Ep76: Generating Immediate Revenue Through Price Testing with Ammanuel Selameab

 

Ammanuel Selameab has spent 7+ years in pricing and can’t imagine what else he’d rather do.  His work has taken him across both B2B and B2C contexts, supporting companies like Enbridge Energy, Cargill, Omnicom, Old Navy, and Shutterfly. He is the Pricing Head at Carta and is the founder of Run Pricing Tests. 

 

In this episode, Ammanuel shares how running pricing tests can help you generate long-term revenue and increase your market share. 

 

 

 

Why you have to check out today’s podcast:

  • Find out why you need to price test, even after making the effort to understand value through all the analytics available
  • Learn how to consistently deliver substantial lifts in revenue and profit through pricing
  • Learn about the social science of pricing: utilizing the best of data science, artificial intelligence, and the psychological behaviors of consumers, to maximize your long-term profit

 

Spend more than 30 seconds thinking about your pricing. It’s the most essential decision you’ll make. It’s the most impactful decision you’ll make, and it deserves more of your attention.” 

– Ammanuel Selameab 

 

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Topics Covered:

 

01:17 – How Ammanuel’s  pricing career began

 

02:29 – Where Ammanuel’s long-term aspirations lie

 

04:13 – How does a pricing role in a company gives you an edge over someone in accounting or sales

 

04:51 – How Ammanuel’s company came to be. Where does he find customers and what product does he offer

 

07:04 – How are tests structured to get desired results

 

09:18 – Talking about price segmentation and price discrimination

 

10:13 – What’s important point to know about price testing

 

11:30 – On dealing with data scarcity

 

12:21 – Explaining how decisions are probabilistic, and the best way of supporting those decisions

 

14:15 – Viewing what they do in pricing as a social science

 

15:10 – How does the engagement of price testing take place in a company with a direct sales force

 

18:37 – What kinds of companies do they offer their services to, and how many salespeople are working for them

 

20:25 – One large test success they have had so far

 

20:54 – Are there negative impacts with tests

 

22:30 – After all the efforts to understand value, and all the analytics available, why go and test it

 

23:14 – His best pricing advice to make a big impact on your business

 

Key Takeaways:

 

“Because pricing initiatives almost always are cross-functional in nature, you’re exposing yourself to many different functional areas. In terms of your capacity to lead, you now have a much broader perspective on the business than someone perhaps exclusively in accounting or sales might not be privy to.” – Ammanuel Selameab

“The business that I built is around taking pricing hypotheses and going to market and testing their viability.” – Ammanuel Selameab

Even if we don’t achieve stats sig, any amount of data we can provide you to inform your pricing decisions is a good thing.” – Ammanuel Selameab

“Going to the market, doing the work for companies of testing and vetting out ideas, is the best way of supporting data.”  – Ammanuel Selameab

 

Resources Mentioned:

 

 

Connect With Ammanuel Selameab:

 

Connect with Mark Stiving:   

 

Full Interview Transcript[Text Wrapping Break] 

(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

Welcome to Impact Pricing, the podcast where we discuss pricing, value, and the tested relationship between them. I’m Mark Stiving.Today our guest is Ammanuel Selameab. There are three things you want to know about Ammanuel before we start, he is an avid listener to this podcast. Woohoo! He is the head of pricing at Carta and he recently started his own company called Run Pricing Tests. Welcome, Ammanuel.

Ammanuel Selameab

Thanks. Super excited to be here and have a conversation over pricing.

Mark Stiving

First off, thanks for listening. I appreciate the fact that you told me. That was months ago that you told me that but..

Ammanuel Selameab

Yeah, this is a really fantastic platform and podcast. Like I reflected to you, it could have easily been a podcast of pricing people patting each other on the back, but you have a wide selection of guests and interesting perspectives, and it makes the conversations fun to listen to. So congratulations on an amazing product you put together.

Mark Stiving

Well, thank you. But as you’re about to learn, I do this because I like learning from people. And I’m asking questions. I just don’t know the answers to, so here we go.

Ammanuel Selameab

That’s awesome.

Mark Stiving 

So let’s start with, how did you get into pricing?

