CEO of ProfitWell and Price Intelligently
Pricing and Packaging for B2B Companies: A Masterclass
Patrick Campbell: All right. I think we're going to get going. We're going to talk about some frightening things, some pricing, those types of things. So come on in. Take your seats. How's everyone doing today? You guys fired up? If you're not excited, I'm not going to be excited and it's all, it's all about me, so no, I'm just kidding. Doug back here. Doug. Doug's like part of the fan boy club here. Like Doug and I see each other like every other week basically, which is good. Cool. So I'm Patrick Campbell. I'm the CEO, founder of a company called ProfitWell, formerly known as price intelligently. Anyone here of either of those companies? Perfect. So clean slate. I can say whatever I want and have a nice first impression, which is great. But we're going to talk about some scary stuff today. And did anyone do anything fun for Halloween last night?
Patrick Campbell: Be Honest. No, there's no fun in San Francisco. Okay, well I was on a flight last night, but this is my dog Sloan. Um, she's a nice little bit of Sushi, uh, pretty last minute. Um, I just wanted to give you a little bit of joy. I'm starting the presentation mainly because this is the last bit of joy that you're going to see in this presentation. Um, cause we're going to be going some deep, deep places, particularly around growth and particularly how you're growing your business. And what I mean by that and because they only have 20 minutes on how I have to get to the point. So that's why I'm kind of softening you up here. Um, when we look at the data and we'll get to a bunch of data today, what we think works for growth doesn't actually work anymore. And to kind of put that in context, a lot of us, some folks in the room, you look like you've been in the game for a little while.
Patrick Campbell: Um, a lot of the tactics that we've been using for the past five, 10, 15 years, unfortunately those tactics are no longer really effective and we keep kind of doing them more and more. And we're going to unpack this in the next 20 minutes here. We're going to leave some time for questions. We're going to bring it, bring it back to pricing. But just to kind of be really clear, we're going to go through a ton of data. I'm like, provide a lot of context to it. You're going to get all the slides afterwards. It's a little bit hard to see. So I'll make sure I'll explain it. Um, but everyone will be unhappy, I promise you that. Um, mainly because this data is depressing, but it's the truth and that's why it's really, really important to go through. Um, but to give you a little bit of background on who I am and why I have any authority to kind of make this claim and present this data, um, I run a company called ProfitWell.
Patrick Campbell: We create a number of different products. Um, our core product is a free subscription financial metrics product. So you plug in your billing systems or a stripe, Braintree, whatever you're using and get free access to your MRR, your churn, all those kind of fun numbers. And then the way that we make money is we sell different products to basically help with your subscription pricing or with your subscription churn. Um, we have a couple of different products and the reason I'm giving you this context here, not because that was the best sales pitch in the world, but mainly because at this point in time we have about 25% of the entire market using one or more of our products. And so there's just a ton of insight in those ton of data that we've been able to go through to come to that conclusion that I started off with.
Patrick Campbell: Um, and I'm going to terrify you with this data essentially. Um, so to kind of kick things off, um, we're going to unpack this thesis again, we're going to leave you with some happy things towards the end, but let's jump in. So who here has heard this whole concept of distribution or like growth is getting harder, right? It's just kind of the start of every growth presentation, right? Like we have to do better. Um, but the problem is is that what we see for a lot of folks, particularly when it comes to growth and particularly when it comes to actually going after certain areas of growth within their business, is that a lot of us don't realize that, again, some of those tactics that we're using just aren't as effective anymore. And our response to a lot of this is that we don't realize that our consumers are getting hammered and not in kind of the fun way.
Patrick Campbell: What's actually happening is, what we've noticed is that competition is now rampant and what we've seen is that the average number of competitors that you might've had about five years ago was probably about three. The average competitors that you're seeing today are now about 12 and the reason for this in particular is because software or product is no longer hard to build. Now. I mean, it's hard to get it right. It's hard to build good product, but we don't have all of these technical barriers that we once had 10 15 years ago. We don't have server racks with bunch of cables coming out of it. We don't have to build our own Dev ops tools. Now, if every single person in this room wanted to build a company or build a product, by the end of the day, we could spin up a server, spin up a website, start driving traffic to it, and even start charging people and it probably wouldn't be a great product, but we at least don't have those barriers.
