Ep88: What is the Market Willing to Pay for New Product Launches with Dave Daniels

 

Dave Daniels is a technology veteran with a passion for product marketing and product management.  

He is a founder of Launch Clinic, which was acquired by Pragmatic Institute (formerly Pragmatic Marketing). He is also a Pragmatic Institute certified instructor, strategist, problem solver, mentor, speaker, entrepreneur, and traveler. 

In this episode, Dave talks about a product launch framework that incorporates crucial components such as customers, segments, competitors, and positioning necessary to build a pricing roadmap that targets your company’s objective.

 

Why you have to check out today’s podcast:

  • Discover about a product launch framework which drives a pricing structure towards achieving a company-wide goal 
  • Learn about straightforward strategies of raising your prices to meet your business objectives  
  • Find out how to increase your price better by using a price launch framework

 

Always assume that your customers are willing to pay a higher price than you think that they do. Because you often look through your own lens of what you would be willing to pay, not what the market would be willing to pay. You can always go down, it’s hard to go up. 

 Dave Daniels

 

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Topics Covered:

01:34 – How did Dave get involved with Pricing 

03:23 – Talking about his aha moment in Pricing – the notion of ‘which one’ or ‘will I’ 

05:03 – How does a product launch framework look like 

06:39 – The fact about not many companies consider about Pricing in the planning stage 

08:09 – What happens when the product launch plan is not well-thought-out and well-developed 

09:31 – The difference between a launch and a release 

11:11 – How should we go about as we launch prices 

12:19 – The scary thing about increasing your prices 

13:42 – What are the two phases of the product launch framework 

15:29 – Doing a price increase better by using Dave’s price launch framework  

16:43 – Components of the price launch framework that you need to look into 

19:05 – On being straightforward in raising your price 

20:53 – What’s the best thing about having a pricing framework 

22:38 – Dave’s thoughts on pricing roadmaps 

 

Key Takeaways:

“It’s not how much it cost us to build it and then price it. It was like how much do people willing to pay?” – Dave Daniels 

“It always came up as a big issue around launch a lot, mostly because in the launch planning process, it starts and everybody starts thinking about all the tactics, the promotional stuff. And then they forget about these important little business details like how are we going to price the product, what’s our pricing strategy, how are we going to price in this market versus that market?” – Dave Daniels 

“At any time prices are increased, somebody somewhere is going to be upset, their feathers are going to be ruffled. That’s to be expected, and you should put that into your calculus, that it is possible.” – Dave Daniels 

“Frameworks provide structure and direction. And they’re designed to integrate with other frameworks.” – Dave Daniels 

“Don’t be afraid to charge a higher price because you’ll be surprised at how many people will actually pay for it.” – Dave Daniels

 

People / Resources Mentioned: 

 

Connect with Dave Daniels:

 

Connect with Mark Stiving:   

  • Email: mark@impactpricing.com
  • LinkedIn

 

Full Interview Transcript

(Note: This transcript was created by an AI transcription service.  Please forgive any transcription or grammatical errors.  We probably sound better in real life.)

 

Dave Daniels   

Always assume that your customers are willing to pay a higher price than you think that they do. Because you often look through your lens of what you would be willing to pay, not what the market would be willing to pay. You can always go down; it’s hard to go up. 

[Intro] 

Mark Stiving   

Welcome to Impact Pricing, the podcast where we discuss Pricing, value, and the new relationship between them. I’m Mark Stiving. And today, our guest is Dave Daniels. Would you go by David nowadays?  

Dave Daniels   

No, no, you know me as Dave. So, I’m Dave.  

Mark Stiving   

Dave Daniels. Here are three things you will learn about Dave before we start. First, he’s a friend that I worked with for many years. We were both instructors at Pragmatic. Dave is an expert at launch and marketing but really launch. He created and sold the launch course to Pragmatic. And I had the privilege of teaching him how to teach the price course. And so, both of us know price and launch, although he knows launch way better than I do, and I know the price a little bit better than he. Let’s think of this as two experts talking. So, Dave, how did you get into Pricing? Did you ever get into Pricing?  