Ammanuel Selameab  

I studied economics as an undergrad, and landed a job in supply chain early in my career, and kind of stumbled into Pricing as just the next thing to do. It seemed at the time to be this perfect harmony between what I’d studied in school, some of the tools and techniques. It was really one of the only fields that felt like a direct application of what I had studied (other than going into academia to pursue a Ph.D., or something in economics) and I fell in love with it. And seven years later, it’s all I’ve been doing and it’s a really fascinating world. It’s a world that not enough people talk about, and not enough people are interested in So, incidentally, to give you a pat on the back, the work you’re doing in evangelizing the importance of pricing, shouting from the rooftops is important, and I think what my career today has been largely comprised of.

Mark Stiving  

Oh, thank you. And I know you don’t know the future, but do you think this, you think you’re gonna stay in pricing, your (whole) career? Or do you think this is a stepping stone to something else?

Ammanuel Selameab

That’s an interesting question. I mean, I launched a business and that’s really where I think my long-term aspirations lie. But, as far as career trajectory within Pricing, I found that it’s actually once you hit probably a director or VP of pricing (level), I’ve seen some chief pricing officers – maybe two – but you don’t really see pricing people in the C-suite.

So yes, pricing is an awesome career path and can get you very far. It’s a specialized skill. It’s a niche skill. But, in terms of career pathing, you’re kind of tapped out once you hit a director or VP level. And so branching off into consulting and building your own company, or, pivoting into some more general CRO role or go to market role is likely where folks have to go. What are your thoughts on that?

Mark Stiving  

So the thing I love about is – I don’t know if you heard this podcast, but we had on a VP of Innovations from Stanley Black and Decker a few months ago, and I brought him on because he had been in the Pricing field and I was really curious about his career transition and how he did all that.

And what he said, which is what I believe completely, is that when you’re in the pricing role, you learn to think about how customers make decisions, what value means to them. And it gives you a different perspective than almost any other role inside the company. And it’s such a valuable role, that even if you leave pricing, pricing will never leave you, right? It’s always going to be this attitude of customers and how do they make decisions? And how do they perceive value? And I think that’s what makes people promotable in the long run.

Ammanuel Selameab  

Yeah, I 100% agree. And also, I’d also add that because pricing initiatives almost always are cross-functional in nature, you’re exposing yourself to many different functional areas, you’re learning about different functional areas. And so in terms of your capacity to lead, you now have a much broader perspective on the business than someone perhaps exclusively in accounting or sales, they might not be privy to it. So definitely hear that.

Mark Stiving

Good. Well, the reason I had you on is I wanted to talk about price testing. First, tell me about the company that you started. What’s it look like? How do you find customers? What’s the product you’re offering?

Ammanuel Selameab

Yeah, it started a couple of months ago, I had some people reach out to me and ask if I did consulingt. And at the time, I didn’t, but was like, ‘Yeah, sure. Of course, I like money”. And that led to a series of engagements, and (something that) to me, on earth (is) a larger problem with… so if we’re all on the same page as to, we ought to be a value-based pricer, we ought to price to value, how do you actually measure value? How do you actually do those things?

And as I’ve seen so far in my career, the primary techniques or tools for answering that question consists largely of asking people in your target market. We can wrap it in conjoint analysis or Van Westendorf, or you know, or Max Diff, or price interviews, but effectively, you’re just asking people in your market what your stuff is worth to them. The projects and engagements that I’ve been working on, that I felt to be, to collect the most reliable data, on the other hand, were observational data.

So, presenting people with offers and seeing how they actually respond to them. What people say they’ll do and what people actually do can be two very different things. So, the business that I built is around taking pricing hypotheses and going to market, and testing their viability. And I can go into more detail there. But effectively, it’s collecting, what to me is the most reliable way of ascertaining whether a price (?) makes sense is, which is asking, or presenting people with real offers and seeing how they react to it.

Mark Stiving

I think without a doubt, people actually behave differently than they say they will behave, which is an important aspect of what we’re talking about here. There are many issues I see with what you’re doing, and we’ll get to some of those by far, but I want to hear the positive side first. What kind of results do you find for people? How do you set up the test? I’d love to know a little bit more.

Ammanuel Selameab

Yeah, we try to structure them in terms of an A/B or split test framework. So we have a test cohort, and a control cohort. And it’s not perfect, of course, but the only variable that we want to explain the differences in how these two cohorts perform over the duration of the test, is the thing that we’re testing. So, the groups are segmented by willingness to pay. So there are a similar group of customers, they have a similar set of needs.