Patrick Campbell: And this is what's caused the most overused marketing slide in the history of mankind here, where these are the four or five or 6,000 different marketing tools. These are just the marketing tools. Every single one of these is trying to help you grow. In four or five years ago, before this slide, there were only about 400 companies on this particular list. Now, the implication of this is that we've lost a lot of our power, and it used to be that if you had a pretty decent product or even just not such a decent product, there weren't a lot of other people out there, and if you had some funding where you could actually go out and acquire those customers, things worked out pretty okay. Now, I'm obviously generalizing, but if you look at the generalization of what's been happening with growth, that's kind of how it worked.
Patrick Campbell: But now what's happened is that we're seeing customer acquisition costs increase pretty steadily over time. So five years ago, the average customer that you acquired in both B2B and B to c, let's just say it costs about a hundred dollars five years ago, that customer now is going to cost you about 150 to $165 and this is actual data. It's not survey data. It's actually what we're seeing within companies. Now, what's really interesting is a lot of growth folks respond to this and say, Hey, you know what? I'm really good at growth. I'm going to find those pockets. I'm going to be really, really good. But the problem is then the context of all this competition and all this software and all this product going out there, we're now also living in a world where the relative value of features, oh boy, I'm going way aggressive here. The relative value of features is actually declining.
Patrick Campbell: So we use some that we've developed and that are also open source to basically measure the relative willingness to pay for different products over the past five years. What we found is that some of those products that you might've been able to charge, let's say $100 for five years ago, they basically lost about 70% of their value. And this includes not only things like core features, but all of those fun little add ons that we used to kind of throw into our products to kind of boost ARPU and boost ACV. And what's really kind of fascinating with this is that everything's kind of amazing and everyone's pretty unhappy. Our customers are the most unhappy that they've been kind of in this gold rush of building product in the past 10 to 15 years. We can actually see this by looking at net promoter score. We are all familiar with NPS.
Patrick Campbell: So when we look at NPS over the past five years, the average NPS, and this is blended across a bunch of different verticals, and so there's obviously differences in those verticals. The average NPS was about 34 or five years ago. Average NPS about a year ago was about 10 and I don't think anyone's going to stand up here and say that product is worse today than it was five years ago. Right? So we're in this environment where, again, everything's amazing, we're able to build company, have build product more quickly or quicker than we've ever been able to before. But all of a sudden the market has changed in a way that it's really kind of kicking us in the face when we're trying to get that growth because there's so much kind of friction against what we're trying to do now. It's really kind of interesting is that our response to this has not been great.
Patrick Campbell: And that brings me back to the thesis that we talked about. A lot of us, what we kind of respond to this is, hey, let's spend money like it's 2005 right? Let's put as much cash as we can attack acquisitions, put as much cash as we can into acquiring those customers. And we actually see this when we look at the meeting expenses that go to acquisition. So in a company, what do you think the median expenses of all of our operating expenses is that is going to acquisition based activities. And he guesses come on now two way street and he guesses it all. What was it, 15 it's 57% so there's just as many people spending more as there are spending less because that's a median, but it's a huge portion of where we're dedicating our time, our resources, and our expenses. And what's scary about this is that acquisition is now table stakes.
Patrick Campbell: And what I mean by that is we isolated, I think it's about 750 companies. We looked at their revenue data and we isolated each of the main growth levers in their business. We looked at their acquisition, their monetization, and their retention. And we basically said if we improve each of those by the same relative amount, what was going to be impact on revenue and what we found is that if we improve your acquisition by about 1% meaning your conversion volume, your net new leads by about 1% you're going to see about a 2% boost in your revenue, and this is actually down a third from 3% or five years ago. Now, it's really kind of fascinating if you improve your monetization, your ARPU by about 1% or you improve your retention, your churn or your net retention by about 1% this is what the effect looks like and that growth is actually accelerating and this should feel intuitive, right?
