Worried your SaaS offering isn’t priced right?
You’re not alone.
Pricing is perhaps the most difficult nut to crack in SaaS.
Let’s meet an expert in this episode of Closing Time.
Thanks for tuning in to Closing Time, the show for go to Market Leaders.
I’m Val Riley, head of marketing for Unbounce and Insighly.
Today I’m joined by Bill Wilson.
He is founder and CEO of Pace Pricing,
a B2B SaaS pricing consultancy.
Welcome to the show, Bill.
Hi, Val. It’s great to be here. Thanks.
So, Bill, I’ve been in this business since the birth of SaaS.
I’m not ashamed to say. I can remember pricing conversations,
actually debates really that I was having back in 2012.
Suffice it to say that this is a hot
button issue.
Why is pricing so challenging?
That’s a that’s a great question.
And you and I are, come from the same place there.
I’ve been in rooms with these conversations for a long time.
I think the biggest reason is that it starts to tinker
directly with the relationship between you and your customers.
And then I always feels a little bit uncomfortable.
So I think people naturally fear pricing changes or conversations
about pricing because it feels like once it’s set, it’s so delicate.
How can we possibly change it?
Save maybe a price increase?
But when it comes to actually having those conversations,
no one really wants to.
No one really wants to upset customers.
And I think there’s a lot of anxiety and fear built in to,
pricing and, and primarily. I think it’s just due to, just those
unknowns, just, you know, we scared we’re we’re afraid of what we don’t know.
And I think that’s what ends up happening a lot is people,
don’t know how people are going to react.
They don’t know how the market’s going to react.
They don’t know how their existing customers are going to react.
Is everybody going to churn?. They all these fears.
And so I think that’s probably the biggest,
the biggest reason it’s becomes a hot button issue is it becomes very,
everybody has an opinion on it because of that.
All that resonates with me.
Let’s start with the basics.. How about that?
Who in a SaaS company owns pricing?
Meaning what member of the leadership team
in an organization should be in charge of it.
Right.
Yeah.
I think there’s,
I think it varies depending on the company,
but at the end of the day, the decision is going to end
with the CEO probably, you know, depending on the size of the company.
So CEO is highly involved, head of product, for sure,
I would say is heavily involved in the deciding factors.
But yeah,
mostly what I see is there’s always there’s always the C-level like,
and usually the CEO is making that sort of final decision. Yes.
This is the model we’ll go with.
Yes. This is how we’re going to do it.
But the team itself is cross-functional,
and I think
that’s probably the most important piece is that you’ve got representation
from product, you got representation from marketing, customer success, sales,
sometimes operations like finance, like revenue operations, of course,
all of those people need to come together to make true
good, you know, data-backed pricing decisions.
And I think that’s the thing I see the most in these companies is there isn’t
that group, you know, the pricing function is delegated to one person.
And,
the, if you can build a group of people together in your organization
to actually start having conversations about pricing, I think that will put you,
streets ahead of many other companies.
And you’re putting product at the helm essentially,
because, if we’re building a feature.
Right, we need to know
how we’re going to monetize that feature, or else why build the feature.
Is that why product is kind of at the center?
100%, I think, product, it is one of those pieces
that, they’re taking in all the information from the customers.
They’re having those interviews. There’s, you know, getting all the data.
They understand the product from that level.
They’re taking in data from sales and marketing, all these places.
And I think
if they’re going to build something, then one of the top three questions
they need to be asking is,
how are we going to monetize this before they even build it?
And if we’re not,. I think we’re making a big mistake
because I’ve seen this before where, you know,
we’ll build out features and then we’ll go, cool, like,
where does this fit?. And that’s the wrong time
to have the conversation, because a number of, you know,
the monetization discussion
can even impact what the feature is, or how it’s implemented.
So I think that’s why I put so much,
you know, power in the, in the product person’s hand, not just because I’m
a product person, but, that’s where I think it lies.
Yeah.
So in your experience, tell me,
what are some things that SaaS companies typically get wrong about pricing?
I think the biggest thing people get wrong,
we’ve touched on this a little bit already is that they just don’t change it.
I think that’s probably the biggest mistake I see in pricing
is people not changing their pricing at all.
It can be years.
I, you know, it’s
not uncommon for me to talk to founders and ask the question,
when was the last time you changed your pricing?
And they either can’t remember
or they’ll be like, yeah, it’s it’s been many, many years.
I feel like you have a cheat sheet behind the curtain of every SaaS company
I’ve worked for.
Because we’ve always had, like, you know, these people are on the 2016 pricing,
and these people are on the, you know, the, the pricing
that’s groups of users as opposed to by user.
it makes me feel good that maybe it’s systemic
and it’s not just the organizations. I’ve worked for.
