Sales Pipeline Radio, Episode 341: Q & A with Dan Balcauski

By Matt Heinz, President of Heinz Advertising and marketing

In the event you’re not already subscribed to Gross sales Pipeline Radio or listening dwell each Thursday at 11:30 am Pacific on LinkedIn (additionally on demand) yow will discover the transcription and recording right here on the weblog each Monday morning.  The present is lower than half-hour, fast-paced and filled with actionable recommendation, greatest practices and extra for B2B gross sales and advertising professionals.

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This week’s present is entitled, “Trendy B2B Pricing Finest Practices“.  My visitor is Dan Balcauski, Founder and Chief Pricing Officer at Product Tranquility.

Tune in to:

• Discover why pricing is usually neglected and underestimated in B2B advertising, and the way it may be a vital think about enterprise success.
• Rethinking Freemium: Perceive the restrictions of freemium pricing in B2B SaaS and why a free trial strategy is usually more practical. Uncover why freemium can appeal to the incorrect buyer segments and distract from constructing a product that actual goal clients are prepared to pay for.
• Unveiling the Idea of Pricing Equity: Delve into the notion of equity in pricing and its affect on buyer notion. Discover the significance of contemplating private and social equity, together with the position of voice and selection in making certain buyer acceptance of pricing modifications.

Watch the video, pay attention in under and/or learn the transcript under.

Matt: Welcome everybody to a different episode of Gross sales Pipeline Radio. My title is Matt Heinz. I’m your host. We’re right here dwell Thursdays at 11:30 Pacific 2:30 Japanese. Thanks a lot for becoming a member of us as we speak. We’ve been darkish the final couple of weeks as I joined my household down in our annual journey to San Diego, however again and again within the saddle and excited to be right here.

In case you are catching us dwell in the midst of your workday, thanks a lot for making us a part of your day. In the event you’re watching or listening on demand, very a lot admire you being a part of this, each episode of Gross sales Pipeline Radio previous, current, and future all the time obtainable at salespipelineradio.com. I’m very excited to have with us as we speak, dwell from sweltering Austin, Texas, the founding father of Product Tranquility, Dan Balcauski. Dan, thanks for becoming a member of us.

Dan: Nice to be right here, Matt. I’m excited for our dialog and thanks to anybody who’s becoming a member of us dwell in the midst of the workday. I admire it.

Matt: Completely. Properly, look, I don’t have an MBA. I didn’t go to enterprise college. I didn’t actually research enterprise, however I, I’m aware of these 4 P’s that we discuss in advertising endlessly. And I really feel like in B2B, we’ve turn out to be fixated with promotion as actually the first B2B advertising operate. Your small business actually focuses totally on pricing. And I really feel like it’s a misplaced artwork oftentimes amongst entrepreneurs and one thing that we don’t actually take significantly and don’t suppose strategically sufficient about. So begin by introducing individuals to you, your background, after which we’ll get into it.

Dan: Completely. Properly, I utterly agree. I feel it’s a, effectively, perhaps not misplaced artwork. I feel it’s a constructing artwork, , in a lot of the way in which that product administration has constructed into itself into an precise reliable observe over time.

I feel pricing is on that very same journey. And I see the constructing blocks day by day, getting us nearer and nearer to that. However, , I spent my whole 20-year profession in software program. I began extra on the, we’ll name the worth creation facet and worth seize facet at first as an engineer and engineering administration.

Finally, I turned far more fascinated by how our merchandise created buyer worth and changed into {dollars} and cents for the enterprise than the person bits I used to be transferring round within the software program. And this curiosity led me to pursue my MBA. I didn’t notice it then, however I used to be fairly fortunate with pursuing my MBA.

Kellogg was a well known for its excellence in advertising. I didn’t discover out till very lately, only a few MBA packages have programs in pricing, so I acquired my theoretical grounding and pricing there and acquired thrown into the pricing world, instantly in my internship the place firm very profitable Silicon Valley startup I used to be working for, they’d a query on CEO’s desk of ought to they do a freemium strategy and requested me to assist them determine it out at TLDR. We would get into it later, however undoubtedly don’t suggest freemium for any of our listeners. So we’ll put a pin in that. Perhaps we’ll come again to it later, however , over time spent extra time on the worth creation facet and product administration.

