409: Take the guessing out of B2B SaaS pricing – with Marcos Rivera

Answering the questions that lead to optimal product pricing Today we are talking about how to price B2B SaaS products, learning from pricing examples. Joining us is Marcos Rivera, the author of the new book Street Pricing: A Pricing Playlist for Hip Leaders in B2B SaaS. Marcos is a pricing specialist with deep roots in product management, having served in roles from product manager to executive senior director for product management. He has leveraged his experience to specialize in pricing for the last several years and founded Pricing I/O to train and coach high-growth B2B SaaS companies on how to accelerate Annual Recurring Revenue (ARR).  Summary of some concepts discussed for product managers [2:18] How did you find yourself moving from product management into SaaS product pricing and packaging? I started building products way back in the nineties and cut my teeth on creating and crafting products starting with basic integrations. Everything I built I had to price. It wasn’t easy. I had to dig deep and learn how to do it because the success of my product depended on it. I realized it’s not as formulaic as I thought it was. There’s not a spreadsheet that cranks out the optimal price. I realized there is a pattern and a way to understand value and capture it with pricing. [4:20] Can you take us through a story about product pricing? I worked closely with the company Mindbody, a fitness SaaS company. They raised prices without data or a good value story, and their customers reacted negatively. We had to step back and take a look at how we think about capturing value in cases where it’s warranted and whether we’re raising prices in cases where it’s not warranted. Most companies want to increase the number of customers and extract more value from the existing base, which is not easy to balance. For pricing and engagement, we go through the 5Q Framework. 5Q stands for five questions. The big question in your mind—how much should I charge?—is one of the last things to figure out. First, you have to understand what experience you’re pricing for, who’s buying your product, what their motivations are, and your purpose in pricing. Mindbody, which sells fitness plans and software for gyms, sold a few fitness plans, and you didn’t see a lot of differentiation between them. They had grown so much, they never thought how to layer value in their plans. I started pressing them on whom they really wanted to win. The yoga instructor who has a couple of clients? The massive chains like Orange Theory? And I asked why they wanted them. What’s the big play here? If you’re expanding your software, how are you expanding it? Where’s your value? They said they needed to grow market share and gain clients but at the same time lift the amount of dollars per client. They found some customers were paying very little for the value they were getting, others were paying the right amount, and the rest were overpaying. We needed to calibrate that. Step one was a neutral strategy, which is balancing the amount of pricing tactics used to get customers with the amount of money you’re getting. Step two was figuring out what customers they wanted. We wanted to make it easy for new yoga instructors who don’t have a lot of courses to come into the platform. We needed a leaner version to compete and give them something they needed, but not too lean, like a free offer, because we wanted commitment. We wanted another price point for growing gyms, and another one for mature gyms. Once we had nailed in the who, we worked on the what. They had new functionality and innovation and didn’t know what to do with them. We had to create different packages. Then, we extracted price points from three inputs. First, we did analysis on happy, inactive, and churned customers to see patterns in what they were payin...