Ep92: The Keys to Pricing Subscriptions with Patrick Campbell
Patrick Campbell is the CEO of ProfitWell (formerly Price Intelligently), the software for helping subscription companies with their monetization and retention strategies. ProfitWell also provides free turnkey subscription financial metrics for over eight thousand companies. Prior to ProfitWell, Patrick lead Strategic Initiatives for Boston based Gemvara and was an Economist at Google and the US Intelligence community.
In this episode, Patrick shares the importance of a pricing person or a pricing department to deal with the complexities of crafting pricing strategies to gain pricing leverage. He also discusses the Freemium model they use at Profit Well and how it is more of acquisition rather than a pricing model.
Why you have to check out today’s podcast:
- Learn how the market is slowly going entirely towards subscription as it provides predictable expense to consumers and predictable revenue to companies
- Find out how to make Pricing and packaging powerfully work to capture value
- Learn how to gain pricing leverage by understanding the different value drivers necessary in capturing value
“Make sure you have a process. Make sure you have a pricing committee. Pricing is at the intersection of important and uncomfortable. And whenever you have that happen, those are things that get de-prioritized inside an organization constantly.”
– Patrick Campbell
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01:56 – Patrick’s remark to Mark’s praise of him being a guru
02:13 – How he landed in Pricing
03:55 – What does he think about ‘so many companies don’t value pricing’
05:50 – Creating a Pricing department when there is already complexity in a company
06:58 – Why are companies not so keen on the important decisions around value and Pricing
09:06 – Explaining his model: acquire, monetize, and retain
10:51 – The use of pricing metrics and value metrics
13:08 – Is Uber a subscription company
17:46 – Talking about the guaranteed price in subscription
20:04 – Can you separate Pricing and packaging
21:21 – Understanding value capture in market segmentation
22:38 – The base free offer they give at Profit Well
24:38 – Patrick’s thoughts on ‘freemium is a customer acquisition model, not a pricing model
27:40 – Discussing about the three types of Freemium model
30:07 – His pricing advice that can have a big impact in others’ business
31:42 – The need to have a committee to make progress
“I think the evolution is going to go from one-time purchases to subscription purchases to recurring revenue businesses. And there’s obviously transitions where everything goes back and forth, and things like that.” – Patrick Campbell
“I would say that there are things you can do independent of Pricing or independent of each other with Pricing and packaging, that leads to essentially different optimizations. So, I think that you can work without each other. But there’s a lot that they rely on with one another. So, it gets a little more complicated.” – Patrick Campbell
“I don’t think you’re going to have pure dynamism anytime soon. But I think you’ll start seeing segment-based Pricing sooner than later.” – Patrick Campbell
“We chose the freemium round, for a lot of reasons, basically, it’s an acquisition model. It’s not a pricing model.” – Patrick Campbell
“I think that the big thing you have to think about with freemium is it’s opening the top of the funnel, so if it is up of the funnel, it is something that will influence your Pricing. But it’s not part of your Pricing strategies core.” – Patrick Campbell
“It’s been successful because we get two effects that come from Freemium. One, there’s a network effect because every time we get more data, it goes into our algorithms of our pricing or retention products. And these are just things that makes them better. But the other thing it does is, it lowers our CAC, or customer acquisition cost quite significantly.” – Patrick Campbell
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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.)
Make sure you have a process. Make sure you have a pricing committee. It sounds so like condescending and pedantic because you’re like, “Well, I don’t need a committee,” right? But pricing, as you kind of alluded to, it’s at the intersection of important and uncomfortable. And whenever you have that happen, those are things that get de-prioritized inside an organization constantly.
Welcome to Impact Pricing, the podcast where we discuss pricing, value, and the recurring relationship between them. I’m Mark Stiving. Today, our guest is Patrick Campbell. Here are three things you need to know about Patrick before we start. He is the founder and CEO of Profit Well, which used to be called Price Intelligently. He’s co-host of the Pricing Page Tear Down and I love that show. And he has access to more subscription data than probably anybody else in the world. Welcome, Patrick.