Patrick Campbell: Because all of a sudden a lot of those channels that we once were kind of exploiting and using and getting almost every single quarter, if not every single year. All of those are starting to dry up and so the growth is really coming from these different areas. But if we're intellectually honest about where we're spending most of our time, most of our time is being spent over here. Most of our money is definitely be spending over here. So it's really kind of interesting is that again, your monetization and retention is four to eight x the impact of your acquisition. And this isn't to say that you don't need to acquire customers. Obviously you're still gonna spend a lot of money and a lot of cash over on acquisition, but it is to say that you should probably audit how much time and how much money you're spending. These other two areas of growth that was kind of fascinating is that when we look at companies and we compare them, those who are strictly acquisition focused, so these companies that you're looking at right here, the only numbers that are improving in their business are their acquisition unit economics.
Patrick Campbell: So there are who is flat or getting worse, the retention is flat or getting worse. And when we compare those, the companies that are basically having all three of those levers improving, maybe not necessarily at the same rate. What we notice is that those companies that have a more balanced growth approach and are spending some time in those other areas are essentially growing. At nearly double the rate is those who are strictly focused on acquisition. That was kind of cool about this is that this gets worse. Um, everyone feel bad. No, it gets worse, I promise. Here's why it gets worse when we talk about like the why this is happening. What we find is a lot of us aren't talking to our customers. Everyone here know what customer development is and they want customer research, right? I ask any luminaries, silicon valley like, hey, if you boil everything down to one thing, what would that one thing be?
Patrick Campbell: A lot of times it's focused on your customer, right? We respond to that with, hey Steve jobs didn't talk to customers like I don't need to either. Right. We've seen a lot of that arrogance and we see this in the data as well. When we ask folks how many non sales conversations are you having with customers or non target or excuse me, target customers that non sales capacity. What we find is that we're talking to about 10 or less people on average per month and this is not just Johnny and Jane startups. This goes all the way up to companies that are doing 50 million or more. So we're not really talking to our customers and there's a lot of folks who respond to this and say like, Patrick, I don't talk to my customers, but I do a lot of ab testing and all that kind of fun stuff.
Patrick Campbell: And I didn't put the data in here, but the data indicates we're not actually doing a lot of that either. But here's the actual implication of this. We're actually building the wrong product when it comes from a value perspective. And to introduce this or to basically show you this data, I need to introduce a new model that you probably haven't seen before, but it's a nice little two by two. Any in the room? Yeah. Two by Twos, right. This is like your crack cocaine, right? You're really excited for this. Yeah. Alright. When you're thinking about value for any particular product, it doesn't matter if it's a cup of coffee, software, enterprise software, retail products, whatever it is. There's two axes of value. There's the actual features of that particular product, the attributes. So for a cup of coffee it's taste, its temperature, it's country of origin, and then there's also the actual willingness to pay.
Patrick Campbell: And what we can do is we can use some methodologies that we've talked about a lot. I'm not going to talk about it in this presentation, but I can definitely share after and we can actually survey a group using good statistical methodology and basically find out that that in this room, most of you care about taste, you're pretty indifferent about temperature and then there's some hipsters in the room who care about country of origin. But most of you don't care about country of origin right now, if we cross referenced this attribute data using another statistical methodology that we can use around willingness to pay, we can find out that those of you who care about taste, like really care about taste, that's the number one thing you care about. Your willingness to pay is about 25% more. Those of you who care about temperature, there's not a lot of you, but you're willing to pay about 20% less than the hipsters, about 40% more here.
Patrick Campbell: There's not a lot of them. They are willing to pay more. And with this model when we find a particular feature or an aspect of a product or an attribute that has high value from an attribute perspective and also high willingness to pay, that's when we have a differentiable feature. So these are the features you put into your premium tiers. These are the features you separate out from the core product. When we find a feature that's low value from an attribute perspective but also high willingness to pay, that's an add on something that's high value and low willingness to pay as a core feature. So you defend the core. And then finally my favorite quadrant trash. Okay, now we went out to, I believe it was 1300 different product leaders. These are vps or above people who are setting in roadmaps. We introduced this model to them and then we asked them, hey, for your last end features, and they picked just under 5,000 features.
Patrick Campbell: Where do you think they are in this quadrant? And this is what they said. So a lot of us, we think we're building really, really high value differentiable features. We're protecting the core a bit. We have some add ons and then there's some insecure folks amongst us who think they're building not so great products, right? These are the things they're like, oh, those damn salespeople told us we had to build this, that kind of stuff. Right. Now, what's interesting is that we went out to about a million customers of these products and we asked them using some of the methodologies that we have developed. Hey, where do you think basically these features are on the map and we didn't ask them like showing them this. We ask them some relative preference questions. We ask them some price elasticity questions and this is what the customer said.