So thank you for that.
Ok, so we just covered what folks get wrong about pricing.
But how do you know if you’re getting if you’re getting your pricing right.
What are some indicators.
Yeah, it’s a good question.
I think, this one thing. I’ve noticed recently
is that at the very beginning, say you start off with a small,
you know, smaller contract mid-market, you know,
and say you’re charging per user, this is a classic example.
Right. Okay.
It’ll feel fine, right?
The value, the value, connection feels fine.
It’s like. Yeah, no problem.
We can have 50 users on it and we’ll move forward.
But as that account grows and grows and grows,
what I’ve seen is the slight deviation
over time between what they’re paying and what they’re getting.
And then all of a sudden they
it trips a switch where they all of a sudden don’t feel like it’s fair.
And so I think that’s one of the ways that you can tell,
if you’ve got pricing right, is that if the value correlation
stays with the account as the account grows?
Because if you do start to get that diversion, then you do.
That’s when you start to see churn.
And that’s that is the function of churn is like at one point
they saw value in the software and they were happy to pay you for it.
So what happened?
You know, and so I think, the big indication
that you’re getting it right is, you know, reasonably low churn,
high NPS scores.
And that value connection stays as, as customers grow, they still feel like
it’s fair, predictable, familiar, like all of those things.
So I think, some of those are big indicators.
So like value alignment is really, really important.
And then value capture is the other way.. You know, you’ve got pricing. Right.
So what do you mean by value capture is is that okay.
We are aligned here.
But are we capturing all the areas we can possibly capture.
And usually a good, hint for that for me is, you know, net,
you know, net dollar retention.
You know, well above 100%, which basically means we have good expansion motion
inside the packages.
And I think that’s another really great way to tell that if you’ve got
if you’ve got some things right.
So yeah, value capture, value alignment.
And then of course there’s pricing ability inside the organization.
Are we monitoring it.
What are we monitoring.
What decisions are we making about pricing on a on a quarterly basis.
And so if you got all three of those things working really, really well,
then I think that’s when, you know, you have, you have a pretty good handle
on your pricing structure. And, and it’s working.
I like the fact that you’ve mentioned things like NPS and NRR.
Because these are things that SaaS businesses are already measuring.
So you’re not asking us to go out and, like,
you know, reinvent the wheel and find a new metric?
You’re saying these are the existing metrics you probably have
that can give you an indication that your pricing is on target.
Oh 100%.
And I think that’s one of the biggest things
I really try hard to work with the like, let’s work with the data you have.
You know,. I think the biggest thing I see or the,
the only piece of data we find sometimes that people just don’t
have is usage data around, you know, features and functionality.
And that’s sort of, an eye opener for product teams.
And they usually go implement it almost immediately.
And, and once you have that, you’ve got all the makings to be able
to make all the decisions you need to really confidently, Nice.
Okay. That’s encouraging.
I’d like to switch gears to talk a little bit about the elephant in the room.
The dreaded pricing page.
This is something that I feel we in. SaaS are always, always iterating on.
It never feels like it’s done.
How do you approach the pricing page when you’re in engagements with clients?
Sure.
I believe the pricing page
is probably one of the hardest working pages on your website.
And so therefore I need I think it needs to be treated with the exact same level
of care and detail as, say, your landing, like your actual home page.
So for me, I look at it,
I’ve tried to figure this out over the years.
And I’ve come up with a way of looking at it
that tries to keep it as objective as possible.
So I look at it through a couple of lenses.
I look at, you know, pricing pages through, the idea of just clarity,
you know, how clear is it about who it’s for and what I’m going to get?
So that’s sort of like the first stage.
And then I look at, confidence.
It’s like, how well are we building confidence in the buyer as they are
navigating the page?
So those two things I think
are probably the most important because one, a confused mind never buys.
So it’s got to be super clear.
And people love to find people that look just like them
and go, oh, if it worked for them, it’s going to work for me.
And that builds confidence and trust.
And so if we’ve got those two things right, then we can start looking at
what’s going on in the packaging and how are we getting to action.
And I think that’s the other two pieces.. So packaging and action.
So I try and you know,
look at everything through those lenses as I go through the pages.
But, you know, some of the big things. I see that people miss, and I’ll just
highlight some of the ones that people miss all the time is the top of the price.
The top of the pricing page will just say pricing, or it will say,
you know, pricing for every size
company or pricing to fit your needs or something like that.
I would suggest that everybody knows they’re on a pricing page,
and we don’t need to talk about the fact that it’s a pricing page.