And also you’re proper. Like there have been product advertising at these firms was ostensibly answerable for pricing, however they might come to me and be like, effectively, I’ve acquired to do that pricing factor. I don’t know what they’re alleged to do. Like it’s possible you’ll, you’ve acquired some background on this, proper? Might you assist?

Between the theoretical grounding and enterprise college by MBA internship. After which the opposite product entrepreneurs being requested to do that evaluation. I don’t actually know what they need to be doing right here. Received my toes moist on, on that facet of the factor. So now I that’s all I do is assist founders and CEOs outline pricing packaging for brand new and present companies, serving to them make sustainable pricing practices that assist them be worthwhile and function many shoppers as doable.

So instantly a LinkedIn profile, greatest observe. In the event you look them up on LinkedIn simply “Balcauski”, simply his final title, you’re going to see his headline underneath his title says “I dispel B2B SaaS pricing illusions”, which begs the query:  What are some illusions of B2B SaaS pricing? I imply, we are able to discuss greatest practices. Let’s discuss dumpster fires first.  What are a number of the issues that individuals get incorrect, in a well-meaning method or in any other case?

Dan: I feel the primary one is in terms of SaaS pricing, most executives suppose that what you cost determines your success.

In reality, who and the way you cost determines your success. So usually these conversations with individuals right here who do pricing, they wish to discuss, “okay, ought to our value be $19 consumer or $99 consumer?” Ought to it finish in fives and nines? That’s all very fascinating, but when I have been you, I’d spend most of my time on what the worth tag goes on and who I’m promoting it to and far much less time on what quantity truly goes on the actual price ticket? In order that’d be one. I may listing off some extra if you need.

Matt: Let’s go, let’s get at the very least another. Completely. Yeah.

Dan: So I feel the opposite factor is you don’t actually have a selection of whether or not you’ll have a pricing dialog together with your buyer.

The one determination you get to make is when you’ll have that dialog and let’s, for the love of God, hope it’s not your poor gross sales rep while you simply launched the product and he’s having preliminary conversations attempting to promote the product you simply invested tens of millions, if not tens of tens of millions of {dollars} into , that’s the primary pricing dialog you’re having.

So, I extremely suggest as a lot as you possibly can entrance load the pricing dialog. Yeah, I’d put the cart all the way in which behind the horse and let’s begin with pricing as a method to assist decide what we should always construct within the first place. Let’s not wait till we’ve one way or the other– in some unspecified time in the future, Pricing and packaging acquired slotted into the advertising launch plan sequence of like, okay, effectively, we’re 30 days out from launch.

So now we’ve acquired to determine what our pricing and packaging seems to be like. Completely not. It ought to have been there from day one, as a result of ultimately you’re going to must have these conversations together with your clients. So why not get it out of the way in which upfront, actually perceive what your market is prepared to pay for earlier than you make investments tens of millions, if not tens of tens of millions of {dollars}.

Matt: Properly, in pricing has to have context, proper? Like whether or not I cost $10,000 or 10 million {dollars}, these are very large variations in numbers, however just like the context of like, what am I getting? What’s the worth? What does that imply? Assist me perceive how to consider the quantity, however then the important thing pillars of the context behind justifying the fitting quantity.

Dan: Yeah, so I feel there’s a few totally different dimensions there. The primary is that clever value administration follows from clever worth administration. I’ve an general mannequin I exploit for SAS pricing. It’s known as The Providers Mannequin stands for the 4 elements of the mannequin: segments, worth, competitors, and technique.

We’ll contact on these first two components. Trigger I feel they’re extremely related to what you’re speaking about. So the primary is that we actually, in any pricing train, and also you’ve acquired an viewers of entrepreneurs, so I’m positive they’ll admire this. We actually want to start out with buyer phase.