Yeah, thanks for having me. I’m glad you’re a fan. We made it for pricing folks. And hopefully other people watch it too, because there’s not a lot of us out there.
Whether or not or not. So, a couple years ago, I was teaching Pricing for a living. And I got into this subscription thing. And I said, Well, I got to study this and figure, actually, to be really embarrassing. In class, people would ask me, how is this related to subscription? And I always say there’s no difference. So, go back to cars. Yeah. It’s always about willingness to pay a value.
That’s right, exactly.
But go back a couple of years. And when I decided I was going to get into it, you were one of the people that I constantly studied, right? I probably read so much of your material, seen so many of your videos. You are like a guru to me. Now, there are others too, but you are absolutely a guru. So, thank you very much.
Yeah, I am embarrassed to say that because I study so much still. So, I feel like you know, as they say, the more you know, the less you feel like you know anything,
The more you know, you don’t know. Absolutely. So how did you get into Pricing in the first place?
Yeah, it’s a good question. I actually had a little bit of a curious path to that because my backgrounds in Econometrics and Math, and so I did more like Econ modeling. And so, I worked for the government in the intelligence communities and at Google kind of doing that with, you know, numbers for some sort of outcome. And I then ended up working at a company that is a B2C. So direct to consumer company that was in the jewelry space as a startup. And they’re basically a competitor of Blue Nile. And I started working for them, it’s just kind of like an analyst, essentially. And one of the things that they threw to me was basically Pricing. And I was kind of like an entry-level plus kid at this point, so wasn’t a big salary wasn’t a big, you know, not a lot of confidence, maybe in me as much.
And so, it kind of started putting two and two together of, ‘Hey, this is something that is super important.’ And when we would make changes, we would see these big gains in revenue or losses, and revenue, depending on the change, but they gave it to some kid. And so, there’s probably a little bit of a disconnect here to jump in and, you know, care about it. And I kind of fell in love with it, because I think that I’m a big fan of, you know, what you were talking about in the intro there around, you know, getting to value and getting to kind of the essence of what matters. And I think Pricing not to sound poetic, but it really does get to the essence of what you’re doing as a business because you’ve created this value, and now you’re trying to find that exchange rate for the value. So, yeah, that’s kind of what led me to this. And, you know, I’m glad I found it. And I’m not just some boring salesperson somewhere, I guess.
Isn’t it incredible how so many companies don’t value Pricing? They don’t think it’s important.
I think it’s more interesting because you say importance there. And I think that a lot of people understand its importance. Like I think if you went up to anyone, and you were like, hey, like, do you think your Pricing is important? Like, no one’s going to say no, right? Because they had some class, you know, in school from someone like you who is like, ‘Hey, this is really important.’ I think what ends up happening is they don’t realize the leverage they get from it.
And I think that the reason they don’t, especially in maybe the subscription space, but also I would argue any business that’s relied heavily on the internet, which is now all of us, you know, you have this beautiful moment in time from kind of like 2001 to probably 2015, where, you know, costs of doing business just kept going down, you could ship more features, ship more stuff. And then all of a sudden, all these channels kept opening up. So, you were able to acquire more users at a cheaper price. You know, Google AdWords, a penny a click, you wrote an eBook that was kind of like just a blog post here looked at as a God just because there wasn’t a lot of content out there, these types of things.
And so, what ended up happening is you basically just had this phenomenon where you didn’t need pricing leverage, right. And what we’ve done, I don’t know if you’ve noticed this, I would be curious of your opinion is that basically, now that acquisition is not dried up, but it’s getting more competitive. It’s denser. We haven’t had a major new marketing channel since 2015. Or I guess Tik Tok will be the new one here at some point. But basically, we now have to look to things like repeat purchases or retention, or we have to look at things like monetization. And I think it’s just people are evolving, their business are evolving, and they’re going to the path of least resistance, which, you know, is a very human thing. So, yeah, I think that’s kind of my take on why it’s not a sphere, it’s curiously taken at that probably should be.
