EPISODE SUMMARY
Understanding the intricacies of pricing and value proposition is crucial to successfully growing a SaaS business. In this new episode of Scale Your SaaS, host and B2B SaaS Sales Coach Matt Wolach sat down with Mark Stiving, the founder of Impact Pricing, who shared his valuable insights on how software leaders can revolutionize their value proposition and dominate the market. Read on to learn more about the pricing mistakes that cost you lost revenue.
PODCAST-AT-A-GLANCE
Podcast: Scale Your SaaS with Matt Wolach
Episode: Episode No. 304, “Pricing Mistakes that Cost You Lost Revenue – with Mark Stiving”
Guest: Mark Stiving, Founder at Impact Pricing
Host: Matt Wolach, a B2B SaaS Sales Coach, Entrepreneur, and Investor
Sponsored by: Leadfeeder
TOP TIPS FROM THIS EPISODE
Unlock the Power of Value
In pricing SaaS products, Stiving emphasized the importance of recognizing the true value a product brings to the customer. He stressed that understanding customer value and harnessing it through effective pricing strategies is the key to generating invincible profits.
Identify and Quantify Value
Stiving introduced the concept of a “value table,” encouraging businesses to identify their most marketable product features. The challenge is to then determine the specific problems these features solve for customers. Through a systematic approach to understanding customer problems, software businesses can quantify the results and ultimately assign a dollar value to the solution.
Leverage Customer Growth
Stiving highlighted that while many software companies focus extensively on acquiring new customers, the real potential lies in growing existing ones. By adopting a mindset of ‘win, keep, grow,’ businesses can explore four avenues for customer growth: raising prices, upselling, cross-selling, and usage-based pricing.
EPISODE HIGHLIGHTS
Strategic Pricing for Sustainable Growth
Addressing the perennial concern of raising prices without causing customer churn, Stiving offered a practical strategy. By incrementally raising prices for the top tier of customers who derive the most value, businesses can carefully monitor the impact on churn. This approach ensures that the value delivered justifies the price increase, creating a win-win situation for both the business and its customers.
Build a Value-Based Culture
The key takeaway for software leaders is to cultivate a value-based culture within their organizations. Stiving advocated for a continuous focus on understanding customer needs and integrating this perspective into every decision. By placing the customer at the center of business considerations, companies can foster long-term success.
Take Action
For software leaders seeking to refine their pricing strategies and value propositions, Mark recommends exploring the framework of the valuable features available on Impact Pricing’s website. Additionally, leaders can gain further insights by connecting with Stiving through a consultation or discovery call.
In conclusion, Mark Stiving provides a roadmap for SaaS businesses to navigate the complex terrain of pricing and value proposition. By embracing a customer-centric approach and staying attuned to the ever-evolving landscape, software leaders can scale their SaaS businesses with confidence and resilience.
TOP QUOTES
Mark Stiving
[12:15] “Buyers trade money for value. That’s what business is all about.”
[23:38] “A value-based culture simply means that in every decision we make, we think about the customer, what’s going on in the customer’s mind.”
Matt Wolach
[18:11] “Features lie in the designers’ head, benefit lies in the salesperson’s head, and value lies in the customer’s head.”
[22:04] “If you feel like, ‘I’ve got a good handle on what we’re doing and how we’re going to grow. But you really don’t understand how that value is seen by your prospects by your customers, it’s going to impact your growth plan.”
LEARN MORE
To learn more about Impact Pricing, visit: https://impactpricing.com/
You can also find Mark Stiving on LinkedIn: https://www.linkedin.com/in/stiving/
For more about how Matt Wolach helps software companies achieve maximum growth, visit https://mattwolach.com.
Head over to leadfeeder.com and sign up for a 14-day (no strings attached) free trial: https://www.leadfeeder.com/
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Check out the whole transcript of the episode here:
Matt Wolach
And welcome to Scale your SaaS, thank you very much for being here. So glad that you could join us. By the way, if this is your first time, our goal here is to let you know how to grow your SaaS exactly like it says. So we’re going to help you understand how to generate a ton of leads, how to close those leads, how to scale your team, all of the fun stuff. If that’s something you want, definitely hit the subscribe button right now. So you don’t miss any of the amazing stuff. We talked about all the incredible innovative guests that we bring on. Like my guest today. This guy is awesome. I’m super excited to introduce him to you. I’ve got Mark Stiving with me. Mark, how’re you doing?