Dave Daniels   

Well, in terms of Pricing, yeah, I mean, like a lot of people were, had roles where Pricing was important. I was a product manager. As Product Marketing Manager, I had to bring products to the market. Someone said, ‘What are we going to price this at, had bid desks and things like that, that I had to take care of.’ But my background was in Computer Science and Math. So, when I think of doing Pricing, I always think in terms of numbers, and it took me a long time to realize that, you know, it’s not how much it cost us to build it and then price it. It was like how much do people willing to pay? Because some apparently are going to, you know, you throw the price out, and they go, ‘Oh, yeah, I’ll do that boom’. And you’re like, I think we left money on the table. And that was too easy. We didn’t have to negotiate or anything. ‘Yeah. Okay, send me the invoice’. But it always came up as a big issue around launch a lot, mostly because in the launch planning process, it starts and everybody starts thinking about all the tactics, right, the promotional stuff. And then they forget about these important little business details like how are we going to price the product, what’s our pricing strategy, you know, how are we going to price in this market versus that market? So that’s how I get involved. And then I learned from The Master, I got to learn from Mark.  

Mark Stiving   

Well, my question that I really want to know is, as a product manager, product marketer, and really, really well-versed in all that, coz you’ve been teaching it for a long time as well by the time we met, and by the time you took the price course from me, was there anything in the price course that was new or unique, or an aha or insight?  

Dave Daniels   

Yeah. Oh, there were a lot of Aha’s. So, I’ll just think of a few. One is this notion of which one or will I? ‘Which one’ or ‘will I’ distinction and I’m making a comparison among a group of competitors or you the only game in town? And I remember vividly, we were in Boston, and you were teaching me how to deliver the pricing class. And we went out to dinner, and we’re sitting there at that dinner, and we’re having a great dinner, and you go, ‘All right, this restaurant, is this a which one or will I?’ I went, I’m looking at the menu, and I gave you the wrong answer. And you said, ‘No, it’s this one.’ You walk me through it, and then we drive in the car, and you just randomly throw one out at me to see if I could get which is which. That was a really big aha. And you know, and I reflected as soon as it clicked. I could, like rewind my entire career and look at how many times I actually did that right. And didn’t realize it. And how many times we as an organization left a lot of money on the table, a lot.  

Mark Stiving   

But I hope I was nice to you at that restaurant.  

Dave Daniels   

You were always nice. Okay. I’m, you know, you got to go pretty far to ruffle my feathers. So yeah, I mean, all right.  

Mark Stiving   

So, let’s, you brought up launch already, which we’re going to talk about anyway. And Pricing. If you were going to put Pricing into a launch plan, where does it go? How do you fit that in there? What’s it going to look like? 

Dave Daniels   

Yeah, at BrainKraft we have a product launch framework and one of the very first activities or what we call doughnuts because they’re circles. The process is called the assessment. And we’re trying to gather lots of information to kind of get the lay of the land and know what we’re going to be up against. Is this going to be a slam dunk? Are we going to have a lot of work to do? And part of that is a questionnaire that goes with an inner team. And one of the questions is, ‘Hey, what’s our pricing strategy?’ And has the Pricing been done yet’? And I got to, I’ll lay bets that nine out of 10 times to answer that question is, ‘Oh, yeah, right. We hadn’t thought of that yet’. So Pricing is one of the very early things that need to be decided before you get too deep into the weeds of all the promotional activities. A launch plan is really about the strategy of how you’re going to achieve your launch objectives. But you got to know what you’re up against, like, which segments you’re going after. Do I need to price it this way in this segment in that different Pricing in another segment? So long story short it’s incredibly critical. and it has to be done early in the planning process. 

Mark Stiving   

So, one of the things that seem unusual about that, by the way, I agree with you. But what seems unusual is it seems like somebody’s already done the Pricing when they built the business plan in the first place.  

Dave Daniels   

Nah, you would think so. That’s a loaded question. Ah, okay. All right. So, the people who are listening, the audience, they’re only going to have two kinds. The one kind is we get to this point where we feverishly run through development to get the product ready, do the beta, and all that kind of stuff. And they’re like, get it out the door quick and, and they’re like, ‘Oh, we don’t have a pricing model yet’. So, you need to figure it out. Or the other one is, they’re incredibly disciplined and structured. And yes, it was done. And for those of you who are listening, it will probably surprise you. And Mark and I have experienced working with a lot of companies all over the planet. You’d be surprised at how many big companies with names that you admire don’t do this until the last second because they haven’t figured it out yet. 

Mark Stiving   

Yeah, I think if they built a business plan, someone took a wag at a price and say, I think we can get this much… 

Dave Daniels  

Yeah. 

Mark Stiving   

And then when it’s actually time to put a product out, now we have to actually go talk to people to find out are they willing to pay something for what it is? 

Dave Daniels   

How much? Yeah. 

Mark Stiving   

Nice, but I would say the same thing is true around all the marketing plans and everything else, right. They’re not well-thought-out and well-developed before we get to the launch stage. 