I was playing off the fact that you as a kid, were given this important role of Pricing. And yet, when you go talk to companies, they don’t have great Pricing departments and have great Pricing strategies. And you’re absolutely right, it’s so important.
Yeah, but you’ll notice when you get big enough, so I mean, you probably have seen this as well, with a lot of companies as soon as they reach, I don’t know, some it’s like 75 million, some of the hundred million, or they have multiple products. Suddenly, they’ll have someone dedicated to Pricing, they might not be called the Pricing person. But they’re kind of the one who’s in charge of it at least. And I think that it’s kind of funny how I think that threshold will come down over time. But I think in addition to that, I don’t know if it’ll actually be a Pricing department until there’s a lot more complexity, I think what ends up happening is it’ll sit under product, you’re sending it under marketing, kind of where it started as well.
I don’t disagree with that at all. And the thing that frustrates me about Pricing is that many companies think Pricing is how much am I going to charge for my product? And if you think about what you do, and what I talk about all the time, it’s really about the value and how do you put together the right packages? And how do you choose the right pricing metrics? And how do you choose the right market segments? There are all these really important decisions around value that I think of is Pricing. But companies don’t?
Yeah, it’s kind of funny, because I think it becomes the amorphous nature of value, right? That’s like a word, and I can’t touch it. Right? My price I can’t touch, I can be like, Oh, that’s $9. So that’s $50, or whatever it is. But what I like to talk about, and I think it’s a good mental model for people, you know, that the exchange rate metaphor I already started using, right, you know, your price is the exchange rate. Now, there’s so many things that can affect that exchange rate, right? Who you sell to, is going to affect that exchange rate. What you sell, how you package what you sell, the positioning, all these different things. And then, of course, the price, right?
So, you know, you and I have been on a similar journey in the past number of years of, you know, convincing people one that stuff’s important, but then also educating them on, hey, like, this is something that is not only important, but it has so many different levers that you should be treating this very similar to your product development in your marketing development. And I think what’s kind of fascinating is, it’s kind of like pet insurance. I think that you know, 10, 15 years ago, when you were, you know, told to get pet insurance, you’re kind of like, wait, what, what is this? Right? And unless you had a major issue, you basically didn’t know this existed, I must have told you, you should have it, right?
Now you’re looking at a world where, you know, pet insurance, like you wouldn’t have Fido without pet insurance, because you’d be a terrible dog mom or dad, right? And I think eventually, it’s Pricing. We’re kind of in the middle there. There’s a lot of people who are like, ‘Well, of course, I need to take this seriously.’ Of course, indigenous folks, like you, you know, preaching out there about, you know why this is so important. And I think we’ll eventually get to a point because it’ll just be so dense in the market that if you don’t have someone focused on retention, 24/7 and someone focus on monetization, you’re just not doing your diligence as a business owner.
Oh, yeah, spot-on, hey, let’s talk about language for just a brief moment since you use retention and monetization. I always use the words win, keep, and grow. And just because I find them easy, and I could say I’m fast and I want to make sure that the listeners who listen to me all the time, when Patrick’s in monetization, he’s actually talking about that expansion, or the grow revenue buckets, I assume that’s what you meant.
Yeah, it’s a little bit of how I look at my model to acquire, monetize, retain, right? So that’s, you know, the Pricing, got our models and our train where it fits with the subscription world because you know, acquire, conceptually, people are like my ads, my content, my sales team, etc. I think that there’s obviously monetization elements in there. And then monetize is not only the point of conversion and how they come in, but also how they grow at least in my mind and then retain. Yeah, it makes it a little bit because some of the monetizing there as well, but it’s about making sure that they stick around into the long-term. So that’s kind of how I think about it. So, the win, keep, and grow like the win would probably be the acquisition there. The keep would probably be the retain retention, and grow, and be monetized. So yeah, that’s the market, the Patrick, exchange rate basically there.