Mark Stiving
I’m doing fantastic today. How about you, Matt?
Matt Wolach
I’m doing fantastic as well, really a great day. It’s been a fun week overall. And I want to make sure everybody knows who you are. Because you’ve definitely got an awesome perspective on a lot of things. So Mark is the founder of Impact Pricing. And for over 25 years, Mark has been educating B2B organizations specializing in boosting profitability. Mark’s diverse career encompasses pricing, marketing, product management, and private equity, providing a distinctive viewpoint mark and impact pricing shows companies how to generate invincible profits by focusing on customer value. He’s also the author of the influential books when keep grow and selling value. So this guy definitely knows his stuff. I’m honored to have him on Mark, thanks for being here.
Mark Stiving
Oh, thank you, Matt, I am so excited about sharing knowledge with your listeners.
Matt Wolach
Perfect, I can’t wait. So tell me what’s been going on with you lately, and what’s coming up.
Mark Stiving
So I’ve been spending a lot of time with private equity firms lately. And what we typically do is teach them where they’re leaving money on the table. And it’s almost always value. Think about any company you’ve ever looked at ever dealt with. And think about the value that they create for their marketplace, the big picture value, how much of that? Are they actually capturing in revenue? And usually, it’s a minuscule amounts. And it’s a tiny proportion. And the reason for that is we haven’t thought through and understood really clearly. What is that value that we’re delivering? How do our customers perceive the value? How could we create marketing and sales messages to go capture that value? How can we craft our product portfolio to to actually capture that value? And so in the end, I think everything comes down to the fact that people don’t understand how our customers perceive value.
Matt Wolach
I think that’s so true. And it’s pretty scary. Because if you feel like, Hey, I’ve got a good handle on what we’re doing and how we’re going to grow. But you really don’t understand how that value is, is seen by your prospects by your customers, it’s going to impact your growth plan. For sure, right?
Mark Stiving
Oh, absolutely. Absolutely. My fundamental concept for business. And this should be everybody’s fundamental concept for business. And that is buyers trade money for value. That’s what business is all about? Sure, if you don’t know what value is, how much do you charge to which buyers for what products and what value? It really causes a problem here? Let me give you a quick example, if I may, this is kind of fun. There’s lots of dichotomies and value in defining value, and how does this customer perceived value versus that customer perceived value? But you brought up the fact that we want to scale your sass? Well, okay, it’s the name of your podcast. So there’s two ways to grow a SASS company, you can win new customers, or you can grow your existing customers. That’s it. Sure, the only two ways you can do it. Now, if you think about it, winning new customers is all about perceived value. How much value do they think they’re going to get? Because they don’t know. When it comes to growing your existing customers, they’re using your product. So they’re realizing a set of value? Now it’s a question of how much real value are they getting? So there’s one difference in value of value perceptions versus value reality? And when we think about that, we have to think about value differently, what’s going on inside our buyers minds?
Matt Wolach
I think that’s so good. I’ve heard I love how you put it that way, what’s going on inside their mind? Because a lot of times when, from the sales perspective, we talk about, oh, we’ve got to sell these features. No, wait, we’ve got to sell the benefit. And then actually, we’ve got to get all the way to value. And I once heard somebody actually right on this show. His name is Raj came on and shared that features lie in the designers head benefit lies in the salespersons head and value lies in the customer’s head. And so it’s absolutely aligned with what you’re saying. I think it’s really critical that we understand how to get that value to happen, right.
