Episode Thumbnail
Episode 87  |  40:30 min

The price is right: How to package for growth

Episode 87  |  40:30 min  |  06.21.2021

The price is right: How to package for growth

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This is a podcast episode titled, The price is right: How to package for growth. The summary for this episode is: <p>Your pricing strategy might not feel urgent, but it's the most impactful way to increase revenue overnight. As an operating partner at OpenView, Kyle Poyar specializes in pricing and packaging. He’s responsible for advising executive teams on strategies that drive revenue growth and lead businesses to dominate their markets. In this episode, you'll learn why pricing lays the foundation for growth and how to navigate the challenges that pricing adjustments bring.</p><p><br></p><p>Key Takeaways:</p><p>11:44 - How to Communicate Price Updates</p><p>19:22 - Data-Driven Pricing Strategy to Help Drive Revenue</p><p>21:05 - How You Can Involve Sales in Pricing Strategies</p><p>27:44 - Should You Make Pricing Visible On Your Website?</p><p>36:15 - Pricing is a Judgment on How Much Value You're Creating</p><p>38:59 - This Week's Micro-action</p><p><br></p><p>Want to explore Revenue Intelligence for your org? It starts here: <a href="https://www.gong.io/revenue-intelligence/" rel="noopener noreferrer" target="_blank">https://www.gong.io/revenue-intelligence/</a></p><p>Connect with Devin Reed: <a href="https://www.linkedin.com/in/devinreed/" rel="noopener noreferrer" target="_blank">https://www.linkedin.com/in/devinreed/</a></p><p>Connect with Sheena Badani: <a href="https://www.linkedin.com/in/sheenabadani/" rel="noopener noreferrer" target="_blank">https://www.linkedin.com/in/sheenabadani/</a></p><p>Connect with Kyle Poyar: <a href="https://www.linkedin.com/in/kyle-poyar/" rel="noopener noreferrer" target="_blank">https://www.linkedin.com/in/kyle-poyar/</a></p>
Takeaway 1 | 01:09 MIN
How to Communicate Price Updates
Takeaway 2 | 01:20 MIN
Data-Driven Pricing Strategy to Help Drive Revenue
Takeaway 3 | 02:02 MIN
How You Can Involve Sales in Pricing Strategies
Takeaway 4 | 01:44 MIN
Should You Make Pricing Visible On Your Website?
Takeaway 5 | 00:50 MIN
Pricing is a Judgment on How Much Value You're Creating
Takeaway 6 | 01:08 MIN
This Week's Micro-action

Your pricing strategy might not feel urgent, but it's the most impactful way to increase revenue overnight. As an operating partner at OpenView, Kyle Poyar specializes in pricing and packaging. He’s responsible for advising executive teams on strategies that drive revenue growth and lead businesses to dominate their markets. In this episode, you'll learn why pricing lays the foundation for growth and how to navigate the challenges that pricing adjustments bring.

Guest Thumbnail
Kyle Poyar
Operating Partner at OpenView
Kyle helps OpenView’s portfolio companies fuel growth and become market leaders.
Connect with Kyle

Devin Reed: Welcome to Reveal: The Revenue Intelligence Podcast, powered by Gong. We're your hosts, Devin Reed.

Sheena Badani: And I'm Sheena Badani. Revenue intelligence is a new way of operating based on customer reality instead of opinions. Making data- driven decisions based on facts instead of opinions or guesswork.

Devin Reed: It's made up of three success pillars; people intelligence, deal intelligence, and market intelligence, the things all revenue teams need and care about. Every week, we interview senior revenue professionals and share their stories and insights on how they leverage revenue intelligence to drive success and win their market.

Sheena Badani: You'll hear how modern go to market teams win as a team, close revenue with critical deal insight and execute their strategic initiatives, plus all the challenges that come along with it.