Yeah, exactly. So, there’s one more that I got to talk about, and I only do this because everybody I talked to that knows you, I say, could you please ask Patrick to stop using these words? I know you won’t. But I’m going to say it to your face if that’s okay.
That’s fine. I actually don’t know what this is. I’m surprised I’m ready to go.
So, you and I use the words pricing metrics and value metrics to mean the same thing. And I use those two words very differently. So, I think of a pricing metric as what do we charge for? What is our company charged for? Yeah, think of a value metric, as to how does my customer measure the value of what I’m delivering to them. And in my ideal world, my value metric and my pricing metrics are highly correlated with each other. But it’s so often I talk to people, and they’re using the word value metric, and I say, Oh, so you watch Profit Well, stuff. They’re like,
That’s awesome. Well, maybe not awesome. But it’s funny. So yeah, that’s interesting. I think I’m going to have to think on that one. Because I think value metric, like the way I would translate, like value metric to me, I think about that as ideal and like, there’s ideal value metrics. And there’s like, pragmatic value metrics. So that’s how I would square what you’re describing as the difference between Pricing and value. I’m basically bucketing all in one thing. And then there’s a usage metric element, because we’re in the world of subscription as well as SaaS.
And so yeah, that’s interesting, I think that comes from Jim Guyson. I don’t know if I’m sure. You know, Jim, are you? And then also from Scock? Yeah, I always get him and his brother because they sound and look very similar. And I was like, I’m going to get David or Michael, I’m going to mix them up. But yeah, from, in Boston, I can’t remember the firm’s name. But he always talked about the value metric in this way. And then I think it evolved from just like the past academic part into like, being a little bit different. So, I’ll think about that one. I think that’s more concrete as well. So yeah, we’ll think of it.
We like to go for truth, though, right, like, so whatever works better. That’s what we kind of focus on. And so, if we notice, for instance, that it’s better for us to, you know, like, people can, if they can grasp on pricing metric versus value metric better to mean, the whole concept of setting up how you’re going to charge, we would switch in a heartbeat. So, we’ll probably do a little micro-study on this and come out with what we’re going to end up doing.
Okay, cool. Let me know so I could see it.
Yeah, I’m cool.
Hey, let’s talk about some of the things that I always struggle with that I’m just curious about your opinion. What do you think of companies like, let’s say, Uber? Now, Uber is officially a subscription company, but they depend a lot on the same recurring revenue that all subscription companies are about? And you would almost call them, we’re just going to use a usage-based pricing metric. So, would you call them a subscription company?
So, there’s a couple of fun things to talk about there. So, for one, they do have a subscription now, so at least some of the revenue, from subscription, like a very pure subscription. I think of these as recurring revenue businesses, I think the evolution is going to go from one-time purchases to subscription purchases to recurring revenue businesses. And this is, you know, there’s obviously, transitions where everything goes back and forth, and things like that. But the reason is, because if I was in your shoes as like an economic analyst, or something like that I could actually look at, for a certain user, what is my like recurring revenue, right? And it’ll fluctuate depending on what’s going to happen. But what’s the revenue that I can expect from you on a periodic basis, and basically, all you’re doing, and I do think this is the future of most businesses, it’s just going to take a while to get there.
But I do think what’s essentially happening is, I am putting the onus of the term on for my customer to the business, right. So, the term is interesting, right, because there’s a lot of implications for monetization as well as retention. But for me, when I’m trying to calculate my recurring revenue, I’m not forcing that monthly purchase on my customer. I’m just measuring their usage, essentially, within a period, and then putting an artificial record of like, Hey, this is what our monthly recurring revenue looks like. And it’s not unlike most like cash flow models that already kind of exist out there. I just think we’re going to conceptualize that a little bit differently, as businesses go to this point of like, not trying to walk someone to an actual term, but basically just measuring what they use within a term.