Dave Daniels   

Now. Well, you know, there’s a lot of really great talent in the companies we’ve worked with. And you know, they know what to do, they’re professionals, but they lack insight about their customers. They don’t have clear definitions of their market segments. Their positioning is for crap. They have no idea what they’re doing. ‘Oh, we have a great product, please buy it from us. We’re good guys. They know little about their competitive landscape. They have no distinction of what their advantages are as an organization, they would just look through the lens of the product. They’re not honest about the barriers that they have, like what to overcome like and we’ll get to that’s not a big deal. And you know, and they really don’t have a clear understanding of how their customers make a buying decision, have no idea what their customer preferences are. So, they go, ‘Sales take care of that’. And so, it just becomes a set of random acts of marketing. You know, it’s just, ‘Let’s try this on Facebook. Let’s do this.’ 

Mark Stiving   

Nice. So, when I learned the launch class, there were two really big ahas’ in that class. I mean, there’s lots of positive aha’s in the class, but there were two really big ones that I want to bring up today. The first one is the difference between launch and release. Yeah. And can you just give 30 seconds on that? 

Dave Daniels   

Yeah, it’s part of the confusion of using the term launch. And too often, particularly in the world of software, we think of, we’re going to launch this, we’re going to launch that, we launch a website, we launch you know, a new pricing scheme, you know, there’s anything, but we get a little confused about a release versus a launch. The release is something that our development and R&D teams actually build, could be software, it could be a thing. And there are iterations of that continuously, but a launch is a bigger deal. With the launch, we’re trying to drive toward achieving a business objective. A launch isn’t just getting it out the door and giving it to sales so they can sell. It’s about creating some acceleration to get to where we’re trying to go faster and faster. And that’s really the distinction. You know, a launch is about creating acceleration. And a release is just an important set of things that we built. 

Mark Stiving   

Yeah, I always thought of releases, ‘Okay, I got a check, Mark, I got it done’. And the launch is, ‘How do I go have an impact in the marketplace’? And then the second huge aha, which comes right on the back of that, and that is I can launch way more than just products. It doesn’t have to be a new release or a new product. And since I learned that, now let’s tie it back to Pricing. ‘Hey, I want to launch a new pricing model, I want to launch a new pricing characteristic’. What kind of advice or thoughts? What should we be thinking about as we go launch prices? 

Dave Daniels   

Yeah. Okay. There’s a couple of scenarios where I would be looking for if I were going to follow our framework. And the first question is, ‘How much do we know’? You know, why are we increasing the prices? Why are we changing the prices, could be an increase could be a decrease could be a bundling? Why are we doing that in the first place? Is this an internal motivation for us’? Because we believe we can get more money. Are we responding to a competitive problem where we have to make a reduction or you know what, maybe we got an old product, this is one of the aha I got from the pricing class? So yeah, maybe we just want to dump an old product and get rid of it. So, let’s just keep jacking up the price until people say ‘Fine, I’m leaving’. So, if I were going to approach launching a new pricing structure, I’d first start with what were the underlying motivations. So, objectives again, so what are the objectives? What are we trying to accomplish? So, the objectives, I can put measurement in place. The other thing I have to do and let’s just talk about a price increase because that’s the more common scenario. 

Mark Stiving   

And it’s scary for everybody. 

Dave Daniels   

It’s scary. We don’t want to raise prices, but you know, constantly go up, you know, regulatory pressure increases cost, right now everybody’s cost is going to go up, guaranteed. So, what we have to do is have a really good understanding of our customers and what will our competitors do? Right, you know, I mean, they’re not going to stand still, they might use it to their advantage or they might just sneak right behind us and increase their prices too. But at any time, prices are increased, somebody somewhere is going to be upset, their feathers are going to be ruffled. That’s to be expected, and you should put into your calculus, that it is possible. And I would say likely that you will lose some customers when you increase your price. Now, some of you are in an amazing position, you’re like you got your customers so locked in, you could throw dirt at them all day and they won’t leave. Right? So, for the few of you out there like that, consider yourselves very lucky. But for a lot of organizations, that’s not the case. 

Mark Stiving   

A lot of what you just said, sounds to me like Pricing, not like a launch.  

Dave Daniels   

Hmm. Yeah.  

Mark Stiving   

And so maybe it’s common sense. How many steps are in your framework? 

Dave Daniels   

There are 13 donuts, two phases. 

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Mark Stiving   

What are the two phases? Can you name those? 

Dave Daniels   

The two phases are the planning phase. The plan and the execution phase.  

Mark Stiving   

Oh, does that make sense?  

Dave Daniels   

Yeah, simple. We like to keep things simple. 

Mark Stiving   

Nice. 