Devin Reed: Sheena, every once in a while, I don't know, once a quarter or so, I find myself looking for some new tools, new technology. Now, I don't always buy every quarter. But I would say around that time, around that frequency, I end up on a product page, which leads me to their pricing page. Now, as a marketer, I enjoy this process. I like seeing what's their homepage all about? How do they break down their product? How are they positioning? Then I have a not so fun experience, which is I get to the pricing page, and it's essentially, contact sales.

Kyle Poyar: Right.

Devin Reed: Now, I'm known to get flustered, I'm known to be a little divisive. Am I alone in this frustration, or is this something that you too are also like, I wish the pricing was just there?

Sheena Badani: Yeah. For me, it's really, really similar, and I just want to, ballpark, is this something that's going to work for me, or not. I don't expect to have the exact number and things may differ, but you want to know, are we in the right ballgame or not? Is this is something I should be considering for my team, or we're not today. I think more and more companies, in general are pretty transparent with pricing, and they'll break down the different tiers, the different capabilities that you get within each one, and I do appreciate that, because it gives me something to base some kind of decision if I want to continue this conversation or not.

Devin Reed: Definitely part of it is like, is this within budget? Or is this very expensive? My thought too, is pending on what that price is, is how much work it's going to take for me to buy this thing. There's that$ 10,000 rule that we all kind of know about, which is like you can get things purchased sub$10, 000 pretty easily. If something's$60, 000 I'm like, okay, there's a whole process, CFO is going to get involved. I just like to know that up front, and I've been pleasantly surprised with Riverside FM, I'll give them a shout out, our podcast platform, because I went to their website, and there was, your standard, basic, pro enterprise. They told me the price immediately. I was like, wow, this is very affordable. Went and got the company credit card, we bought it like a week later. Very simple. Now, the enterprise package did have contact us, which I did do, it did get me because I was like, it comes with some nice things. But then that's a whole thing, you're in the funnel, it's a process. Anyway, I'm sure we all have different opinions here, and we know we're all about reality. But we brought Kyle Poyar in who is a pricing and packaging expert to help explain why are there scenarios where you should have your pricing on your website, scenarios where you should not have your pricing on your website? I was really fascinated by that, having been a seller, and as I just mentioned, a buyer.

Sheena Badani: Exactly. We also talk a lot about the role of sales in this process of determining pricing, determining what's being shown on the website and more. I think there are some companies that are very sales driven and that's natural for them, and there are many other companies where it's maybe more of a product and executive and marketing decision, or some combination of those. But, as I think most of the listeners on this episode know, sales is closest to the customer, usually. Making sure that they have a seat at the table in these type of decisions.

Devin Reed: Closest to the customer and closest to my heart. That's what I actually thought you were going to say, is that sales is closest to my heart. Sheena, we almost forgot a big announcement.

Sheena Badani: That, we did. It's been a tough year, we've been apart and we have craved being closer together to our colleagues, our customers and more. That's why we're reuniting you. The deal closers, the coaches, the revenue leaders for the biggest bash of the summer. Guess what? We're inviting you.

Devin Reed: There it is. There's the Sheena I know. That's right. Celebrate, the celebrateon of the summer is back. It's a day of next level learning, real connection and serious motivation. Join 1000s of revenue pros who are coming together from all corners of the globe to celebrate your accomplishments, celebrating your grit, celebrating you.

Sheena Badani: Sign up today, and guess what, the event is free.

Devin Reed: Free 99.

Sheena Badani: Save the date, July 21st. You can sign up at celebrate. gong. io.

Devin Reed: See you there.

Sheena Badani: Kyle, welcome to Reveal. We're super excited to have you here at the show.

Kyle Poyar: Thanks for having me out.

Sheena Badani: To kick things off, and to give some context for the audience, Kyle is a partner at OpenView. He is specifically, I would call an influencer in the pricing world. I have heard about him from multiple folks, he posts a ton of amazing content and thought leadership around everything related to pricing. If you have a product marketer or pricing specialist at your company, ask them if they know Kyle, they will probably start shouting and jumping up and down and being super excited that you've listened to this podcast with him on it. Before we kick into it, how did you navigate your career and ultimately land on pricing and become a specialist in the world of pricing?