It’s actually kind of interesting, because if you think about a coach is just like Uber, right? I want you to buy and drink coke every week. But wouldn’t think of them as a subscription business.
Well, I’m sure that they have, there isn’t the tie, the difference there is like I can’t measure it, right? Because you might get your coke from Kroger every single week or every single month. Or you might get it from, you know, the 7/11. Or you might get it from wherever. And so, they probably, if they wanted to put enough effort into it, they could model an actual recurring revenue like a model, I mean, the industry like Wall Street wouldn’t believe in the compounding nature of the recurring revenue or anything like that. But I think the difference is, Uber has like the actual connection to a high usage, so they can measure the usage perfectly, essentially. So, I think that’s kind of the difference.
But I think that as we get, you know, interestingly enough, as our billing systems get better, and that’s the biggest constraint here, basically, we’re going to be able to measure this more and more, and then with that data, basically make it so that we get to value in almost as perfect a way as possible. But I think it is what the future looks like, which means not having to tie you into a specific term, but basically saying, hey, like, this is what the usage metric looks like. And, you know, go on from there.
Yeah, it feels like going pure usage is going backward in some ways, not completely by any means. But in some ways. And one of the reasons companies or people like buying subscriptions is that we have a guaranteed price, right? I know how much I pay Netflix; I pay him this every month; I don’t have to pay him a different amount. If I watch more movies or a TV show 12 bucks, right? Leave me alone. And so, I think in a lot of cases, we like the predictability of the expense.
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I think when you’re talking about something like Netflix, if you think about retention, like, we always think about like features or value metrics, and in our definition, at least, a metric they should say, that correlate or amplify to higher retention versus lower retention, right. So, if I have a marketing product, all things being equal, let’s just say a generic marketing automation product. I actually don’t want to do users because that’s going to diminish the number of people there. And the higher level or higher value pricing metric is probably contacts, right?
So, when I look at something like Netflix, I don’t want to get in front of that usage. I don’t want to charge per movie, right. But I might have, you know, some sort of large bank of movies, you can watch in an unlimited manner. And then like this, plus, recently, they will move on, I might have these one-offs, where I can pay essentially, to get it sooner, right, I can pay for it to be within the first three months. And then from there, you know, I can go, so on and so forth. But I think we’re going to have more need for usage metrics that we’ve at least seen in the enterprise, there has been a softening of variable Pricing. Because there’s been more of importance, especially this year, given obviously, everything that’s been happening, that they want more of, like, I only want to pay for what I’m using, I don’t want to go by the SAP contract that has 4,000 seats. And I’m just going to renew the contract because 300 people are using it, but I’m going to have to pay for all 4000 a year. I don’t want to do that anymore. I just want to like pay for what’s needed.
And I think that that is going to outweigh the predictability like relatively soon as the accounting and DRP systems get better at being able to recognize this stuff. But I don’t think like you’re going to end up paying. I know that some people believe you’re going to pay per listen on Spotify, I think it’s a terrible user experience. I just don’t think that’s going to happen. But there might be some very consumptive or usage-based things like, hey, you’re going to pay for every squeeze of toothpaste, you know, Kindle like a black mirror, I don’t know if you saw that episode, or you’re going to pay for just the usage of whatever you’re using. And I think that’s better for the customers. I think inevitably we’ll get there.
So that leads me to the question, can you separate Pricing and packaging because it seems like They’re so tightly related and everything we’ve talked about so far.
Yeah, I think so I mean, based on how I would define the terms, I think that well, so price being, as it’s going to depend on how we define the terms here, like, in my mind, when I look at something like packaging, there’s a lot of things I can do with packaging that have very little to do with the actual number, right? So, I can move features around, theoretically, if you want to look at positioning around, not many people do positioning and packaging, so I won’t do that. But I can move things out to become add–ons.