Dave Daniels   

Right. It’s something that’s easier to adopt. 

Mark Stiving   

I’m trying to fit Pricing here. Because I want to understand this right? I want to learn something new today, how I can do a price increase better, because I run it through your launch framework, instead of doing what I’ve always done naturally or intuitively. 

Dave Daniels   

Alright, so here’s what I would start with. In the assessment component, we look at the whys, we try to identify the whys. Why are we doing this? When do we want it to happen? It’s the why’s and the when’s. And then from that, we collect the information and then transition and we do what’s called a product launch planning session. So, you get an inner core of key stakeholders and you get the lay of the land. That’s all you’re trying to do. So, you’re trying to avoid surprises down the road by doing this. Then from that, the output of that is a formulation of the objective. So, what does success look like? So, if we’re going to introduce a new pricing model, say we’re doing a price increase, we might be looking at things like, how many adopters did we get of the new Pricing? How many customers decided to leave us so that we can put some objectives in a place like maybe within six months, we want to see all renewals on the new pricing scheme with an acceptable loss of less than 5%. Right, so return a 5%. So now I’ve got that default. 

Mark Stiving   

And I might have a win-loss number today that I have as a baseline and let’s say, I want that to go down by 3% max or something like that. 

Dave Daniels   

Right, I can put a line in the sand and say, ‘This is what success looks like’. And then I can examine more market-focused areas like, okay, I can look at my customers, my segments, my competitors, and my positioning. So those four things all interlock. So, which customers are more likely to embrace? Which ones will and some will go, ‘Yeah, okay, whatever?‘ And then whatever the price has gone up, some will go. I don’t like it, but I’ll pay it and some will say go pound sand and they’ll run away. Right? So that helps you calculate, you know what your loss rate is, you know, say you lose three to 5%. But the rest of them are paying the higher price. So, who cares? We’re making more money, right. The other one is to evaluate how your competitors are going to react to that. So, by comparing as you said, win-loss I could very quickly see, ‘Oh, wait a minute. We’re now losing deals to competitor X’. Right? And then segments, ‘Do we need to take more of a segmented approach to our pricing’? Another secret I learned from Mark, one of the AHAs, and here we have positioned a framework, how am I going to communicate that to my customers? All right, you know, obviously, a price increase is hard to spin as it’s good for you, you know, but there could be ways you could do that. Like, we’ll be able to continue. You know, you might increase the price, but improve the service. 

Mark Stiving   

Customers examples, if I may. Yeah. One was Netflix’s most recent price increase. We’re raising our price so we could invest more in original content.  

Dave Daniels   

Oh, there you go. There you go. I saw that. I, you know, I chuckled a little on that one. But, you know, good for them, but at least they gave it a try. 

Mark Stiving   

And the one that I actually really, really liked, is Zipcar. And if you go back to the beginning of Zipcar, the CEO sends out a letter to everybody saying, ‘We totally mess up if we don’t raise prices, we’re going out of business’. 

Dave Daniels   

Now that’s honest. 

Mark Stiving   

If you want the product, guess what we’re raising prices? 

Dave Daniels   

Yeah, if you like it, this is what we have to do. Sorry, everybody. Yeah. Right. And then I would look at how I communicate that. So, I don’t have to worry as much as the advantages and the barriers in our scheme in our framework because I already have them as customers, so I have less to worry about there. But I might be looking at customer preferences. So, am I, who am I likely to lose as a result of increasing prices? And then my launch plan is fairly straightforward. It’s more customer communication, and internal communication to my sales team on my sales channel, and channel partners. But then once I’ve got everything locked and loaded, and I’ve got my date scheduled, then I’m going to make sure my team is prepared. I’m going to try to prepare the market as best I can. A letter like that, like, ‘Hey, we screwed up, we’re going to have to increase the price is fine. And then we have a go step. So, it’s like once I’ve got everybody prepared, boom, let’s, you know, let’s flip the switch. And then let’s accelerate through it and get there as quickly as possible. And in the end, the very last donut is a review. So, it’s a retrospective. What did we do? Well, what did we do badly? What would we do again? What do we learn from that? Folks, there are many lessons to be learned from watching Netflix’s pricing changes. So, lots to be learned by all of us. So yeah, I mean that the framework works in this scenario. The good thing is you can shortcut it a little bit because you already know your customers. 

Mark Stiving   

Yeah. What I like about frameworks, though, of any type is it’s a structured way of thinking through a problem. So, you don’t forget anything, you don’t miss anything. So, if a step doesn’t apply, that’s okay. 