Buyer phase is crucial. As a result of clients in several contexts will worth your product in a different way. They may even have totally different aggressive alternate options obtainable to them. They may rank order, totally different worth drivers of your product. So perceive they are going to have totally different constraints that dictate what’s, and what’s it was not possible.

What’s inflicting them friction of their present setting? So we’ve this on a regular basis, proper? If, I, am on a drive throughout nation, I cease at a gasoline station, I purchase a bottle of water, that bottle of water goes to have a distinctly totally different worth to me than if I’ve been strolling by way of the Sahara desert for the final two weeks and somebody tries to promote me a bottle of water, that water can have a distinctly totally different worth and value I’m prepared to pay relying upon that context.

Matt: You introduced up earlier this concept of presenting value and doing it earlier. And I feel in the event you discuss to a whole lot of salespeople, that may be a very worrying dialog. I feel there’s a whole lot of concern about citing pricing in a gross sales dialog. You’re throwing out a ton of the simply fact bombs round fascinated by the worth facet earlier than the pricing facet.

And actually, within the gross sales course of, in the event you can establish the worth, in the event you can establish amount and high quality, establish the worth, the impression that’s going to have and the significance that has to your prospect, it places the worth in and in context and places the pricing context. Why do you suppose so many salespeople have a concern of citing pricing? And the way do you assist mitigate that?

Dan: As a result of they’re working with none type of steering from on excessive, proper? So, after I was speaking about having pricing as early as doable. I used to be not even speaking concerning the gross sales competitors. I used to be saying, transfer that up. The product administration group, the product advertising group, the chief group that is considering growing a internet new product must be fascinated by their pricing and packaging from day one.

And we shouldn’t be leaving it to the tip salesperson. Now as we get into nuance right here, proper? There’s a distinction between what you may name product versus companies pricing and companies pricing. Each provide, in the event you’re doing consulting is custom-made. Proper. And also you, have a worth discovery dialog at a person degree with a, with a buyer, proper?

Since you’re, you’re constructing a custom-made providing for them. Going again to your level although, these salespeople, they’re not having a superb pricing time with pricing as a result of they don’t have robust pillars to face on. Proper? We are able to’t simply do value-based pricing. The pricing group or whoever goes off right into a closet someplace and does some ROI calculations after which springs it on the remainder of the org and says, “all proper, right here you go, gross sales group, go promote a factor at this value” as a result of they’re going to be ailing geared up, proper? As a result of it’s important to have value-based promoting, value-based buyer success, value-based messaging, proper? So, except it’s a real organizational mandate held on excessive that, we’re going to assist every little thing we do with a worth based mostly mindset, like they’re going to have gross sales groups on the market on their very own. Proper. After which what, what instrument have they got? In the event that they haven’t been given the assist that they want, the enablement, the coaching the foundational pillars of a strategic, a value listing, a superb, general discounting, technique that’s, that’s truly enforced. What instruments left to them? Is it depart value to the final minute after which low cost if pressed. So, so I don’t blame them.

Matt: Speaking as we speak on Gross sales Pipeline Radio with Dan Balcauski. He’s the founding father of Product Tranquility. In the event you haven’t already, try producttranquility.com. Don’t miss it. A number of nice content material. We’re going to must carry you again, discuss worth pricing steps to calculating a SaaS financial worth.

There’s so many nice matters we are able to cowl right here, however you talked about one thing earlier. I believed I heard you say this. Is that you’re anti freemium, is that proper?

Dan: I’m. That’s right.

Matt: All proper. So freemium is a highly regarded technique or tactic in a whole lot of SaaS firms. A whole lot of product led progress people like dwell on it. I’ve heard execs and cons on each side of this. I’d love to listen to your take. Why are you anti freemium?