Then we split them off into two groups, and we make one group an offer that the other group, the other gets the status quo, whatever the current rate card or packaging structure is. The reason for that, obviously, is, it’s hard to assess or ascertain causality if you don’t structure a test in that sort of way. So, price optimization tools as an example are great, like they’re looking backward and pulling data and building models.

But, it’s really hard to, I mean, I think those are problematic for a number of other reasons as well, but it’s hard to ascertain causality from those backward-looking models. So there’s that. And then the actual – we’re connecting to a CRM or an ERP to actually manage the data and report on performance. That was a very long answer, but that’s the structure.

 

Mark Stiving 

So this is mostly e-commerce sales, is that correct?

Ammanuel Selameab  

No, more B2B; with price being presented via (sales) reps.

Mark Stiving  

Oh, direct salespeople going out and presenting prices. Okay. I love that more than e-commerce in the sense that, with e-commerce, I’m a little worried about two different people getting different prices and that becoming public because someone wants to make fun of a company, or you know, they find something unethical that they’re doing. But if it’s B2B salespeople making presentations, we do that all day long, right? Salespeople negotiate prices every time they walk into a customer’s door so there’s nothing against, ‘Hey, we made this offer here, we didn’t make that offer there.’

Ammanuel Selameab  

Exactly. Yeah, price – I mean, I think I can anticipate the cons which are real, the risk present in price discrimination. In this framework, it’s – to your point, it already is happening, reps are managing discounts as they’re working with a customer. So, in fact, it’s the same thing happening. It’s just that in this for a one to two-month period that we’re running a test, it’s just a more structured way of doing what’s already happening.

Mark Stiving  

In the B2B world, with direct salespeople I have no qualms about price segmentation or price discrimination issues. I don’t think that’s an issue at all. Sometimes when you teach companies that are in the B2B space, they think that’s a problem. But it’s almost never a problem. Because you see it so often.

Ammanuel Selameab  

Yeah. And that’s been something I’m finding I have to educate. When you hear price testing, or particularly A/B price testing, you immediately think e-commerce and segmenting traffic into two buckets, but that’s not really what we do.

And the other I think, to anticipate another objection you might raise, which is, it’s not just about the price level; there’s a universe of attributes related to how you’re selling. Your price metric, your packages, your bundling, contract length, the more psychological metrics of how you’re positioning prices. I mean, it’s not just how much you’re charging. But all of that merits testing and getting real-time feedback from people.

Mark Stiving  

I think that’s a fair statement. Now, as soon as you change more than one of those, it’s hard to say, what was the issue? Was it the price level? Or was it the way I framed it when I presented it or… so it gets challenging. I think the challenge I would have in what you described to me, meaning B2B, direct salespeople, is there’s probably not as much data as I would get in an e-commerce site where I’m going, B2C, and I’ve got, you know, thousands of people that are seeing one offer versus another offer.

Ammanuel Selameab  

Yeah, certainly, sure. We screen for transaction size and transaction volume per month, and we strive to hit statistical significance. And we can measure at what point are we hitting it, but in situations where there’s data scarcity, there’s an effect; or not enough transactions, we have to rely more on qualitative measures and measurement. The reality is that companies aren’t using any data to make pricing decisions. So, even if we don’t achieve stat sig, any amount of data we can provide you to inform  your pricing decisions is a good thing, in my opinion.

Mark Stiving 

So let’s pretend that you have a P value of 70%. Right? All of a sudden you say, well, at least I’m 70% sure that I’m right. I may not be 95 or 99% significance, but you know, this is a decent guess.

Ammanuel Selameab  

Yeah. That opens up a can of worms of just statistics education, I suppose, and interpreting statistical results, which is maybe a conversation for another day. But yeah, at the end of the day, decisions are probabilistic. And the more data you can bring to the table to inform a decision, the higher the odds of success, you’ll have, but it’s, it’s still..

What I find to be a bit challenging is building a deck for three months, to produce a pricing recommendation, and then the grand unveil, and then “good luck” – you know, which is how I see a lot of consultants operate with businesses. For what it’s worth, I think, going to market, doing the work for companies of testing and vetting out ideas, is the best way of supporting them – you know, again, super biased, and just my perspective on it.

Mark Stiving 

But yeah, I think that’s pretty fascinating. So, let me tell you, another big problem I have with data-driven decisions, which most people are the opposite, right? Give me data, I want to make data-driven decisions. In the world of pricing, when we make decisions based on data, especially purchase data, then we tend to lose or stop thinking about value. So we start thinking about “why is it that this customer values this product”, or “why does this customer value differently than that customer”.