Patrick Campbell: This is what we think we're building. This is what we're actually building and it's funny, right? It's like, oh, that's not me, right? We're all like, oh, not my company, not my product. We really audit where our customer research goes, where our prioritization of features goes. Oftentimes what ends up happening is we actually find out that we are in this particular category and to just scare you a little bit more. They're really clear winners and losers in this environment. So we separated out the upper core tile companies when it comes to customer research, meaning these are the people who have consumer insights teams, they have people dedicated to customer research conversations, surveys, quantitative analysis, all kinds of fun stuff to the people who are in the lower core tile. And what you found in about 2012 is that those people who were doing their research or were in the upper core tile of research, they were growing at about 15% more on an absolute basis.
Patrick Campbell: And here's what that split looks like now because of the market, because of what's happening where there's all that competition, there's all of those fun, big old, all those logos that we were seeing and all of a sudden we're not doing our homework and it's costing US growth and we're spending so much money on our acquisition, we're not spending money really on product. And really understanding those customers that has these serious implications on how you can actually grow your business and to kind of make you not want to kill me. Um, everyone feel bad. No, you guys are like whatever. What is great? Is that what I'm getting the vibe up? Okay. Well let's go through a couple of things. So I can't teach you, you know, customer development and there's a lot that's been written on it. I can't teach you the full pricing process in 20 minutes or however much time I have left right now, but I can give you a few very key layers that you should focus on in order to get your pricing right, but also kind of take advantage of some of the things that we found. Um, the first one is super blunt and super obvious. You got to make pricing a process. So anyone have a guess, that's the average amount of time per year a company spends on their pricing anyway.
Patrick Campbell: Just any guess how many minutes? I like that. Average amount of time is about 15 hours and that is basically the same across all different company sizes. Um, we've spent probably more than 15 hours picking out our toilet paper for offices. Like just to give you a perspective on what goes on in our companies. So when you make pricing a process, and what I mean by that is basically doing research and basically updating your pricing on a quarterly, every six months, every nine month basis. That doesn't mean actually raising the price. Here's some of the effects that you can see. So this top line here, companies that are basically updating something about their pricing, not just the number but their packaging, their positioning, they're updating every single quarter down here. People who are basically haven't updated their pricing in three years and the lift is on ARPU.
Patrick Campbell: So is the old adage of, hey, if you focus on something, you will improve it. And if you just focus on basically something around your pricing and you don't necessarily have to update every quarter, even if you just get into a cadence of every year or every six months, you will start to see what those gains look like. Mainly because you'll start to discover where those kind of discrepancies in value. You actually have within your business and your customer. Now it's interesting a little bit more practically. The one thing if you're not using it is utilize what's called a value metric. So a value metric is what you charge for. So it can be per user, per hundred visits, per thousand videos, whatever it is for your particular business. Give you a couple of examples. We all heard the inner comp probably right? So intercom, their value metric is based on the number of people, their messaging service and basically the number of people that go through the service.
Patrick Campbell: You have a competitor called Drift. Everyone here heard of Drift, very loud, hard to ignore, right? Um, they're in Boston with us, so I like to give them shit anyways, but Drift. What's interesting is that same type of product, they say they're not competitors, they are competitors. And what you're looking at is they have an element of contacts but also an element of users, right? And this is the reason that they do this is because they're targeting salespeople who are a little bit more keen to go after per user pricing. Whereas Intercom is focused on all types of different types of buyers from salespeople, support people, et cetera, so they need a little bit more of an averaged or a generic type of value metric. Now what's interesting about this, the why the value metric is so important is because it helps not only with the expansion revenue but also with your churn and just your growth in general.
Patrick Campbell: So to give you a perspective, what we did is we split out companies that weren't using a value metric versus those who were using a value metric and this is what growth looked like. So essentially non-value metric because of the feature kind of decline that we saw in the earlier part of the presentation, they're basically declining in their growth. Folks using value metrics are basically growing pretty substantially. And the reason for this is because people are paying for exactly what they're using as they use more, they're able to pay more. And it was kind of fascinating about this is that this also affects gross churn pretty substantially. So what you're looking at here for about 6,000 companies, these are the featured differentiated companies. So no value metrics. This is what their gross churn looks like. These are the folks who are using value metrics. They're at about half.