Kyle Poyar: Honestly, I stumbled into it, which is probably not the answer that folks are looking for. But I went to undergrad as an environmental studies and economics major, and did environmental science related internships all throughout college and then graduated in the recession and was realizing, wanted to get a good job where I was going to learn quite a lot about how decisions got made and how to really build a marketable skill set from a career standpoint. The consulting world called. I joined a consulting firm called Simon Kucher& Partners that happens to be the world leader in pricing and packaging consulting. Just fell in love with it and realized pricing is so strategic, yet so under appreciated at the average company. Most SaaS companies don't have anyone that focuses on pricing and packaging until they get to about 50 million in ARR. It's just fascinating. The combination of behavioral economics that goes into it, consumer or customer psychology, analytics, that becomes part of making good pricing decisions, just a really fascinating topic. Spent six years at Simon Kucher, and then have continued in my role at OpenView, working with our portfolio companies on pricing and packaging.

Sheena Badani: I think some of the most interesting career decisions get made opportunistically like that. I think if you had even asked me Devin or myself or anybody else, where are you going to be in 10 years? We would not have said where we are right now. Great place where you ended up.

Kyle Poyar: Exactly. Yeah, very happy with where I ended up. We actually have our newest portfolio company is called Encamp, and they're in the environmental space. The founder was actually an environmental science and econ major as well, and can finally put that degree to good work.

Devin Reed: In doing some research and prepping for today, I saw that you recently, I think it was a couple of months ago, started a newsletter called Growth Unhinged, and your social post alone, and some intrigue around you got me to subscribe. We'd love to hear a little bit about that newsletter and what motivated you to start it?

Kyle Poyar: Absolutely. I sit in an interesting role at OpenView, where I'm working with not only our portfolio companies, but broader companies in the SAS landscape around different topics around growth and scaling a startup, from zero to 100 plus million annual recurring revenue. A fly on the wall in working with companies is they think about, how are we going to acquire customers? How can we adopt elements of product lead growth, which is the buzzword of software in 2021? How do we monetize our products? I should take some of those conversations and the learnings and share them more publicly and create more of a community around best practices. I also tend to be pretty data- driven, looking at public companies and how they're performing or surveying SAS companies. All of my content tries to be practical in real life with a company while also bringing in outside data, evidence and examples to support it. We're a few months into the journey and the reaction's been positive so far. So, I have to keep doing it now.

Devin Reed: Congrats on early success. I saw you had 900 people register on the first day, which is saying something.

Kyle Poyar: Yeah, apparently there's some pent up demand for pricing content. You might be new to it, and I think a lot of people stumble into it. But once they get bit by the pricing bug, it's something that doesn't go away. Because really, every product needs to be priced, and everything you buy has a price on it. That's not some miracle of supply and demand sets a perfect price for you. There's actually people who get together in a room and make a decision around how much you should pay. It's fascinating how those decisions get made.

Devin Reed: In a previous life, I was a sales rep, usually at early stage companies, Gong included. I was always fascinated with the concept of changing the pricing and the pricing model. I always thought was interesting. But as a sales rep, you're not involved in those conversations too often, right? You're given a slide and some enablement and you're told to go to market. I do find it fascinating. I'm very much looking forward to hearing from you today. I'll say that the limit to my experience was early days of Gong, selling with our VP of sales, and we were in a small room, as most startups are, and he looks over, he's like, " I think we can raise the price." I'm like, " Oh, cool, what makes you think that?" He's like, " I don't know, I just think we can do it." We picked a number out of thin air, raised it to that much and just started going to market, and people paid for it. Also say I'm very excited, Kyle, to hear the right way to do it, since I doubt a quick passing conversation is the most strategic way to land on that number.