And so I’m not saying that you’re causing that at all. And in fact, in the way you described your tests, I’d say that you have the ability to try to get the best out of both of those worlds. Where (we’re saying) let’s do a little bit of data, and let’s try to ask the question, why? Because you’ve got direct salespeople in there.

 

 

Ammanuel Selameab 

Yeah, I definitely agree. I think particularly, you know, what I’ve seen in past roles where we’ve implemented testing is we test one thing, and then suddenly, we want to test everything without really any rhyme or reason.

I view what we do as a social science, and I think pricing has been more heavy on the social and less on the science. And so there’s some harmony of both, obviously, of utilizing the best data science and AI tools that we have, but under the lens of, we’re studying human beings making decisions – not just throwing spaghetti at a wall and seeing what sticks.

Mark Stiving  

Nice. So tell me about, how do you roll out a price test with a company that has a direct sales force. Doesn’t every salesperson want the best price?

Ammanuel Selameab  

You’d be surprised, and it’s also contingent first on what the company wants to do, the overall business objectives where, we’re aligning our pricing strategy to what the company overall wants to do, not the motivations of individual sales reps.

So in general, the process is, you know, you sit with typically a CRO, who, – as we both know, pricing responsibility can sit in different places at a company, but if there is a CRO, that person usually is both responsible for pricing, and has revenue targets. So they’re very motivated to get the pricing right. We just think the first thing an engagement typically looks like is, what is your most pressing worry about your pricing.

What’s the thing that’s keeping you up at night right now, let’s go test that first. And let’s just start with the proof of concept to see. We’ll do the legwork of structuring the test, advising, monitoring it on an ongoing basis, reporting results. I think that the first win for a company in just seeing what pricing can do for them, is really impactful.

And we’ve seen some – over the course of my career, in doing tests, (we’ve) seen some really incredible lifts. That makes sense, lifts and ACB have – when introducing a package or raising a price or reducing discounting, and as we both know, it’s getting to that first win and that first bit of validation for a company – to me, that’s most important.

Mark Stiving  

Yeah, so I guess what I was really curious about is how do you, do you just leave it up to the company to say, ‘Hey, we’re going to roll this out. Half the salespeople are going to sell this way, half the salespeople are going to sell that way.’?

Ammanuel Selameab  

Okay. Let me give a more tactical answer for sure. Yeah, once we aligned on what the test goal is, supposing it’s, we are trying to establish the correct price level for this given package. We will typically then within the CRM, segment the customers that we are going to expose in sort of testing control, then we train the reps: one set of reps will get one set of prices and the other will get another; the CROs is directing reps to do one or the other.

And I think in the long term, we’ll probably build in blockers within the CRM that force reps to present a certain price or not. But it’s all directed from the CRO in terms of getting the sales teams on the same page and getting them to deliver and execute different prices.

Mark Stiving  

Yeah, I’ve worked in enough companies or seen enough companies I could just see that not going smoothly.

Ammanuel Selameab 

Yeah, I think there are other issues that, (such as) raises of quota, and how can that other person get a different price than we do? And so, because these aren’t permanent changes, they’re a month or two months, so far it hasn’t been problematic.

The CRO just makes the adjustments and sets expectations on their end. But yeah, you’re right. It could be, it could grow to be a much bigger problem down the road and something we’ll have to get ahead of and address.

Mark Stiving  

Yeah, what size companies typically… I guess the word is, what type, or what size companies would typically hire you to do this? Where do you think it fits well?

Ammanuel Selameab

It’s a great question. I mean, we’re still early going. So we’re still trying to answer the question ourselves,  but so far, what’s been working is series A series B companies, usually actually under 20 million, under 50 million. They’re at an early stage in the company.

They’re very interested in growing, and they’re the most anxious about whether their pricing is correct or not. Too small and they both don’t have the number of transactions we need, and they can’t pay us. I think the event for the start-ups is we’re about to go fundraise. We need the highest valuation we can so we want to have someone come in and run pricing tests. That’s been kind of a sweet spot so far.

Mark Stiving  

And in that 20 to 50 million range that feels like there’s probably in the ballpark 10 salespeople you’re dealing with, does that make sense?