Patrick Campbell: And again, because if I'm buying what I want or what I'm actually using, if I stopped using it and I pay less and I don't have a reason to churn, the reasons I'm going to start churning are probably going to be because I go out of business. Maybe I don't like the product anymore, whole host of other things. But it's not because I'm paying too much or there's too much of a value differential. So use a value metric. If you get this one thing right, mostly everything else in your pricing can be wrong and you're still going to be okay. Um, there's a lot of resources we've written on how to basically pick your value metric. So happy to share those afterwards. And then the final thing here, if you don't want to do any work and you just want to do something super, super tactical, um, is used what's called price localization.
Patrick Campbell: So what I mean by this is make sure that you're priced, if you have let's say 15% or more of your traffic outside of your home region, I'm assuming most of you are based in the United States, but if you have 15% or more of your customer base outside of the United States, you should make sure that those main other regions that you're in have different price points. And the reason for this is because there's different willingness as the pay because there's different density in different markets. There's also different costs of living. And so when you look at essentially companies that are doing price localization on some level, even those who are just doing cosmetic localization, meaning there's not a different price point, it's literally just the currency symbol changes. They're seeing some boosts and growth. And then those folks who are actually putting different market demand prices in different regions, they're seeing even more growth.
Patrick Campbell: And it's because there's just different willingness to pay where you're looking at here, his willingness to pay for an aggregate of products, uh, compared to the United States. And what you'll normally see is folks like the Nordics in Western Europe, about 20 to 30% more higher willingness to pay than the u s on average. And then obviously folks in Southeast Asia, Brazil typically, you know, tend to tend to 20% less willingness to pay than folks in the United States just because these are different markets. This is a really, really good tactical thing. If you haven't done a lot of pricing and you have basically those folks who are outside of the your home region basically paying you, this is a really good and easy thing to kick off with because it's super tactical, it's super straightforward. You don't have to change your packaging, you don't have to change anything else. You can just focus on basically those price points.
Patrick Campbell: So kind of wrap things up here before any questions. Um, growth is getting more difficult. I think it's one of those things that we all Kinda know is happening. What the gold rush, particularly in the subscription space, but also just in kind of net acquisition. The gold rush is basically at a tent. A lot of us, what we're doing is not really kind of shifting our tactics. We're basically saying, hey, we're just going to act like the gold rush is still here. Unfortunately, that's going to have some pretty bad implications on your business. Um, talk to your customers. That's a huge thing. I know you've heard that before. A lot of us aren't actually doing it. Um, that's something that's gonna help a lot. And then these three pieces around pricing I think are pretty crucial and they're kind of in an order of, hey, I want to jump a hole in.
Patrick Campbell: I don't want to jump all in, but I want to hedge myself, or I just want to start something super tactically. Stuff that, that can work out really well. The big thing here and the reason that we're able to kind of study this as we focus a lot on the fundamentals of what actually builds a business and think that a lot of us, because of that gold rush mentality, we're focusing a lot on best practices. So I encourage you to make sure that you're kind of focusing on the right things. It's going to be different for every business, but it is something where you have to go where the growth is actually coming from. And I know a lot of you aren't going to do this, um, you're going to keep doing what you have been doing, but I will tell you all of the data, all of the marketing data indicates that that is no longer going to work. There is going to more and more of a reckoning. We're already starting to see it in certain verticals and it is one of those things that needs to be taken care of. Thank you. It's my email address.
Patrick Campbell: There we go. That's my email address if you want kind of the how or some of the more tactical aspects. But I'm more than happy to answer any questions.
Speaker 1: Cool. [inaudible] yeah.