Dan: Yeah, so to start with, consider, I cope with solely B2B SaaS at this level. So one false impression or mis construal round pricing is individuals attempt to undertake issues which will work in a B2C context right into a B2B context and so they fail dramatically, proper? So, this not solely applies to freemium, however individuals take into consideration AB testing pricing. And that’s an absolute nightmare. By no means do this in B2B. You’re going to have a foul time. I promise you, however you requested about freemium particularly. So, I feel that’s in all probability the primary false impression is persons are like, Oh, I noticed, , this shopper firm do it.

I noticed this sweet crush app that I’ve on my cellphone. They do freemium. So, I’m going to make use of it for my enterprise workflow software program. No, completely not. The higher reply, primary, anybody says freemium nearly universally, the higher reply is free trial. I’m completely an enormous fan of free trial.

And, and I feel free trials make a whole lot of sense. Free trials and freemium typically work underneath the concept that of what economists name software program, they might classify it as an expertise good. So, there’s search items, expertise items, and credence items. Search good, it could be such as you’re shopping for a can of Campbell’s tomato soup so I may seek for it on-line and know what I’m going to get, proper? If I’ve had that earlier than versus expertise good, proper? You may suppose like getting a haircut, proper? Like I don’t know till I’m finished with that. I can’t actually decide the worth of it. With software program our expertise and our perceived worth modifications as we use the software program and so a free trial actually helps that I do know you’ve acquired a whole lot of actually sensible gifted advertising people that take heed to this present. These people can do the entire net design, copywriting, messaging, work white papers, webinars.

However till there’s one thing primal, this hits our lizard mind. Once we see our personal information in a chunk of software program that actually modified our perceived worth of it and a free trial accomplishes that. However a freemium, uh, it, it simply doesn’t work for a complete lot of causes. I do know we’re operating out of time, so I’m completely satisfied to elaborate them.

Primary is, I feel it creates is a huge mirage. So to start with, what I see occur is that the those who find yourself on the free facet are basically totally different than you’re paying customers. I’ve seen this in extremists with some shoppers the place in the event you go on like Belief Radius or G2 or any of these evaluate websites, you’ll truly see a bunch of opinions that don’t make any sense.

It’s as a result of the those who for B2B SaaS firm is as a result of the opinions that they see on these websites are from are from customers. They’re from like households who’re utilizing it for some dwelling use case. However , they outnumber the enterprise use case 10 to 1. These persons are by no means going to purchase within the mannequin that you really want and so they’re polluting your go to market messaging.

So, after which additionally you’re filtering all of that consumer information into the product administration group. Generally they’re getting suggestions from a number of totally different channels. They, they’re not all the time checking who’s a free consumer, who’s a paid buyer once they’re getting suggestions and soliciting it and hastily, you’ve acquired a complete consumer phase that’s not your actual goal market. And in addition, I feel it’s, it’s this barrage, proper? Once more, very gifted entrepreneurs I’m positive who work day by day to get clients and there’s this pressure of, OK 99% of our consumer base is on the free facet. It’s actually arduous to do search engine optimisation, to do paid search, to do social, to get new clients. If we simply tried a bit bit more durable with our product, if we simply did XYZ, change this onboarding circulation, added this characteristic that the free customers say they need… it’s like, I’ll promote one toothbrush to each man in China sort of factor.

If I may solely convert 1% or 2% of these free customers, however it’s a mirage. And I feel it simply finally ends up losing a bunch of time, vitality, and assets within the group that’s higher spent simply constructing a product that actual customers who’re your goal clients can pay for.

Matt: Improbable soapbox on freemium. I find it irresistible. So many individuals simply put in feedback and I wish to return to one thing Jill stated earlier I feel reinforces your level right here, Dan, that, pricing is a part of the launch dialogue when finished effectively — it’s too usually a part of the final discussions versus type of earlier within the dialog.

And simply since you talk about worth and value up entrance doesn’t imply you may change and pivot, however to make {that a} core part of the dialogue versus an afterthought, I feel is necessary right here. In the previous few minutes, we’ve right here, Dan Balcauski thanks for becoming a member of us as we speak on Gross sales Pipeline Radio. He’s the founding father of Product Tranquility.