There’s a whole host of things that I can do. But yeah, I would say that there are things you can do independent of Pricing or independent of each other with Pricing and packaging, that leads to essentially, you know, different optimizations. So, I think that you can work without each other. But there’s a lot that they rely on with one another. So, it gets a little more complicated.
I think I agree with that, in that it’s possible to do some things without really paying attention to Pricing. But I also think that once you start thinking about the two together, they become so much more powerful.
Oh, 100% totally.
And the third one that I would throw in there is market segments. Right? If we could start creating market segmentation and certain packages for certain market segments, now we really are capturing value.
Hundred percent. And I think that’s where you’re going to go. I don’t think you’re going to have pure dynamism anytime soon. But I think you’ll start seeing segment-based Pricing sooner than later wherein a lot of companies already do this, right? Like, obviously, massive retail giants, like hallmark, for instance, like Starbucks, like their prices are different across the country, depending on urban, suburban, you know, high density, low density, it’s a thing. But I do think that there’s going to be, there’s going to be a move to some dynamism, which means you might have, let’s say, 20 different plans, right.
But as a customer or prospect, I’m only ever going to see two or three, right? Because you’re going to somehow know and drive me to the right landing page, or based on some sort of recognition, you’re going to be able to see that I came from SEO versus from Facebook. And therefore, SEO, I know my LTV is better. So, I’m okay taking or my retention is better. So, I’m okay taking a little bit of a lower price. And now these types of things, but I think the tooling needs to get, you know, supercharged even to make this happen. But if we don’t dream about it, and don’t think about when it’s going to come or how we can do it with the tools we have will never develop the tools to make it.
Well, speaking of the tools we have, could you tell us about what is the base free offer that you guys give at Profit Well x price intelligently?
Yeah, we do. We have freemium, which I know is controversial in pricing communities. So, I actually was very against freemium when I became a bit of a freemium zealot. So, I’ve been on all sides of this issue. But we basically what we did, and since you have a pricing audience, I’ll go into a couple more details. And the normal just because it’s just not interesting to other people normally is that we just found the willingness to pay for the product was terrible, just terrible, right. And it’s an analytics product. So, you plug in your billing system, like Zuora stripe, Braintree whenever you’re using, and then we give you access to your subscription financial metrics.
And with that, we thought we were geniuses because we wanted a way to get better data, revenue data for our pricing product. But we also wanted, we also were talking to people who were like calculating these numbers completely incorrectly, like very large companies. And so, we thought we were smart. And then we did pricing research. And we discovered, oh, like people don’t like paying for analytics products. It’s a really tough industry to be in unless your niche or go upmarket, so we have the decision of we could do freemium, go upmarket, or go niche and was already niched with subscription companies. So that wasn’t really an option. And we chose the freemium or we could kill the product. But we chose the freemium round, for a lot of reasons. But what was interesting about it is that, you know, I always say this.
So, you probably heard this before, Mark. But basically, you got to treat it like a premium eBook. You know, it’s an acquisition model. It’s not a pricing model, not true pricing people are like, no, of course, freemiums for the pricing model. And yes, I get that. But it’s one of those things when you’re talking to people who aren’t even pricing properly, you got to kind of give them a little bit of a different metaphor.
Pause you for a second and then remember where you are seeing continue. But when I first heard you say the words, freemium is a customer acquisition model, not a pricing model. I love that, I still do. And the reason for that is because it changes your mindset, right? Because that’s what it really is. It’s really all about how do I go win customers who are going to pay me money?
Yep. Well, and it’s what it comes down to how like, what is the metric that the tactic is influencing, right? And this is why I’m a big believer with monetization, that you should really be looking at your revenue per customer, right, and you might measure that ARPU. ACV, ARPA, like a whole host of things. But I think that the big thing you have to think about with freemium is it’s opening the top of the funnel, so if it is up of the funnel, it is something that will influence your Pricing. But it’s not part of your pricing strategies core if that makes sense. It’s part of your acquisition strategies core. So, yeah, that’s what we ended up doing. And it’s been successful because we get two effects that come from it. One, there’s a network effect because every time we get more data, it goes into our algorithms of our pricing or retention products. And these are just things that makes them better.