Dave Daniels   

That’s okay. Yeah. The thing I researched earlier this year in the distinction between models, frameworks, and processes. And they actually do have distinct definitions. And what I liked about the definition I found for the framework was to build on what you said, frameworks provide structure and direction. And they’re designed to integrate with other frameworks. So, I can plug in how I do things here. I can plug another thing in there. And they’re like Lego blocks in many ways. They should interlock. 

Mark Stiving   

Nice. There’s a concept in Pricing that I don’t talk about very often, and I probably will start talking about a little bit more coming up in the near future. But you know, we have product roadmaps. And obviously, the launch is probably I shouldn’t say obviously, but it feels reasonable to me to say launch sits on a product roadmap. 

Dave Daniels   

Oh, yeah. Yeah. I mean, there’s definitely inflection points in the roadmap where you say, ‘Okay, here’s a launch, there’s a launch’, and so forth. Yeah. 

Mark Stiving   

And so, there’s this concept called a pricing roadmap. Yeah. What I like about the concept of a pricing roadmap is Pricing is such a complicated thing, just like launching or building a new product, which I like lumping those two together. But Pricing is such a complicated thing. And it touches so many different departments, so many different areas inside a company, that it makes a ton of sense to have a roadmap just like we have a product roadmap, right is, hey, we’re going to do a price increase at the end of the year. We got to make sure everybody knows this. Here’s what the game plan looks like. Here’s how we get everybody ready for it. And so, it’s just like putting together that launch plan. 

Dave Daniels   

Hey, maybe what we should do when we get off this call is we should come up with a set of doughnuts for you. And you can have your own price launch framework. I’ll give you different colored doughnuts even. How about that? 

Mark Stiving   

I have tried to stop eating donuts, Dave. Thank you. Timing is pretty much up here. But, you know, I have to ask this one question because I always do. What’s one piece of pricing advice you would give our listeners that you think would have a big impact on their business? 

Dave Daniels   

Always assume that your customers are willing to pay a higher price than you think that they do. Because you often look through your own lens of what you would be willing to pay, not what the market would be willing to pay. You can always go down, it’s hard to go up.  

Mark Stiving   

You know, nobody’s ever given me that answer. And I really like it. The concept that people probably are willing to pay more than what we’re asking them to or what we think they will. I think that makes so much sense.  

Dave Daniels   

I mean, and you know, if you get it way wrong, you can always have an incentive, right. You can have a forever sale if you want to. There’s always something you could do but, yeah, I think the lesson that I learned is that, don’t be afraid to charge a higher price because you’ll be surprised at how many people will actually pay for and the problem is we look through our own lens we’ll go, ‘Oh, I would never pay for that’. Like Wait a minute, you’re not even our target customer. Of course, you wouldn’t pay that. But hey, people are paying you to know $120,000 for a Tesla S and other people will say no way and they’ll go buy a nice economy car like a Kia or Hyundai or something for everybody. 

Mark Stiving   

That’s what we call market segmentation.  

Dave Daniels   

I do, definitely mark do. 

Mark Stiving   

Thank you so much for your time today. If anybody wants to contact you how can they do that? 

Dave Daniels   

You can go to our website at BrainKraft.com, that’s as you can see from behind me for those who are listening, brain, B-R-A-I-N, like the thing in your head and Kraft with a K, K-R-A-F-T dot com. We actually have a Facebook page. So, there’s a BrainKraft Facebook page you can search for and you can put any kind of comments you want there and we just have a general email if you want, called Hello. So hello@brainKraft.com. You could come into one of us and we’ll respond to you. 

Mark Stiving   

All right. Thank you very much, Dave.  

Dave Daniels 

You’re welcome. When are we going to go out and do that putt putt with shotguns again? 

Mark Stiving  

Oh, sporting clays is what that’s called.  

Dave Daniels   

Sporting clay, I call it putt putt with shotguns. Yeah. 

Mark Stiving   

Come visit me and Reena. We’ll go.  

Dave Daniels 

Okay, all right. 

Mark Stiving   

Episode 88 is all done. Would you please leave us a review, we take those very seriously. They’re very valuable to us. And if you leave us one I will read it on the air. Here’s one that we just receivedUibanez on Apple podcasts, and I apologize for messing up that name. The title: Must have this podcast.

“Mark Stiving is doing such a great job helping Pricing to broaden the vision for business. Highly recommended.” 

Well, thank you very much. Don’t forget to join our free community at championsofvalue.com. There you’ll see everything I publish for free. The memes, the blogs, the videos, the podcasts, we put links to them all right there. And if you have any questions or comments about the podcast or Pricing in general, feel free to email me mark@impactpricing.com. Now, go make an impact! 

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