Kyle Poyar: It is not the most strategic way, but that it's something that comes up way more than most companies would admit. In fact, when I survey companies around pricing, the average startup increases price by more than 50%, from seed to expansion stage, and then another 50% from expansion to growth stage. Typically, companies are quite underpriced early on. Then it's actually fascinating because as a startup, you have so many things going on. You have a lot of hair on fire problems, you're responding to customers, you're fixing your product. Pricing is not normally the most urgent hair on fire thing for you to go solve. But the revenue impact of changing pricing, especially if you can increase price by 50%, and your customers are still buying, that's a pretty significant impact. But it's not the thing that seems urgent to go fix. What I argue for a lot of folks that are earlier stage listening is that, pricing might not feel urgent, but it's maybe the number one most impactful thing you should be doing right now. So, you've got to make it urgent.

Sheena Badani: Can you elaborate, why is it so important? Of course, for sales folks, that's how they're getting their commission for a revenue leader for the CEO, those are the targets that they're setting for their company. But why should it be your number one or number two or number three strategic initiative?

Kyle Poyar: I'll walk through a few reasons. I guess, first off is the opportunity to raise price is pretty significant. The revenue growth implications of doing that are pretty major. When I've surveyed companies that have changed pricing, which is almost always a price increase in the startup world, 98% said that their revenue growth increased after they did it, and 40% said their revenue growth increased 25% or faster because of that decision. If you think about the number of things you can do as a business to grow by 25% faster, more than you're already growing, how many can be done relatively quickly, and without additional headcount on your team to go implement. Don't increase your cost of acquisition necessarily, or your cost of goods sold. Pricing is just the most powerful lever that anyone has. Number one is that revenue impact. I also would challenge companies to think about it in terms of being able to have a foundation to grow the business. You can only invest so much in acquiring customers, building a sales and marketing experience to attract folks, you can only build so much of that, insofar as you can pay that off with how much your customers pay. That's your CAC payback period, it has to be fairly healthy. If you're able to increase price by 50% and convert the same percentage of customers that you had before, all of a sudden, you can afford 50% more in sales and marketing to go attract more of the right customers. You can actually build a business that is not only growing because of pricing, but allows you to fund future growth efforts, a bigger sales team, more marketing spend to attract the right customers. Actually, that's a foundation where all of a sudden, you haven't just grown 25% faster because of pricing, you've set up a foundation to scale 50%, 100% more than that, and it started by rethinking how you are approaching pricing.

Sheena Badani: On the topic of increasing pricing, I feel like it's kind of easy for a vendor to say, " Oh, we're going to increase price. Okay, sure, we're going to have higher revenue." But that has a huge impact on your current customers, and you have to now notify them that price is changing. Assuming that they're going to continue to renew, so then that's how you'll hit that 25% growth or whatever number you're aiming for, what is the best way for sales teams, customer success teams, to communicate this? What do you need to be communicating to your existing base of clients?