But the other thing it does is it lowers our CAC, or customer acquisition cost quite significantly. And we were a little bit worried. And we did face some scrutiny with like very large companies, because very large companies, one hooking up their revenue data, like that’s, you know, tough in and of itself. But then in addition to that, a free product, it gets a little bit dubious, right? And I think we went from, you know, a new notice probably better than anyone. We went from a world of like freemium being a thing like freeware was a huge thing in the 80s and 90s, all of a sudden being this, like, well, if you’re, if it’s free, you must be selling my data, you know, to all of a sudden this world of like, no, no, there are other models besides ad telling data, like I can, you know, I can use this as an acquisition tool.
And so, yeah, so that’s been something that we’ve been on for quite some time, it’s worked out really, really well for us, especially given our market dynamics, which we have a low logo market. So, you know, there’s only about 150,000 subscription companies in the world. And that’s if you know, we’re being very generous, and includes media, subscription, Ecommerce, SaaS, etc. And when you’re in a little logo world, you have a requirement to get as many of those logos inside your sphere of influence is possible. And the best way to do that content as well as through, you know, some sort of freemium product. And so that’s kind of the path we took. I don’t know if we were at that crushing when we were coming out with a lot of that some post pocket. But yeah, it definitely worked out.
Doesn’t everybody pivot and figure it out on the way?
Yeah, lots of stuff the game man.
So, here’s what I like about your freemium model. I actually don’t think of it as freemium. the way I think of most things is freemium. Right? So, one of my favorite companies LinkedIn, true freemium, I sign up for a free account, and then maybe I pay them more money, so I get more access. But I think of your freemium as I get this free product, and then you now have the ability to look at my data and say, Mark, do you realize that you’re having a retention problem, let me come help you with your retention problem, you realize you’re having a payment problem, let me come help you with your payment problem. So, it’s almost like you’ve offered me this huge value up front. And then in exchange for that, I’m giving you the opportunity to find my problems for me. And so many solutions to my problems.
Yeah, the way we kind of look at freemium is just kind of two or three types, depending on how you want to cut it, you know, there’s the full free trial, which is kind of an access deal. Where you give 100 visits or 100 watch it per month, and then as soon as that person goes to 101, hopefully, it’s your target segment, it’s two to three weeks into the month, then you’re forced to convert or forced to wait until the next month. And that can be also feature differentiated, we’re doing what we call basically forever free, which is you provide a ton of value to the group you’re going after. And it’s not a smart strategy, unless you get a network effects from either data or word of mouth, etc., which, you know, thankfully, we get both, or you get what you’re talking about, we call it creating the requirements, right? Where we’re basically, you know, once you hook up, we have these triggers, and they’re not intrusive, you can still use the product forever for free and get a ton of value.
We have these different triggers of like, Hey, you see this number? Like, I don’t know if you know this, but that number should be this, you know, a lower number. And if you want that number to be lower, like click this button, and we can set up a call or we can get you hooked up to the product. Oh, yeah, it’s interesting. It’s definitely one of those things where I think if I had to do it all over again, which is always a dangerous statement, I think that we still would have gone freemium. But I think we would have gone about it in a little bit of a different, like, path, I think we would have gone enterprise first, not with the metrics product, but with the other products we knew were coming. And then we would have gone freemium, because it’s going, everything I’ve heard about going to market was kind of, you know, your segment selection, if you either want to go high and then come down, or you want to go low, and then go up, right?
If you want to go in the middle and kind of go out, it’s very expensive, because you’re just constantly getting nibbled at the edges of, you know, whole host of things, price packaging, you know, marketing, all these different things. And I think we kind of chose a logo up model, but we also had our price intelligently products, which is already up. Right, you know, it’s not the 50 bucks a month, you know, so it was one of those things that gets really interesting to kind of look back, but I think you know, at the end of the day, we’re doing well and so I can’t complain. Of course, these are all champagne problems.
