Ep 35 – Impact pricing for companies – Mark Stiving

Mark: I’m fabulous today, Gabriel. Thanks. How are you ? Gabriel: Fine. Can you introduce yourself and the company you have funded ? Mark: Sure. Impact pricing is really about helping companies who wanna win more deals at higher prices. I happen to be a pricing expert. I’ve been in pricing for probably 25, almost 30 years now. And so I find it fascinating and fun to help companies figure out how it is their customers perceive value and then how they can make better decisions inside their companies. So they can capture more of the value that their customers are getting. Gabriel: Great. And we will have, I hope, a great discussion on the subject. And before we start this discussion, can you tell me a fun fact about you ? Mark: I love flying airplanes nowadays. That’s my, I call that my old man sport. Gabriel: That’s great. And you told me that you have two planes. Mark: I do. I have ownership in two different airplanes. One’s a six seater. One’s a four seater. The six seater goes faster, flies higher and farther. So I use that for trips and the four seater is fun to just play around in. Gabriel: That’s great. So we will have a discussion really about value and value conversation. And I really love this subject of pricing because it’s one of the easiest way to get more revenue because changing the price is much less difficult at changing anything else in a product. So could you tell us, how do you help your customers to make the right pricing decision ? Mark: Oh my gosh Gabriel, there’s so many answers to that question. But the thing that you pointed out, which is so powerful is let’s pretend that I could increase my price by 1%. That entire 1% is profit. Any margin that you were getting before, you know, let’s say that you were only making 20 points a margin. If you get an extra 1%, you just increased your profitability by 5%. This is really powerful and there’s so many different ways you can do this. You could certainly do it just by raising your price, but you could also do it by finding the right market segments and creating different products or different prices for different market segments. You could do it by creating the right product portfolio. Good, better, best, within a market segment. You could do it by choosing the right pricing metrics, what are we gonna charge for. And this is especially important in the SaaS world that we live in today. And the thing we’re gonna talk about today is we can especially do it if we can learn how to communicate value better to our customers. And I have to say one of my biggest surprises, disappointments, is how much people don’t understand how their customers perceive value. It is a really interesting problem. Gabriel: So, how do you solve this problem? And to help people perceive value, perceive the value that their customer perceive in fact. Mark: Yes exactly. That’s the key issue. I wrote a book called selling value for exactly this reason. And the first thing I like to do is try to go through and guess [00:05:00] document how do we think our customers are perceiving value? A lot of salespeople, a lot of companies look at webpages. You’ll see this exact thing. We love our products. We want to talk about our products. I wanna tell you what my pro my product is so good. I cannot wait and nobody actually cares about your product. The things people care about are the problems they have, that you’re gonna solve the results they might achieve and how much more money they’re gonna make because they achieve these results. And that’s what value really means. What I typically do with a customer when I’m working with them is we’ll step back and say, okay, what’s your best feature? Why did you build it? What problem of your customers does it solve? And that’s a really hard thing for people to answer. Once we get to that answer, we go, okay, assume we have a customer who has this problem and they buy your solution, what result might they expect? Let’s make that measurable. It’s 2% less turnover. It’s 4% higher ASPs. There’s some measurable something. And if we’re in B2B sales where most sales people are in B2B, then we can take almost any result using business acumen and turn that into how much more profit are we gonna make that customer? And so this is how I think this is how I know our B2B customers are evaluating the value of our product. The problem that we have is that we have to go figure that out. We have to go learn to think the way our customers think. Gabriel: That’s very interesting the way you express this for SaaS because I agree with you, I’m sure that most of the times the features that the funder or the engineers are valuing the more, are not the features that the customer are valuing the more. Because they, most of the time, prefers the easiest features that seems simple for the engineers. But that are the ones that they have bought the product for, and not the ones that are technically complex most of the time. Mark: Yeah, I think that’s absolutely true. In fact, here’s a challenge that I’ll give any company : sit down and try to write the five reasons people buy your product. And then go out and talk to 10 customers and see how little they answer those five reasons. Right. Because we just truly don’t understand why people buy our products. Gabriel: That’s right. And so when you know more why your people, why your customer buy your product, how could you use it during a sales conversation or a customer meeting? Mark: Yes. So I typically start, I call it a value table, where we list all of these features, problems, results, and