Mark Stiving
I think that’s a great analogy, a great way to think about it. The way I think about it is I created something I call a value table, which by the way is exactly aligned with what you just said. I tend not to use the word benefit just because I want a different set of words. Because I think a different set of words is more helpful. And that is that we have features or I call those solutions. Solutions solve problems. So what was the problem in the customer’s mind? Or the problem the customer is facing? If a customer has that problem, and they buy our solution, what’s the quantitative result they’re going to get? And that quantitative result could be 2%, less turnover, or 5%, higher revenue, or whatever that result happens to be? And then in the world of b2b value is how much more profit? Are you going to make your customer? And so do you have the business acumen to turn those quantitative results into dollars in your customers pocket?
Matt Wolach
I love that you’re saying is totally speaking to me the choir on this, because this is something I train my people on a lot. When clients come to me, one of the things they’re struggling at is, especially trying to understand it early on, when you’re doing discovery, you’re learning about your buyer, understanding what that true number is. And that’s why I’m so glad you said we’d need to quantify it. Because we asked them, oh, what do you want to do? Well, we want to grow, we know, we need to ask exactly how much and what are you losing? We feel like we’re inefficient here, we’re missing this. No, let’s quantify what that is so that they can understand what the value they need is. And when you can demonstrate that and get them to trust it, then it becomes so much easier to get them to sign. And you’re just totally making me feel so great about everything you’re saying Mark.
Mark Stiving
Well, it just means that you figured it all out at the same time I did so or maybe before.
Matt Wolach
I’m not sure about that. Haha.
Mark Stiving
But of the things that I teach people all the time, is you never ever walk in and tell someone, here’s how much we’re going to make you. Or here’s the results you’re going to get. It’s always what’s the big problem that we’re dealing, so we ask the questions. And then if we could solve that problem, what are the results you might achieve. And if we achieve those results, let’s figure out how much money that’s worth you. So the client, the customer always does the math, what we’re doing is holding their hand guiding them through it. So it’s like we’re the ROI calculator. But nobody believes in ROI calculator. So don’t don’t bother. So true. Getting one out.
Matt Wolach
So true. I’ve also said a lot of my clients have spent all this time on ROI calculators, and I said, Well, actually, ROI calculators are less effective than a powerful story. And if you can tell a story about how somebody else similar to them, was able to achieve incredible value who had the same challenges, same issues, and they were able to overcome it using your tool using your solution, that’s going to be much more impactful and much more motivating to close than, hey, here’s an ROI calculator. And you said exactly the reason because they’re not really believable.
Mark Stiving
So if we go back to the value table concept I was talking about a second ago, our job isn’t to walk into a client. By the way I talk as though I’m in sales, I’m not in sales in any way, I am all about understanding value to the customer. That’s it great. But our job is not to walk in and say here’s where the value of our product is. Because our product probably solves five or six or 10 Different really good problems that different clients have. Our job has to be to know what those possible problems are, what the potential results would be, and how to calculate value from those results. So that when we walk in the door, and we say what problems do you have, or we ask it in a much more elegant way than I could, then now we know what path we’re taking to get to profit. And that’s where value is to the customer. Now, if we’ve done that work, we now we have a really good feel for customers value, as you know, a pricing guy. So that gives me a lot of indication on how much someone’s willing to pay based on how much profit we’re about to deliver for them. And by the way, it also helps our marketing, because nobody cares about your features. Nobody cares about your product, they only care about the problems they have and the results they’re gonna get. So he’s done all this work ahead of time. It really aligns the entire company around what the customer wants and needs.
Matt Wolach
Yeah, so beautifully said I love it. So let’s talk about that. So can you share some practical steps with the audience and how they can aim to revolutionize their value proposition and dominate the market?