Yeah, exactly. It’s okay. It’s okay. Patrick, this is just so much fun. We’re going to have to start wrapping up, though. But what’s one piece of pricing advice you’d give our listeners that you think could have a big impact on their business?
Oh, great question. Pragmatically, the pricing metric, I’ll use your terms on your podcast, I would say, that is probably the most powerful thing you can do. If you get that right, I’d like to say, to get that right and get everything else not completely wrong, but still a little wrong, you’ll be okay. But I think that even more pragmatically, maybe I’m preaching the choir here because of your audience base, make sure you have a process, make sure you have a pricing committee. It sounds so like condescending and pedantic because you’re like, well, I don’t need a committee, right? But pricing is, you kind of alluded to, it’s at the intersection of important and uncomfortable. And whenever you have that happen, those are the things that get de-prioritized inside an organization constantly.
Or, you know, you didn’t talk to Joe in sales. And now Joe is going to make you do another eight weeks of conversations in order to implement something that you just have all the data on, right. But if you have that committee, and it’s made up of the main stakeholders, or the main troublemaker they like to say, but you also have a bit of a process and agreement that like, Hey, we’re going to make changes every three months, not raising prices, necessarily, but changing something about the monetization. That tends to be like the thing that separates companies that make this core competency versus those who don’t. So that’s probably the big thing besides that metric.
Yeah. The other reason I love the idea of the committee is like pricing touches, finance, and sales and marketing and product management and engineering. Everybody in, oh executives, don’t forget them. Right? Everybody in the company, cares about Pricing, and has an opinion. And if we don’t have an opinion, we’re never going to make any progress. Or if we don’t have a committee, we’re not going to make any progress.
Totally. And the troublemakers are the biggest thing. That’s the biggest thing I learned because early on as like an external company coming in, you know, helping people with Pricing with our software and our expertise. It’s like, it’s one of those things where you don’t realize, like, Oh, it’s the data, the data will like, guide us. And yes, we’re going to have to make a decision, because the data is rarely like, you know, picture-perfect. But I made a mistake where, you know, we went and we were like, cool, we’re going to implement and then we never included, you know, the guy’s name was Joe. And he was the head of sales. So, I referenced him all the time. He doesn’t know that. But and he, you know, and I thought he was just being a jerk. But it turns out, I was like, well, you know, he’s worried about his numbers, he’s worried about his job.
And if he feels like this isn’t going to work out, because his sales team isn’t going to be able to hit their numbers, that affects him a lot, right? He didn’t necessarily have like the best, like, arguments against the change. But he wasn’t involved in the process. So, I would also probably be uncomfortable if that was that. I felt that that was that big of a change. And I wasn’t involved. And I was the one who had to implement it. So, this is a really good lesson where I don’t think you know, the VP of Sales, or the head of sales should be the decision maker. But they should definitely be in a room that should include product, finance, you know, customer success if you had marketing, of course, and these types of things. Yeah.
Nice. Patrick, thank you so much for your time today. If anybody wants to contact you, how can they do that?
Yeah, so LinkedIn is great. I post a lot there. And I’m also at email@example.com. So, feel free to hit me up there as well. Just like Mark we write and talk about this stuff a lot. So, you know, hit us up if you have any questions to kind of start that journey and start that conversation.
Awesome. Episode 92 is all done. To our listeners, would you please leave us a review, I promised to read them. Rws_01 left us a review titled ‘Subscription pricing excellence.’
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Mark is a pricing expert who helps companies understand value, how to create it, communicate it and capture it. He has a PhD from U.C. Berkeley and an MBA from Santa Clara University, plus 25+ years pricing experience. As an educator, speaker and coach, Mark applies innovative, value-based pricing strategies to guide growth and increase profits for large and small companies.