values, and think of that as a menu. It’s a set of possible answers that a customer may give us that says, these are the problems that I have. And once you have a nice menu of good value table put together, then you can have a great conversation with a potential buyer. And you’re not gonna go in and say : « Hey, we’ve got this feature. Let me tell you what problem it solves ». Instead we start by asking questions and the questions go, something like « what kind of results are you hoping to get? » « Why are you looking at a product like this? » « What issues are we hoping to solve? » And we want our buyer to just tell us everything they think and likely whatever they say. Hopefully is in either the problem column or the results column of the value table that we’ve already put together. So if they give me a problem that I have in my value table, now I know « oh, you have this problem. You’re likely looking for this result ». So I could ask a question. If you have this problem or you could solve it, what kind of result might you expect to get. Right. So our goal in the beginning is just to capture as many of these problems and results that buyers are thinking they may wanna resolve. Now, by the way, we may have on our value table, some really powerful features that our buyers never mention to us. They didn’t mention the problem that we associate with those. It’s okay to ask, well : « do you have this problem? » « Is this an issue for you? » « And so then we can document that. » Gabriel: So it’s kind of close of different methodologies that are looking for pains and measuring the impact of pains. Is that the same or there is some slightly difference from, those approach ? Mark: Yeah. So let me say yes, it’s the same. We’re [00:10:00] looking for pain. You could think of a pain as a problem, a different word. And what we’re doing in these value conversations is we are trying to capture as many of these as possible without selling our product, without talking about our features and our solutions to the problem. Because what we’re really trying to do is figure out how much value our customers are gonna get from our products. So that was just step one. We’ve got more steps to go if you’re ready to move on. Gabriel: Yeah, sure. Let’s go ! Mark:. Let’s go ! So the next step is I wanna know which of those problems or pains doesn’t matter which word we want to use. I wanna know which one of those problems is the most important problem to my buyer. I might ask the question which of these is the most important. And hopefully they’re gonna point that out. And once I know which one’s most important, then we can start to dive down into how do I put a dollar value into solving that problem. Well, the way I put a dollar value into solving that problem is I ask the next question. Well, given you have this problem, what do you think the result would be if we could solve this problem. And they give us some measurable result or they give us some result. I think it would improve our turnover. I think it would improve our productivity. Gabriel: Great. How do you measure that? And do they always know to evaluate the results and the impact or you can help them to do so? Mark: Yeah, they don’t always know that’s without a doubt, a true statement. We have to be really careful in the way we help them, but yes, we’re going to help them. And I say, we have to be really careful in that the end state of what we’re about to deliver to a customer is how much more profit are they gonna make because of our product. Now you’ve probably heard of an ROI calculator and you could walk in and say « Hey, give me all these numbers. I’m gonna stick it in my ROI calculator. And look, you’re gonna make $10 million with my product ». Nobody believes that, right? It just isn’t realistic for whatever reason. And yet if I can walk you through it, where you give me all the feedback, you give me all the input, you give me all the numbers, you do all the math. When we get to that 10 million at the end, now you believe it. And really what we’re doing is we’re building an ROI calculator on the fly. So let’s say there’s a really important result that, I have a feature that’s gonna deliver for you. And you didn’t say it to me. I might say « well, do you think this could increase productivity as well? » And you go « oh yeah, it would great by how much ». And so there are techniques we can use to get to what’s what’s the measurable result that solving that problem could give. Gabriel: So, really the idea is to make the customer figure it out by its by himself the impact and the results he can get. You don’t want to push him or to throw the number, but you want him to really understand the way it is calculated. Mark: That’s absolutely right. We wanna hold their hand while they do all the work because at the end they will believe the number. Gabriel: Great. And, and what is if the results is in thousands of dollars and the price, and we talk about SaaS, is in maybe $50 a month or something like that. It’s a huge gap between result and, and price of the software. For example. Is it correct? It’s because also some software as a price that are public and that compare to other software, in the same markets. So you counting multiply by 10 or 100 the price of the software, for example. Mark: Yep. Great, fabulous question by the way. Very insightful. So the first thing I wanna point out is let’s pretend that I have no competition. If there is no competition and the value conversation, my customer says to me, oh, I know that I’m gonna make an extra $10,000 a month because of your product. We should