Kyle Poyar: Well, I first off challenge that assumption. It's possible that you're going to go back and change pricing on your existing customers, but it's not mandatory. In fact, if you're doubling your headcount, or your customer count year over year, that revenue that their new cohorts of customers are bringing in, is going to be much, much more impactful than the install base, after you look back at 12, 18, 24 months from now. You might find, if you're in that hyper growth mode, that it's not even worth it to go back to your existing customers, the juice isn't worth the squeeze. I try to bifurcate the decision. Does it make sense to change pricing? Then based on that, does it make sense to go back to your existing customers, and change pricing on them, or just the new cohorts of customers? On the new side, I'd say a lot of folks don't know how much they're going to pay for your product before you tell them what the price is, which gives you a lot of flexibility on how you approach pricing for those customers. Your existing customers already know how much they paid, and now it's a price increase. But for your new customers, essentially, this is just what the price is, going forward. I always want to test pricing on new cohorts of customers that don't have these preconceived notions, haven't been told what to expect, and you can see what that impact looks like, and that derisks or gives you a lot more confidence before going back to the install base. Always do that first. If you are going to choose to go back to your existing customers, there's a few things I like to do that makes the price increase go over a bit smoother. The first is generally to validate, " Hey, is a price increase the right strategy, or is there a different approach we should be taking? Should we charge on a different metric? Should we charge on usage, rather than just users? Or maybe should we offer different packages, where there's a more expensive enterprise edition that we can go upsell customers into at a higher price, rather than charging more for everyone?" With that in mind, you might also think about where are customers in their journey with you, and do you want to take a one size fits all approach or be more segmented? You might say, hey, there's customers that are at risk of churning based on their usage patterns, and there's also customers that are seeing a ton of value and would be more than willing to pay more for the product. Your price increase strategy on that install base can be more segmented and personalized based on where your customers are. You don't necessarily need to take the same exact approach with everyone. Then the final thing I'd say is, pricing changes with your customers can be also a way for you to talk about all the great things that you've done over the last 18, 24 months, what features you've released, investments you've made in them, and what investments you're going to continue to make. While it's, at the end of the day, a pricing conversation, I want it to also be a conversation around value and helping customers see the innovation that you're able to provide, because many folks especially... We're in B2B software, right? If you're selling to a business, that business understands that if they're paying more for a product, they're okay doing that if they're going to see more value over time. That's something that I think a lot of companies forget, they think it's just about price. It's really about price versus value.

Devin Reed: Sticking with the pricing status quo feels most comfortable. It might be nerve wracking to consider raising prices that could cause churn or lowering prices and losing revenue. That's why I want to bring up this stat from Bain& Company, which they found by surveying CEOs, CROs and MVPs of sales, at over 1,700 B2B companies. They found that 85% of respondents said that their pricing decisions could be better. That includes areas like discounts, raising prices, and having the tools they need to know if their decisions are actually working or not. How can sales leaders and company executives gain confidence on their pricing decisions? Well, the survey also found that 26% of the companies use software that helps them make data- driven pricing decisions. In turn, these companies had the most successful pricing strategies to maximize revenue and minimize churn. The company's using data to drive pricing strategy knew what their reps were saying, and even more importantly, what their customers and prospects were saying about their pricing structure. This allowed them to see when pricing models like discounts, or upsells, were successful or not, and implement the successful strategies at scale. Like Kyle says, they know whether the juice is worth the squeeze when it comes to all things pricing. How does sales play a role in this? I don't mean the activity of sales, but the sales department, the sales lead, are they typically part of this decision making process? Are they involved in maybe, what we call it, the tiger team, let's try to go into market on a small scale, see how its received, or maybe a third option that I'm not even thinking of?

Kyle Poyar: Well, a lot of times the way sales and what is involved is the way you talked about at the beginning of, they're told at the end, hey, here's the new price list, here's some enablement, here's a one pager on it. Take this training, otherwise, you got to start selling at this new pricing. Then folks wonder why it's not adopted very well by the sales team, or why there's discounting behavior, or why people aren't consistent. But when you go back and audit the recordings later on. I like to involve sales much earlier, and starting with even just understanding what you want to fix about pricing. Sales is having all of these conversations with customers, and getting feedback on pricing and just about every one of these conversations. So, you should be listening to the recordings on how is it brought up, what are the questions that customers typically have? What objections are raised? Then also interview the sales team of what concerns they have? Because if you can get sales as input at the beginning, you're going to come up with a better answer in the end, and have a better chance of folks actually implementing it in the field. Then, when you do have pricing that you want to go move forward with, I typically like to pilot that pricing with a handful of reps before implementing it live across everyone. I typically look for forward thinking reps that are open to a new approach, typically have been higher performers, that can sell new products, that can really wrap their head around these changes. Then what happens in some of these successful cases is that the new reps are doing really well with the new pricing, they're achieving higher deal sizes, they don't have a ton of pushback, and all of a sudden, all the other reps are actually asking, " Hey, when are we going to get access to this new pricing as well?" When you pilot it, you can be surprised about pricing changes being a pull from the field and generating excitement, versus having to constantly fight and getting the reps to adopt it.