Mark Stiving
Absolutely. So first off, try to create a value table. Now the value table my step one is what are your best I call them marketable product features. So what that really means is these are the things you put on your webpage. We’re really proud of this. Are these are the things your salespeople talk about. It’s what they think has won them deals in the past. And so there’s a reason they want them deals because someone cared about it. Now, here’s the really, really hard step. What problem did that solve? And so many people want to say, well, it’s solved the problem that I needed one of these. No, that’s not a problem. Right? What problem did it solve? Can you put yourself in the shoes of the buyer and say, I had this problem. My whatever it happens to be. And there’s many, many great examples of this. I’ll give you one of my favorites. By the way, I’ve worked with many, many companies on this. And it’s like pulling teeth to get them to think this way. It is so hard. So I was working with a client who makes all the technology for Drive Thru restaurants. Right? Long range radio, I’m like why the hell does anybody need long range radio. And overtime, we can pair it. Well, here’s the problem. If you go to a fast food place that has a really long line, and someone pulls up into the line, then they say, well, that line is too long, and they leave. If you have a long range radio, you can have someone out taking the order at the edge of the lot. And they’re much less likely to leave the line
Matt Wolach
Chick fil A does this beautifully.
Exactly, that’s exactly right. But But the whole point is, what’s the problem? The problem is I have customers who think the line is too long. And they they drive away, and we lose customers, right? That’s a real problem. For sure. Right? So then you can quantify what’s the result? How many more customers do we get during which peak hours? And then what’s the dollar value? You know what’s, so the hard part is defining the problem.
Matt Wolach
I love it. And actually, that goes right to something a great man once said, that was my dad who was an awesome marketer. And he said, Never make people wait to hand you money. And your example right there of the line and people ready to give them money to the business exactly what you would want, figuring out how to make sure that those people stay in line so you can get the money and get them served faster and get them to pay you faster is is genius. And it kind of goes back to the jobs to be done. Right. Like we have to figure out what that job to be done is isn’t it?
Absolutely right. I tend to think in terms of customers problems and results, as opposed to the jobs to be done. But they’re very similar concepts.
Matt Wolach
Yeah, yeah. It makes a lot of sense. Okay, so you’re we’re in software, we got software leaders listening to the show, how can they know that they’re doing this accurately? How can they make sure this is happening? And that the the, the they’re getting the revenue they deserve?
Mark Stiving
I really don’t want to answer this question. Because here’s the answer. They’re not doing it. Right. Right, I have never met a company who understands the value of their products. And the reason for this, by the way, I have the same problem with my business, is we all have the curse of knowledge. We know what it is we do so well, that we forget what it’s like to be a customer to be a client to not know. And so I gotta say, I’ve never met a company that does this exceptionally well, without a lot of help. So So here’s the answer. Everybody needs help. Right? Everybody needs to figure this out. But Can I Can I mention something important on software companies? If that’s okay, yes, software companies. Great. The reason I love software companies is the product can change really rapidly. They don’t think so. But compare that to try to change hardware. Right, we can repackage into different options and different offers relatively quickly in the world of software. And so we start thinking of software. Now my second book was titled Winky grow. And that stands for we have to win customers, we have to keep customers, we have to grow customers. You’ve heard this as land and expand over and over again. And so many companies spend lots of resources on landing, and very few resources on expanding. And so how do we expand our marketplace? When we expand customers, there’s four ways to do that. The four ways that we can raise prices, one of my favorites, right, we should figure out how we’re adding more value and how we raise prices. The second way, though, is upsell. And we can only upsell someone if we’ve crafted the product portfolio. So that you know, think of good, better best, how do I get them into my good level relatively easily, and then upgrade to better and then upgrade to best? We can cross sell, of course. And then the other way is we can do usage. And this has everything to do with what’s the pricing metric. What are you charging for. And in the world of SAS software, we learned that we can charge for anything right? We can charge most people charge for us or still. But we can charge for clicks or gigabytes or downloads or hours or whatever the heck we want to charge for when you can pick the right pricing metric. Then as your customers get more value from your product, they pay you more money. And so I think one of the biggest problems companies have have is they don’t focus on how do we grow our current customers?