What I would do is I would revamp,. I would reiterate
your value prop, your best value prop should be at the top of that page.
Who is it for? What am I going to get?
And right underneath that, do as best you can.
At risk reversal.
So free trial, no credit card required.
30 day money back guarantee.
Trusted by thousands of companies.
A little logo, a little logo, a little logo.
You know, like whatever it takes to try and get people framed properly,
that this is the value I’m going to get and this is why you should trust us.
Those that’s probably the number one thing. I see that I flag.
And then after that it’s using language customers just don’t understand.
Right?
We will all come up with our own jargon and, you know,
like words concatenated together
that don’t really mean anything to anybody else but us.
And we’re so used to it in our organization that,
of course, it makes sense.
So we become blind to some of this stuff.
So I think I just try and tell people like clear over clever,
like don’t get cute, you know, you can call it whatever you want,
but just make sure they 100% understand it.
They’re not in your world yet, so they don’t understand
what clear sight is or whatever the thing is you’ve called it.
You need to.
You need to be really, really clear.
And sometimes it feels
rudimentary.
But I think that’s way better than the opposite.
So those are the big things I see, not surfacing
the most important features first in their, in their, in their grids.
Like what’s different is probably the biggest thing.
And then my last one that I absolutely hate is the giant feature grid comparison
on the pricing page.
Now everybody’s going to say that’s the point of the pricing page.
Why are you saying that?
I’m saying absolutely.
Let’s surface the most important things that differentiate these packages
for the various personas, the jobs-to-be-done, whatever way we are
slicing up those packages, and then let people who want to go deep, go deep.
So I have a button that says view all features or put it in each plan.
And when they click on it,
you get a lightbox and then it just stays there.
You can scroll inside it and then you can close it when you’re done.
And you’re right where you left off.
And I think that gets us a nice balance between the people
who are really just trying to make a decision and decide
if this is right for me
and those people who really want to go deep and compare it
because they’ve been looking at competitors or whatever it happens to be.
So I think those are the those are the things that I said a couple,
but that was like four. But
there’s many more.
Yes. I am sure that there are.
I mean, everything you said. I could visualize in my head.
You know how different companies, approach the pricing page, and it is.
It’s just it’s a never ending task.
I mean, we are currently doing some A/B testing on our page,
and I feel like that’s the page that you could A/B test in perpetuity.
And still find incremental wins because there’s so much happening on that page.
So that was really great insight.
yeah.
There’s never right.
Like it’s never right. It’s just optimal.
So how do we get it to be optimal for the time period?
Yeah. Got it.
Okay I think I’m going to use that phrase also.
So as part of that pricing page,
you know, companies come up with tiers.
Is there a way that you coach folks on
how to create those pricing tiers and, and, how they differentiate them?
Yeah.
I think, a lot of SaaS companies, especially when they first start,
they will think they need to do this sort of good
better best small medium large kind of packaging structure.
And you can almost see this when you go to a certain pages and you,
and you realize that
there’s not a lot of differentiation and they’re just reaching to, to have
the separation.
Now that’s fine.
And I think what it does, though is if people get into these conversations
going, well, what should be in the basic plan
and what should be in the mid plan?
We want everybody in the mid plan, we know that.
So let’s make sure most features are there.
But what do we strip out of the base plan.
And that’s to me it seems like the wrong conversation.
What I’d rather do is figure out, you know who it is we’re serving the best.
You know, how they get to value.
Those are the two biggest questions.
And we may not know that early on, but for reasonably seasoned companies,
you can you can do that journey.
And then really figure out what is the core job to be done
of our customer.
And, and I mean, the core, like the biggest job to be done.
And the nice thing about the jobs-to-be-done framework
is it’s kind of agnostic of a technology.
And so what that does is it forces this is forces us into this idea that,
this job is going to get done anyway.
They just happen to be choosing our software to do it.
And I think that’s the biggest thing.
So then,
if we can start thinking about that, it’s like, well, what are the things,
and just the things we need in our software that will solve that job,
like just the, the minimum, you know, minimum viable
packaging, I guess, to solve that particular job to be done?
And I think that’s how you should start, because if you start that way
now, things become a lot easier because
a customer now is getting full value out of every package they get.
They can solve the job they’re trying to get done all the way through.
Now, can they solve it any as many times as they want?
Maybe. Maybe not.
There could be limits on on various things.
And that’s how you can move people from left to right.
And then the other way to move people left to right after that is like,
what’s the next job to be done once they’ve solved this job to be done?
And then they can start to think about, okay,
what are the things that need to go in there?
Oftentimes it becomes like insight and analytics and workflows.