You introduced up proper earlier than we went on the air, this idea of pricing equity and equity– we are able to spend a complete different hour simply speaking about simply what equity means relative to cost, however perhaps unpack like why this has turn out to be sort of controversial of late. And what are your ideas on it?

Dan: We discuss so much about value differentiation. And so, persons are like, “effectively, no, everybody ought to pay a good, similar value”. The factor is, is that your definition of equity actually is much more influenced by custom than you notice.

So, one instance could be, I pay one value after I get on a bus, however a senior citizen pays one other value. And perhaps within the US that made sense at one level. However in the event you have a look at the demographic info now, just about 98% of the wealth is owned by individuals over 50 years previous. So why are they going to get low cost to trip the bus when our poor millennial buddies should not essentially doing that, proper?

The factor is, is as a result of that’s been a practice. It’s we’ve all the time had senior citizen reductions. And so, we proceed to. If I am going to Europe, I, they put bread on the desk and I eat it, I’m going to get charged for that bread. However within the US, they put bread on the desk, and I eat it. I’m not as a result of we’ve custom that the bread is free.

So, if I get charged in Europe, American visiting over there for summer time, I’m going to be upset. “That is unfair. I didn’t order the bread. You set it on the desk.” “Sure, however you ate it “and that’s social custom. So, I feel one of many issues that’s actually come up during the last couple of weeks, and we don’t have time to unroll the entire state of affairs, however anybody who’s been following the saga with Reddit has seen a significant equity downside with the response they’ve. They rolled out pricing modifications for his or her Reddit’s API and find yourself having a revolt on their fingers from the entire moderators who’re free customers of Reddit that take their free time to assist Reddit reasonable their dialogue boards and principally ended up having a full-blown revolt on their fingers.

So, one of many issues we undergo when it comes to equity is first we decide the result. All proper, right here’s this value. Is that this, do I decide this as personally truthful? If the reply is not any, then I am going to this different part of social equity, proper? So is there a precedent for it? And what was the method?

So, I feel that is actually the place Reddit fell down is without doubt one of the elements we search for after we’re judging social equity is voice and a selection. In the event you give your clients a skill to present a, give their voice, give their opinion about an upcoming change, then they’re more likely to simply accept it.

Even when the tip consequence finally ends up not being perceived as truthful so we undergo this this two-step strategy of is it personally truthful to me? Okay, if not, I am going to is it socially truthful? After which I begin trying on the course of. I feel it is a large motive why democracy works, to not get into politics However you we go vote our group didn’t win this time, however we are saying okay Properly, I assume the opposite group gained, 4 years later, however I had a voice in it And so we don’t find yourself having riots and , we’ve peaceable switch energy often. So, I feel the identical factor occurs in equity. So, if Reddit perhaps had helped carry alongside their neighborhood a bit bit extra, they might have prevented this absolute revolt on their pricing modifications.

Matt: A lot to unpack there. Yeah. We’re sadly out of time. This has been superior, Dan. Thanks a lot to your time, your generosity.

ProductTranquality.com. Verify that out. The place else, Dan, can individuals be taught extra about you?

Dan: Glad to attach with people on LinkedIn. Simply ship me a connection request. Let me know you heard me on Gross sales Pipeline Radio, so I can separate it from the LinkedIn spam, however thanks a lot, Matt. And if I needed to rename my firm once more, I’d make it simpler to pronounce. So, I apologize for that.

Matt: I feel it’s incredible. If I can return in time, I wouldn’t have named my firm Heinz Advertising and marketing. I’d have provide you with one thing much more fascinating. I feel Pricing Tranquility for a pricing dialog is incredible. So, congratulations in your success. And thanks once more a lot for being right here as we speak.

Dan: Thanks a lot.

Matt: Thanks everybody for listening and watching, listening and commenting.

As all the time, we’ll see you right here subsequent week. 11:30 Pacific 2:30 Japanese. My title is Matt Heinz. See you subsequent week.

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