Devin Reed: You mentioned it though, anecdotally, yeah, the sales team wanting to get more involved, wanting to adopt this as a great sign. Is there any other way that you typically measure the success of the rollout of a new pricing strategy?

Kyle Poyar: Well, success is going to depend on the objectives a company has, with the changing pricing in the first place. You might be trying to increase your average contract size, in which case you're looking at what's the change for these new pricing versus the old pricing? You might be actually trying to speed up the sales process and close deals faster. Some of the things I consistently look at, though, are win rates. Does your win rate from qualified opportunity to close one deal, has that been negatively impacted? Is that not impacted at all? Is that positive? Then looking at, what are the win- loss reasons? Are you losing deals because of price more frequently, are customers pushing back more than than they were before? Then finally, at the realize price versus your list price. You might say, hey, for a 50 user deal, here's what the list price is, and here's what the discounted price is. But the reality is that the deal might actually be sold for 40%, 50%, 60% under what the recommended price is. You can tell whether the folks in the field are actually adopting the new pricing based on how close those deals are coming relative to where the price is supposed to be.

Sheena Badani: We're in a pretty rapidly changing world. There's constantly new products, there are even companies that are showcasing the pricing that vendors provide. Buyers actually have access to more and more information. In addition to maybe that, what other kinds of trends are you seeing from buyers and how should that influence how folks who are focused on pricing actually price their products?

Kyle Poyar: It is fascinating, and first thing is, people are doing a lot more research online before they're getting in touch with sales. I think that's been happening for a long time. COVID potentially even accelerated it. One of the most important things that buyers are looking for is information around pricing, and they're finding it in many cases, whether they're talking to peers who bought software before, they're looking at peer review sites. They're even messaging forums and private communities, where folks share this kind of information. If you're a vendor, and you were not transparent at all on your website with pricing, you might actually be missing out on an opportunity to both get that traffic, which is a very high intent traffic. Pricing pages tend to be the second or third most visited pages on a company's website. You're missing out on all those people who want that information, and you're not able to present it in the right light, where buyers are all of a sudden searching for information, and then they find it about you on someone else's website, rather than on your own website, in a way that you want to position it. That, first off is doing more information. Then I'd say, the other thing that's come up loud and clear is that end users, rather than just executive buyers are becoming more important in purchase decisions, and that's happening at organizations large and small. That's even what's fueling the rise of this trend called product- led growth, where end users might even adopt a product, start to roll it out with their team, and then tell their boss what to buy. If I think about my experience buying software, or my portfolio company's experience buying software, it's not normally the C- level person going out, looking at vendors, creating that long list of companies to reach out to, having the initial conversation, there's someone on their team. It's more and more important to actually appeal to the end user or that team lead, than just that executive buyer in an organization. I think that many organizations forget that and they don't have a strong enough end user value proposition in addition to their executive value proposition.

Devin Reed: I feel like you've pretty much answered my question, but I'm going to be very straightforward, because this is the question I was living to ask you. Should companies put their pricing on their website visibly?

Kyle Poyar: Well, I hate using the answer, it depends. That is generally the answer, but my-

Devin Reed: I had a feeling that was coming, but I wanted to ask you.

Kyle Poyar: My argument is that when in doubt, be more transparent. Yes, some of that is maybe just what I want, as a consumer. But realistically, I think it allows you to reach people earlier in their research process, and own that customer lifecycle, that customer journey. It allows you to position pricing the way you want to talk about it, and it acts as a really good qualification signal too. You don't want your team to be wasting a lot of resources on buyers that aren't qualified whatsoever, and reach out to do a demo, you spend 30, 45 minutes with them. All of a sudden, you get to pricing, and it's like phone call end, Zoom call over. This is just out of our budget. This is not even anywhere within range. It's a bad experience for the buyer, and that's a bad experience for your sales team that just wasted a bunch of time that could have been a lot more productive at qualified buyers. I think the final thing I'd say is that if you publish pricing, you get a lot of interesting data and signals back from the market. You can put analytics on that page, you can use it to generate buyer intent, you can have chat interactions with people on that page, who are more qualified buyers really looking at pricing, rather than just looking at your homepage or your blog. I'd say that, there's a lot of great ways that you can leverage that as a competitive advantage, and as a way to accelerate adoption that a lot of companies don't take advantage of.