Ammanuel Selameab  

Yeah, like 10 to 20, usually. That’s a manageable sales force. And in the future, like I alluded to earlier, I think we’ll find more automated ways of managing sales teams. I mean, suppose we have a company with 100 sales reps. We have to build tools to manage price recognition that changes out to them but, so far, it’s been working well. Now, there’s been ups and challenges but yeah, it’s been so far so good.

 

Mark Stiving  

Good. Okay, so just to prove that this is valuable to people, here’s what I’d like to ask, what’s the biggest test success dollar-wise, don’t give me a company or product or anything, right? What’s the biggest test success dollar-wise that you found, that said, ‘Hey, when we change this to this, we could create X amount more money, X amount more revenue.’

Ammanuel Selameab

Ah, just wrapped up the test earlier this year, where we changed from – trying to be as anonymous as possible – basically, we ran a test, changed the package, and drove a 300% lift in ACV.

Mark Stiving  

Nice. Okay, so here’s the next question. Have you found any tests where there was no impact?

Ammanuel Selameab  

For sure or negative impact?

Mark Stiving  

Negative impact even better.

Ammanuel Selameab 

Yeah, that’s it. Not every test is successful for sure. A few years ago, I ran a test at a previous company. And within two weeks, the test cohort, it was negative 50% ARR. I mean, it was absolutely tanking. So, yeah, that does happen. I mean, then you terminate the test and you move on to something else. But then you’re also gaining valuable information, that then informs the next test you want to run.

Mark Stiving  

Oh, so trust me, I’m not being negative about that at all. Because here’s what you just said, is you just said, had we just made the decision to do the change, we would have lost a ton of money. But instead, we tested it. Does this make sense? Oh, no. It doesn’t make sense. Let’s not do that.

 

 

Ammanuel Selameab  

Simple as that. Yeah, exactly. And this is the reason why, before making a wholesale change to your pricing and packaging, testing – whether you use us or someone else – is to me the plausible way of approaching it.

Even with the best analysis – you’ve done a survey, and your Van Westendorf curves, it’s all great, you have some robust recommendation, you still probably want to test it in the market before making a change to your pricing page and running with it wholesale.

 

Mark Stiving 

So I think that’s a great place to end this in the following sense: no matter how much I like the idea that we’re going to go out and understand value, and we’re going to ask people how much they’re willing to pay in different ways, and we’re going to do all this analytics; after we’ve made these decisions, (and say) ‘I think our best decision is to go do this’, why wouldn’t we go test it? Because if you don’t go test it, it’s just like, I’m taking this risk that everything I did was right.

Ammanuel Selameab  

Exactly. Yeah. If you’re confident in your decision, your test should prove to be successful. If you’re not willing to test it, that probably tells you something about your level of confidence with whatever recommendation that you’re hoping to make,

Mark Stiving  

Or my level of impatience, one or the other.

Ammanuel Selameab  

Fair. Yeah, totally.

Mark Stiving

All right. So, Ammanuel, before we wrap this up, final question, what’s the one piece of pricing advice you would give our listeners that you think could have a big impact on their business?

Ammanuel Selameab  

Spend more than 30 seconds thinking about your pricing. It’s the most existential decision that you’ll make. It’s the most impactful decision that you’ll make, and it deserves more of your attention.

 

 

Mark Stiving  

Nice. I agree. I agree 100%, by the way. Thanks so much for your time today. If anybody wants to contact you, how can they do that?

Ammanuel Selameab  

Yeah, feel free to reach out to me on LinkedIn, or ammanuel@runpricingtest.com.

Mark Stiving

All right. Episode 76, all done. Nice. Okay, every single week I plead with you listeners to please give me a review for the podcast. And my marketing folks just begged me to beg you. And so here’s what we’re doing now. We’re going to give away access to our value-based business course if you will leave us a review on iTunes or wherever you listen to this, all you have to do is leave the review, take a screenshot, email me the screenshot, and we will give you access to the value-based business course.

We sell this thing for $500 and it’s worth way more than that. So I highly recommend you do it and hopefully, my marketing people will stop complaining to me. So let’s see if we can make that happen. Don’t forget we have the community at championsofvalue.com. That’s where you see all of my content that gets posted there.

My memes, my blogs, my videos, my podcasts. So go there if you want to make sure you’re not missing anything. If you have any questions or comments about this podcast or about pricing in general, feel free to email me, mark@impactpricing.com. Now, go make an impact!

 

 

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