Matt Wolach
Yeah, I think that’s so smart. And it’s something that kind of aligns with what I teach on the sales side with new logos new business is focus on how you can help them improve. Instead of thinking like I need to sell, I need to make a sale, I need revenue, focus on how you can help them improve. Same thing with your customers don’t turn that off, once they’ve actually bought from you, I love your model of let’s focus on how we can help them grow. And if we keep that thought, and we keep pushing towards let’s help them grow, then obviously they’re gonna grow, which means they’re gonna go up upgrade for you, and get more more packages with you or more options and pay you more, and it’s going to help them and if they’re getting help, and you’re able to tell that story to other new ones, they’re able to tell it to other new ones. I mean, it’s just, it’s such a natural thing. But I agree. Not enough companies think about that side of it. How can we help our customers grow? Because you’re exactly right, you talked about land and expand, that’s actually a term I use a lot. And I tell people land and expand, most companies are great at the land and suck at the expand, they don’t know how to make that happen. And my you have a great point, from your perspective, my perspective on another reason why that is, is because the sales team doesn’t communicate accurately enough well enough to the rest of the team on Hey, we got them to dip their toe, but they’ve got a lot of opportunity, they need to be doing this, they should upgrade to this and a couple months, they’ll need this and that communication just doesn’t happen. And companies who do figure that out and get a great way to land and expand, can take off. Because when you can land and expand and your mindset is let’s just get them in the door. Like you said, Let’s just win them. Let’s make sure they’re happy. Let’s keep them and let’s grow. So I love your model markets. Absolutely fantastic. I believe in it.
Mark Stiving
Thank you. Let me give you another reason why companies ignore the Expand of land and expand if I may. So think about have a chart that has urgency. And we’re going to define urgency as does somebody get fired if this goes bad, okay. And then on the other line, we’ll call it lifetime value of a customer or overall revenue for the company. And so when I first launch a new product, winning new customers is both urgent and really important. And by the way, once I’ve won a customer, keeping those customers urgent and important, if we’re losing customers quickly, that’s a real problem. Someone’s getting fun. Yep. Over time as we build up, by the way, growing customers is irrelevant, because we don’t have any. Yep. So over time, what happens, winning customers actually becomes a little bit less important and less urgent, just because we have a large installed base. Keeping customers is always painful. So it’s always a little more urgent and a little more important than than winning your customers. But think about the growing customers, it becomes more and more important. But it never becomes urgent. Nobody ever gets fired because we didn’t grow a customer. So true. What has to happen is a company has to say let’s prioritize net revenue retention. Right, let’s do the things it takes to make this grow.
Matt Wolach
Yeah, that’s so true. Okay, so let’s say somebody’s really soaking all this up. And they realize, okay, I need to figure out my pricing. What should software leaders be thinking about when it comes to their pricing?
Mark Stiving
That’s such a big question. It is.
Matt Wolach
You’re like, that’s why people pay lots of money for me, because I just spend lots of time with them figuring it out.
Mark Stiving
Right. So part of the issue is who gets what value, and possibly my, my favorite exercise I do with clients. And in fact, I’m going to give a link to your listeners, the thing to download the beginning of this exercise is called the valuable features framework. And if you list 10 customers across the top of this framework, and then down the side, you list your best marketable product features. And then in each of the little cells on a scale of one to five, how valuable does that buyer think that feature is. And what you’re going to find is that there’s a series or set of buyers that really loves certain features and couldn’t care less about others. And then there’s other buyers who really love those features that the other ones didn’t care about. And what’s going on here is that you’ve actually got different market segments that you haven’t identified. Because the market segment are people with common sets of problems. And a feature solves problems. What we’re doing is we’re looking to see who cares about which features in us since Who cares who has which problems? And now can we start to figure out what are those right market segments? And now, it’s very possible that I could choose and find a single market segment that has a really high willingness to pay, tweak my product, so that those people get exactly what they need, and charge them a much higher number. and they will pay it. And this is a no brainer, easy way to add market segmentation to the package that you have today.
Matt Wolach
Yeah, it’s so true. And you talked about charging them a higher number. So I want to ask you your take, and I know you’ve worked with a lot of companies to help them do it. But let’s say they realize we need to be charging more, can you kind of help us understand how businesses can successfully raise prices without any churn and backlash?