Devin Reed: It sounds like the answer is yes. I agree with you, Kyle, because as a consumer, I want to know the price immediately, probably because I'm on Amazon all the time, I expect things to be visible and fast. To play devil's advocate because you said depends, what are the scenarios or what are the reasoning behind why you should not publish it on your website?

Kyle Poyar: Well, you don't have to spend very long with that enterprise sales rep before you hear some of the reasons. A lot of times, what feedback I get is that customers don't know the value yet. They have to be educated, they have to go through a demo, they have to walk through a business case, before they understand how much they should pay for your product. Which to me just seems like they're not really good at marketing, versus that's a solvable problem. But that is something that comes up over and over again. Then, I think there are some instances when a company hasn't actually nailed their pricing strategy yet. They might have multiple models for different customer types. Maybe they're experimenting with different models. It's a lot harder to do that experimenting, or changing pricing for different scenarios, if your pricing is public. Once your pricing is out there, there's an expectation in folks' mind of how much they're going to have to pay. It actually becomes really distracting for the customer if you start pitching different pricing models for them. You have to be at a place with your pricing where you're confident in it, in order to make it public.

Sheena Badani: Yeah, and I can see this would evolve over time where maybe you have very minimal information as your company grows and matures, maybe you have some basic information on how you price, maybe that grows into showcasing the different skews you have. Then ultimately, there's more full transparency around it, or there's full transparency for some skews, but not others. I think there's so many different variations of what transparent could look like for a company as well.

Kyle Poyar: Totally, there absolutely is. Going through that process can help you clarify how to talk about packaging and price points and the way you charge and your philosophy around it, in a way that connects with those buyers that you have. Because, when you want to make pricing public, even if it's not making everything public, you have to really distill it down and make it valuable and in a language that a customer can understand without a salesperson there to support it. I think that's actually a healthy process for a company to go through. They should have to do that with their pricing. They should not use sales conversations as a crutch, to not simplify.

Sheena Badani: Coming back to trends that you're seeing in the space, we're all familiar with traditional pricing models, which are seat- based or usage- based, license- based, what are some new and interesting pricing models that you've seen?

Kyle Poyar: I'm going to have to say, the usage- base trend, while it's been around for a little while, and I think people know about how AWS and Twilio charge, companies are taking that to the next level, and really going, pay as you go or consumption- based pricing at the low end. It's really a huge phenomenon over the last couple of years. It's another thing where I'd say that trends have played out, such that companies now have a ton better visibility into how their customers engage with the product. Usage- based pricing used to be really hard to do in the past. Now, there's the technology that makes it more readily available. Then from a buyer perspective, you don't necessarily know how much you want to adopt, how many people need to log in, and with COVID, you might have even had uncertainty around what your business is going to look like. That ability to pay flexibly based on exactly how much you consume is a much more attractive value proposition, I think now, than it used to be a few years ago, where everything seemed very predictable. We know our headcount, we know what our business is going to look like, we want to lock in our budget for it. We're just in a different environment now. I'm seeing so many companies launching consumption- based pricing models that had never had it before, and those companies performing super well, which is making it interesting for other companies. Another thing I'd call out is free offerings. This is again, I think the audience in this call is going to be a number of sellers who will probably hate me for pointing this out. But, when we look back at COVID and the lockdowns last year, one of the first ways that companies responded was they said, " Our demand just fell. No one is engaging in sales conversations anymore. We've got to do something to get people interested again." You saw companies launch free editions, maybe it was free for 90 days, free until October, until the end of the year. Many different campaigns around free. But what's fascinating is that those campaigns did so well for different companies, that they decided to make them permanent or introduce fully free versions. Even companies like GoDaddy, which is'90s era hosting business, not a freemium SAS company in the traditional sense, they tested freemium as more of an A/ B test, an experiment around April of last year, and it worked so well generating millions of new signups that they've slowly exposed more and more traffic. Now, it's just their default model for going to market. JFrog, which is a public company in the developer space that targets large enterprise companies launched their freemium edition in October. I've seen dozens of companies, from startups to public companies start to launch free editions for the first time and the results have been staggering.