be able to charge approximately 10% of that number. So the price of our software should be in the ballpark of a thousand dollars a month. If I could proof if [00:15:00] the buyer truly believes they’re gonna make 10,000 a month. For my product. However, let’s pretend we have this situation the buyer believes they gonna make 10,000 a month. I’d love to charge them a thousand a month, but there’s a competitor who’s only charging a hundred dollars a month. Well, now what happens? They’re not gonna buy from me at a thousand. So I have to be somehow relative to that a hundred dollar number. What do we do there ? What we’re gonna do is the exact same thing. But what I wanna know is how is my product different than my competitor’s product? So we need the differentiation. And then, what problem does that differentiation solve? We do the exact same thing with the value table, but now we’re just looking at the features that are different between my product and the competitor’s product. And let’s say that I do all that math and it turns out that that my product is gonna deliver an extra a hundred dollars a month in value than my competitors do. Then I should be able to charge a number higher than the competitor’s typical $100. Now how much higher? Probably somewhere between one 10 and one 50. But I should be able to get a number that’s higher than my competitors. Gabriel: Yeah. So the, the competition really decrease the values that you could have get if there was no competition, in fact. Mark: Absolutely. I hate competition because it drives prices down. Gabriel: And when this is great, when you are in into a selling conversation. But what if you are more on a product type product led growth type of product with self-service and you don’t have the time or the opportunity to have the value conversations that would make realize the customer that he could gain 10,000 of dollar and is just comparing the product even if it’s with no competition to similar product in the same markets that make it more 101,000. Mark: Yeah, so there’s really two different situations. One is do I have a salesperson involved and one is, do I not have a salesperson involved ? If I have a salesperson involved, then I get to use sales. I get to use these value conversations to help my customers understand. If there is no salesperson involved, then everything I’m doing is marketing. And now the question becomes « how well does your marketing explain the value of your product? » The value tables we talked about, where we had the feature, the solution, the problem, the result, and the value. Those things are still equally important, but now we have to be able to explain it in marketing. And I briefly alluded to this earlier, but go look at almost any company’s webpage and they talk about their features. And what they’re doing is they’re hoping, they’re just hoping that a customer reads this and says, oh yeah, that’s really important that’s valuable to me. But what if instead, our webpage talked about the problems that we solve, the results our clients could expect. And now, we’re not hoping that someone can translate our features into value. We’re actually helping them do that. We’re helping them think through the problem. And so we have to do the exact same thing. Gabriel: Great. We are arriving at the end of our conversation. Could you share with our audience, your contacts and your book for them to know you ? Mark: Sure I practically live on LinkedIn. So you’ll find me on LinkedIn pretty easily. Send me, a request and I’ll say yes. My Email address is mark@impactpricing.com. And my third book, my newest book is called « Selling Value, how to win more deals at higher prices ». And it includes chapter eight is really about what we talked about in terms of the value conversation. And chapter four is really about the value tables that we talked about earlier in the conversation. Gabriel: Great. Thank you, mark. And last question, before the outro, you have the opportunity to test for 15 minutes before our recording salesdeck.io. And what do you think of salesdeck to be a good tool to conduct some value conversation between the seller and this buyer, Mark: I actually think it would be an incredible tool because what would happen is as I’m talking to a buyer and I’m asking what results might you expect to achieve? I could be entering those and allowing the buyer to see exactly what I’m writing. Do they agree with that? Do they not agree with that? Then after we have this whole list, we could ask the buyer, which of these is most important to. And we can [00:20:00] start to prioritize and the buyer can see exactly what we’re doing while we’re doing this. So I think it’s a pretty powerful way to have a nice value communication with our buyers. Gabriel: Thanks a lot. Mark. It’s really the idea of the product to be more transparent in your conversation between buyers and sellers. This episode of the virtual selling podcast is over, thanks a lot and thanks for sticking around. Join us twice a week for a new episode, with new stories and challenge of giants in the field. If you enjoy today’s episode, we are always listening for your feedback. Share the show and subscribe on your favorite podcast platform so you don’t miss any episode. This episode was brought to you by Salesdeck.io, the virtual selling platform that increase your sales team efficiency and sales readiness, enable remote management and advance sales operational excellence. Book your Salesdeck.io demo today to discover how you can close more deals with engaging and better prepped customer meetings. Thanks a lot Mark.