Mark Stiving
Yep, absolutely. One of my favorite things to do. So first off, if you can, we’re going to talk about raising prices on current customers on existing customers. Sure. And so if you can rank order your customers based on usage, and think of usage as a proxy for how much value are they getting from my, from my product? How much do they like my product. So if you can rank order your customers on usage, you take the ones at the top, and you raise their prices, whatever you’ve chosen 10% 20%. And, and you watch the churn, and you’re gonna see nobody churns, and then you go to the next 10 20% down, and you raise the price, and probably nobody turns but maybe one or two. And then you can go to the next set, and it says, ooh, now we’re starting to lose more than we want. So stop raising prices. Think of it this way. If you’re if you have a membership to a gym, and you never ever go, and they raise your prices, what you just say is, oh, I don’t use this, I probably should cancel. If you go every day, you’re thinking Damn, I don’t like that they raise my prices. But it’s worth it because I go every day. Yeah, for sure. And, and so this is exactly what goes on in our buyers minds. When we send out the communication, there’s a five step communication process, I recommend everybody use if the five steps are applicable, right, I don’t want you lying to your customers. But here’s the five things you say to a customer number one, my costs went up. Number two, we added more value this year. Number three, do something nice. So what this means is, you’ve been a loyal customer, we’re raising prices as of January 1, but we’re going to hold your price the same until July 1. So do something nice for customers. Number four, you’re still paying less than somebody. And, and usually that’s relative to new customers. Something like that. And I’m gonna tell you that I just forgot the number five. I’ve got blogs on my, on my, on my website, that’ll explain these.
Matt Wolach
No worries, no worries, I’m sure people can go find that on the site. By the way, what is that link to download that that resource you mentioned?
Mark Stiving
Yes. Go to impact pricing.com/sys for Scale your SaaS. And I have three different clicks taking three different downloads they can have their one is this valuable features framework and other is a link to my book. So you can grab that. And then if for some reason they want to get a consultation with me or discovery call with me to see if I’m helpful or possibly helpful for them. There’s a link there for that as well.
Matt Wolach
Okay, perfect. So impact pricing.com/s y s scale your Sass love that. Go there guys, check that out. We’ll put that in the notes as well. Mark, as we wrap up. What advice would you give for software leaders who are like, Well, I’m not sure if my pricing is right, I’m not sure if I really have understood the value well enough. And I’m thinking maybe we need a raise? What advice can you can you give to those leaders?
Mark Stiving
The single biggest piece of advice is to see if you can turn your company into a value based culture, right. And value based culture simply means every decision we make, we think about the customer, what’s going on in the customer’s mind. So often, we lose sight of our customers because we have to do our accounting, we have to do our finance. heck can I just confess that I do this myself. I realized the other day in my proposals, I was breaking out travel. Because it was easy for me and something I’m doing in my business. But in truth the customer doesn’t care. Right, bundle it in, put the price into the package. It’s like so we so often just stop thinking about the customer, every decision should be around the customer.
Matt Wolach
So true. I love it. I think that’s so well said wraps us up really nicely. Mark, it’s been fantastic. Seeing your perspective and learning from you. Thank you so much for coming on and sharing. Impactpricing.com is where you can find Mark. And, Mark, can they see you on LinkedIn as well? Is there anywhere else they should find you.
Mark Stiving
I practically live on LinkedIn. So feel free to send me a connection request and send me DMS and I talked to everybody.
Matt Wolach
Okay, perfect. We’ll put that into the show notes as well. So if you’re listening if you’re watching go check that out. Go see Mark Go check out those resources he gave at impactpricing.com/sys Mark, thanks so much for coming on.
Mark Stiving
Matt, thank you. This has been a lot of fun and we’ve covered a ton of ground and a little bit of time.
Matt Wolach
I love it. Just the way I like it. Somebody’s driving to work, perfect timing for their commute. And hopefully they got a lot out of it. So saying thank you so much everybody out there. Thank you for being here. It’s been really glad to have you. Make sure you’re subscribed so you don’t miss anything. We’re also looking for reviews. So if you think that what Mark just shared was amazing, like I do, go on there and review it and say this show is really helpful is made me better. Thank you for that. I really appreciate that in advance. And we’ll see you next time. Take care bye bye.
