, maybe there’s different pricing. There’s a coffee shop in Europe that charges by the hour, not by the coffee. Now isn’t that clever? And so it’s really just trying to answer the question of what do I charge for? How’s my client getting value for my product? I just, I love this topic. I think it’s so fascinating and we don’t, we wouldn’t even have thought of it if it wasn’t for all these SaaS companies..
Scott Miller: Yeah, and I think there has been a lot of innovation in the pricing world because of this, you’re right. And in B2B, what I like to say is, there is no silver bullet answer. I mean, do you know one client, for example, it’s a software that goes into banks and the metric they’re trying to find is, well how do you use a metric that’s a good measurement of bank size you look by a number of customers or number of total accounts or based on total assets it can go through and each one has its own pros and cons. So for me to be, at least what I like to say is, you know, I start off by saying there’s no silver bullet answer, but what you can do is you, again, you go through a process, right and look at, you know, maybe three or four possible pricing options that have different metrics and just go through each option and evaluate the pros and the cons of the each. And it’s kind of like trying to answer those questions that we’ve been talking about, right? Like are the metrics that we’re using an option one, are those ones a good reflection of the value that our software delivers? Can we measure it, track it, bill for it, does it help us scale? So if the client doubles in size, are we priced or restructured in our pricing, the metrics that we’re using? Does that help us double in size as well along with the client? And so that’s the approach that I take is that, you know, I think a lot of teams really want to find the silver bullet answer for the right metric, but go through the process, look at two or three different options and weigh the pros. And the cons is my approach.
Mark Stiving: Yeah. Nice. Nice. Scott, we are running out of time. I’m so, so the love of this conversation though. I have to end with this question. What’s one piece of pricing advice that you would give our listeners that you think could have a big impact on their business?
Scott Miller: The one that gets neglected the most is the voice of the customer who really listening to the customers. And you know, even for business to business software, like you have deals you’re going to win-lose or you’re going to win some deals, you’re gonna lose some deals. And in both cases it’s really good to think or talk with the clients and, and some will use a third party market research firm for this as well. But, listen to the client and, and just get their thoughts like as you were pitching your product to the client, what was their thought process? What did they like, what did they not like? What were some of the decision criteria that they had when they were evaluating you? What were the most important ones? What were the least important ones? Were there other groups in the company that you might’ve not known were actually part of that decision process as well? And so I find that’s a big gap in a lot of pricing scenarios. A lot of people do a lot of, they’re good at doing socialization internally and making sure everyone’s on board, but we leave out that client part and so I think that’s a really valuable piece of information that a lot of folks neglect.
Mark Stiving: Well, I couldn’t agree with that anymore, especially on the B to B world because, in the B to B world, we often don’t have all these massive quantities of purchase data that we can go do analytics on and say, Oh, here’s what the price sensitivity is this market segment. So you gotta go, we have to listen to our customers.
Scott Miller: You bet.
Mark Stiving: Fabulous. Scott. Hey, thank you so much for your time today. If anybody wants to contact you, how can they do that?
Scott Miller: Yeah, so reach out our number, on the website, www.miller-advisors.com or email me at [email protected].
Mark Stiving: Excellent. We’ll have those links in our show notes as well. Episode 62 is all done. You know what I learned today? I think I’ve been underestimating moving legacy customers to subscription and I thought the very beginning of that was pretty interesting. What was your favorite part? Please let us know in the comments or wherever you downloaded and listened. While you’re at would you please give us a five-star review and we take these very seriously and they’d been so helpful to us. It helps us reach out to more and more pricing people. I don’t forget we’ve got a community at champions of value that you find that at community.championsofvalue.com. Go there and see everything I publish. Ask questions. We have a great time, good conversations, and if you have any questions or comments about the podcast or about pricing in general, feel free to email me at [email protected].
Now, go make an impact!
Tags: Accelerate Your Subscription Business, ask a pricing expert, pricing metrics, pricing strategy