Devin Reed: All right. Kyle, I'm going to mix it up on you a little bit. Sheena doesn't even know about this. At the end of every interview, we ask our interviewee the same question, but I'm going to change a little bit for you. Are you ready?

Kyle Poyar: Okay.

Devin Reed: How would you describe pricing in one word?

Kyle Poyar: In one word. I can only use one word? That is really difficult. I guess the word that comes to mind most is value. Because to me, pricing is ultimately a judgment on how much value you're creating for customers, and how much of that value you think you can capture. We're in software, we're generally pricing based on cost, because then our prices would essentially be zero. The biggest cost is our cost of acquisition and not our ongoing cost of delivering the software. It's actually just a fascinating study of who gets value, why they get value, when do they get value, and what do they need from you in order to see that delivered? If I think about anything related to pricing, its value.

Devin Reed: Great answer. The question we usually ask, and I did this on purpose is, how would you describe sales in one word? Obviously, as the pricing and packaging guy, wanted to switch it up on you. But there's something to be said that multiple sales leaders come on the show, and they say sales described in one word is also value. I don't know a correlation we're making there between pricing and sales, but value centric, for sure.

Kyle Poyar: Absolutely. Well, that's another reason why I love including sales folks in pricing conversations, the best sales reps have a really solid understanding of the value that a given customer is going to see, and they're often, while a lot of marketers and finance folks probably hate this, they're often doing real life pricing tests on their own, seeing, hey, with this different pitch, with this buyer that we're targeting, given this ROI, I think I can get 25% more, 30% more in this deal. Folks look at that and say, " Hey, they're not following our standard practices." But I look at it and say, " Hey, they're really smart and understanding who sees value and when, and let's try to take those insights and apply them to a more consistent way of pricing."

Sheena Badani: Well, Kyle, it was really great to have you on the show. I have to say that you challenged a lot of perceptions that I had about pricing, and I actually took some notes down to go check in with the team on some things as well. Not only did this add value, I'm sure to our listeners, but also to us as your host today. Thanks again for being on the show with us.

Kyle Poyar: I love that. Thanks for having me. Any chance I can to evangelize pricing, I'll go one person at a time, even if it's starting with Devin.

Devin Reed: You got me. I'm your, at least one person today, at least one person.

Sheena Badani: Thanks.

Devin Reed: Thanks so much, Kyle, we appreciate you. Every week we bring you a micro action, something to think about or an action you can put into play today. Discussing price can often be a skill gap for some sales reps. They can get prospects in the door and show them value. But when the big question of how much will this cost me is asked, things can get complicated. This week, try out Kyle's successful coaching tactic of asking reps what pricing objections are raised and what concerns they have when talking about pricing, either current or if you're changing to a new model. Then you can work with your reps on how to best address the dreaded pricing objection head on. If you're changing your pricing structure, work with your reps on how you can personalize pricing for each customer, if applicable, to address how much value they see instead of going for a one size fits all approach every time. It's worth mentioning, revenue intelligence can give you the visibility into how these pricing conversations are playing out in the field, so you can coach and hear how customers are responding. Did you like today's episode? Subscribe now so next week's episode will be waiting for you on Monday.

Sheena Badani: If you really like the podcast, please leave a review. Five star reviews go a long way to help get the word out there.

Devin Reed: If you're not ready to give a five, check out another episode and see if we've won you over by then.

Sheena Badani: If you have any feedback or you want us to interview one of your favorite revenue leaders, just email us at reveal @ gong. io.

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