#10: Pricing — alchemy/science? 🧙♀️
Paul Joyce on the rigorous art and science of managing pricing risks, Colin Nederkoorn on realizing the merits of traditional sales, and Jaleh Rezai on an extreme form of customer development.
Hi there,
Welcome to the tenth edition of The Baton. A fortnightly newsletter that brings you three, hand-curated pieces of advice drawn from the thoughtful founder-to-founder exchanges and interviews taking place on Relay and the interwebz. So, stay tuned!
In this edition, you’ll find instructive and inspiring pickings from the brains of Geckoboard’s founder Paul Joyce, Customer.io’s founder Colin Nederkoorn, and Mutiny’s co-founder Jaleh Rezai.
#1. Paul Joyce, founder and CEO of Geckoboard, delivers an arresting, 12-point snapshot of meaningful lessons learned from a decade of pricing iterations. (Source: Relay)
1. Pricing hasn’t gotten/gets any easier, even 10 years in.
2. Between value positioning, pricing psychology etc, it feels more like alchemy than science.
3. Despite that, our ASP is now 10x higher than it was when we started.
4. Pricing surveys, interviews etc can get you so far but the best way to learn is to try new pricing schemes.
5. We had to be prepared to take some risks in order to learn, the bigger the risk the greater the chance of busting out of local maximas, but that increases chance and magnitude of downsides also.
6. The best way to militate against the downsides of pricing risks is having the ability to execute quickly once we had made a decision.
a) We found that instrumenting pricing touchpoints and having the ability to rollback or change pricing quickly gave us the confidence to be bolder and take riskier bets.
b) This changes the attitude to pricing experimentation from something that needs to be substantially right, to something that allows us to learn.
7. Being able to segment our customers into different groups based on how they perceive and articulate the value they get from the product is probably the single most important thing we did.
8. We’ve used various approaches using customer interviews, mapping to JTBD, understanding their journey in the product and as a business.
9. These are shared around between the team working on pricing.
10. Based on that, we then punt around some ideas, decide on one, model the upsides and downsides then, tweak it again then push it live.
11. Of course, this is an iterative approach and isolating signal from noise is difficult.
12. So stay fleet-footed and on top of the data.
#2. Colin Nederkoorn, founder and CEO of Customer.io, confronts a host of his own notions around sales as a function and contemplates how sometimes going against the current can be utterly misguided. (Source: Colin’s blog)
It took us years beyond that early experience before we formalized sales as a function. Here are some hard lessons we learned by not doing things the right way early on:
- The More Complex the Product, the More Value Sales Can Provide
What we thought: We’d build a product that would be so simple we wouldn’t need documentation or people to answer questions before someone would buy.
What we learned: Our customers valued flexibility in the product so we made it more advanced. The more advanced our product became, the more people wanted to talk to someone who could help them understand their fit before buying.
- Bigger Companies Are Complex and Benefit from a Sales Rep
What we thought: Big companies would sign up and try the software, then they would put in a credit card.
What we learned: At a bigger company, a buyer often has to make an internal case for the purchase. A great sales rep can help the buyer articulate the business value of buying the product to their internal stakeholders.
…
- Go After the Customers You Want to Have
What we thought: We’d put the right words on the marketing site, and our ideal customers would arrive at our door.
What we learned: The world is noisy. Some of our best customers have come from word of mouth. However, I’ll be honest: about half of our customers today aren’t companies we’re specifically looking for. If the fit isn’t good enough, that can lead to frustration and bad experiences. Having a mix of inbound and outbound will probably help you build a customer base that more closely fits your ideal customer.
Don’t Make Our Mistakes
If you’re starting a new company and you don’t think sales can add value, consider some of the lessons we learned. There are places your company should innovate, and how customers buy your software is probably not one of them!
#3. Jaleh Rezai, co-founder and CEO of Mutiny, discusses how “being extensions” of the teams they were building for didn’t just help validate their hypotheses, but unearthed valuable unknowns that would have taken them years to arrive at. (Source: SaaS club)
So one of the things that we did at Mutiny that I think was extremely valuable that a lot of founders ask me about, is we were very very hands-on. So rather than building a product for 6,9, or 12 months, then releasing it and seeing if people liked it, we built the bare-bones and we approached the customer and said, ‘okay, here’s the problem we solve, do you have this problem?’ And if they agreed…then we would help them and say we have a platform and we would be really hands-on and walk you through this whole journey…
And we kind of needed to do that because the product wasn’t fully built out to let the customer do all of those things. So they needed a lot of hands-on help from us.
But the reason we purposely chose that strategy was that I knew personalization was really hard for people. And it was an idea that a lot of folks had talked about but for some reason most people don’t end up personalizing their sites. So clearly there were lots of obstacles in the way. And learning those obstacles first-hand, by being essentially an extension of their growth/personalization team would be really really valuable to our product development process.
To give you an example, we realized very early on the interdependence between analytics and making decisions around personalization. So for a lot of our customers, we thought, ’okay great, so just tell us which industry you want to personalize for and we’ll get that launched, but what we realized was that they actually had a lot of questions around where to start. They would need to pool a lot of data and understand what are the larger segments. Look at conversion rates. And make some comparisons. And that process was all done in Google sheets and it would take several weeks.
So from that we learned exactly what that initial interdependence is around being able to make a choice around personalization and we productized that. So very early on we built into the product UI all of the analytics around the different segments. And that was something that probably would have been years before we understood, had we not been so hands-on and just watching what our customers were doing manually and then thinking about, ‘okay how can we automate this for them and make their lives easier.’
Hope you enjoyed reading this edition of The Baton. We are trying to bring you the most nuanced insights from SaaS founders across categories. And we’d love to learn which SaaS subject would you want us to cover next/more of? Let us know? :)
Until next time,
Astha and Akash