And that often gets people moving left to right.
It’s like, how do I do more of what I’m doing more efficiently?
And I think in B2B at least that’s the progression I see.
It’s like if we can do a really great job of jobs-to-be-done,
figure out what you know, what they need to do next, and then build
in efficiencies, efficiency, productivity and workflow across across the packages.
We can get people moving.
So that’s how I coach people to think about it.
Basically jobs-to-be-done first, it gives you clarity
and you don’t have to be fighting about, well, let’s remove this and remove that.
It’s more like, well, do we absolutely need this to solve that job?
It’s just a different question.
Yeah. That’s a great. I like that way.
I’m visualizing my own pricing page as you’re speaking, so this is excellent.
That’s great.
One more question I want to throw out at you.
Because a lot of folks have, a freemium.
And I hear in conversations
is that the approach to freemium, like, is kind of all over the place.
So in your opinion, how and when does a free tier really work?
And what do companies get wrong or right on their approach to freemium?
Yeah. I mean, this is a really big topic.
So, there’s the like you said, there’s lots of different ways of dealing with it.
I think what I’ll start with is. I see a lot of sales led growth companies
try and switch to almost like a product led motion freemium.
And I think one of the big things people miss there is around this idea of
how do I get to value as fast as possible?
Because if we’re going to get people signing up for free,
then we need to be able to give them something almost immediately,
like, how do we, what is the fastest path to value?
And a lot of these sales led organizations, there’s probably lots,
there could be lots of onboarding.
There could be, you know, data in ingestation that has to happen.
All these other things that really slow that process down.
And since it’s free, the risk
like the my return on investment is really not there
in my brain as a user, like I’m not going, oh, I paid you money for this.
I need to get something out of it.
I’m like, oh, I created an account like, that’s it, you know?
So like, we have to be able to get them to value as fast as possible.
So I, I feel like if you can’t do that, you need to stay away from freemium,
at least until you can do it.
Now, on the other side of that, where I think,
you know, it works really, really well is when you have built in distribution
mechanisms into your software, and that’s said is,
you know, someone signs up, and they can get to value
and they just naturally share it with other people.
Like, that’s sort of the the dream of product led growth is that,
you know, we have all these people that are using it.
It’s kind of like an extended trial.
They’re getting tons of value out of it every day.
And then eventually they’re going to convert or the sales
team is going to see that enough people from XYZ company are using it,
and then they reach out and do a bit of a fear
play to get them all on side and, you know, rolled into a, a plan.
So I think of the distributions built in,
I think you, it’s worth the investment.
Like it’s worth the investment to do it.
So one of my favorite examples of this is Notion.
Their free plan.
They talk about
they basically give you everything except you can create a thousand items.
I think they call it.
And this sort of goes against my,
I mean, it’s a clear word, but nobody really knows what it means.
So they have a little hover over there and shows you what it means.
So basically anything you put on a Notion page becomes an item.
And this is the only time they talk about it is in this free plan.
And basically you can get a thousand of them.
And once you hit up against that then you need to convert.
So that to me is more of the not free forever, but free for a while
till you get to value like until you get to that value then
and they figured that’s around a thousand and then then you move into into paid.
And so I think those are great ways of moving people
from left to right in, in, in sort of a freemium motion.
So, I’m not sure of that 100% answers your question.
It’s such a, such a wide topic.
But I hope that was helpful.
Well, that’s super insightful, because oftentimes we’re stuck
with, like, oh, it’s going to be 14 days, or it’s going to be, until you,
you know, want to do X, but in that example you gave,
it’s someone experiencing value at their pace over time.
And then they’re deciding, okay, well,
now I’m ready to pay for this because I have reached a point where
I would like to derive additional value and I’m willing to pay.
That’s just very insightful, because I feel like a lot of times,
the parameters are a little arbitrary.
Yeah.
I mean, free trial, like seven day free trial. 14 day free trial.
Really, really common,
you know, builds urgency to get to value all that kind of stuff.
And sometimes you can do it, but other times you just can’t.
So I, I’m a fan of usage based demos or uses usage based trials,
for that reason is because. I want people to get the value
and plus it gives us as a team a ton of more opportunities
to surface the features, the value, nurture campaigns.
You know, there’s a lot of things that can go into it while you have
people in the software getting value, maybe they’re just not there yet.
Bill, I feel like I could ask you a million more questions.
This has been so great for me personally.
And I think our listeners are going to get a lot of out of this episode.
So thank you so much for your time.
Oh. You’re welcome.
It’s been a it’s been a it’s been a fun time.
Thank you so much.
And thanks to all of you for tuning in to Closing Time.
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