Speaker 3: Hi. So I would like to know, um, you know this, so we're, we're, we're the intranet, the velocity or the, the, you know, uh, the business itself has accelerated like the, the pace of change. Uh, so what is, what does your research tell you about, you know, the expectations are, you know, the customers or users of, you know, various products. Uh, they're, you know, sort of expectations are, you know, features change, you know, requirement. Uh, cause it's like, you know, our transition phase that is happening in businesses or all I'll go, cause you know, even in like my MBA marketing one-on-one, we read that, uh, you know, customer retained is like, you know, eight times more valuable. So that's like a repeat, you know, what we are sort of listening over here. Uh, but, but what about, you know, the customer side, their fetal expectation piece, how much, you know, so also if people are saying that, you know, they are not sort of innovative. Is it also because you know, the customer environment is shifting, you know, sort of is now much more dynamic compared to previously.
Patrick Campbell: Do you want to chunk that down into one? What's the one question that comes, yeah,
Speaker 3: So you know, what, how much is the, you know, customers set of expectations also changing because that is now much more fluid.
Patrick Campbell: No, 10 years back, totally. Customer expectations are changing pretty dramatically. That's why we're seeing some of this reactive data in the market. And if you think about it in context, like, I don't know how old everyone in the room is, but if you gave someone like a database, you know, 20 years ago or 30 years ago even, they were like, oh my God, you're a God right now. We're all like, it doesn't have good support and good UI and I don't like their office dog's like, I'm not going to use the product. Right? Like I'm being dramatic for effect. But like that's, that's where that a lot of the expectations have changed. Like a lot of what we're building and there are still things that, that fly against this convention, but a lot of the things that we're building just aren't magical anymore. Um, as they once were and there's a lot of magic we're still building but it's not in like the CRM space.
Patrick Campbell: Right. Um, and if we can find those things that have that really high value then than we have that magic that we can go after. But it's one of those things you have to understand where that value is because 10, 15 years ago you could just throw a bunch of stuff up against the wall and see what stuck. And you saw this in like how people grew. They were just like, let's get as many features as possible. Just cause there was, there was nothing out there. So everything you put out there like on a good, you know, probability was probably going to be valuable to thank you. Yeah.
Speaker 4: Would it be a wedding? Like would it be an important metric to sort of have an index which sort of tracks, you know, the change in terms of, you know, customers yes. Feed you those expectations.
Patrick Campbell: Yeah. It, it would be good, yeah. To have something like that. We're coming out with a couple of indices, um, for our content around like growth and churn and things like that and hopefully around like willingness to pay as well.
Speaker 4: All right. Uh, what's, what are your views on having no pricing on your website? Like just a free trial and contact us?
Patrick Campbell: Yeah, so not having your pricing publicly. Um, there's, there's only typically two reasons you don't want to have your pricing on your website. It's so early on you have no idea what the hell you're doing and you have no idea what it's gonna look like. And so you're optimizing for people who are willing to get on the phone with you and go through all that friction because they're the ones who really care. And you're going to have some people who are just, you know, waste of time, but you're going to have a lot of people who like are going to give you that, that fidelity around the information that you need to get your pricing out there. The other reason is if you look at your customer base and basically you have a lot of like it's still a core product but every deal looks a little bit different.
Patrick Campbell: I'm sure you see this in like upper mid market and the enterprise type products where hey like every deal is a little bit different. The price intelligently side is kind of like this, but we still offer some context on like pricing starts at and the reason you want to do that is because you don't want at scale basically to waste your sales team is time. Um, and basically you want to make sure that they're getting really good leads and you don't want to necessarily have them go through really complicated qualifying processes. And so I would recommend that do your research to get your pricing out there. At least the pricing context out there, unless you fall into like one of those two categories. Okay. Thank you.
Speaker 4: Hi, I'm, I'm a product manager. That'd be at a SaaS company. Cool. And, uh, we have kind of, I think like a lot of people, kind of two different pricing areas. We've got our enterprise pricing area where we don't publish the prices and we've got our as kind of low touch self-serve pricing area where we are very transparent and customers sign themselves up. Um, we spend time pretty regularly talking about our pricing update and pricing, but mostly on the enterprise side. And it's, I feel like partly because that's where we're focused as a company, but it's also easier, uh, to update those prices because they're sort of mostly internal and it's a bit of a negotiation anyway, once you're talking to the customer. Yeah, exactly. But when I'm kind of curious about is, you made me sort of realize, and I thought of this before, is we haven't really done much, if anything with our self serve prices in quite awhile.
Speaker 4: Yeah. um, and so, you know, I'm starting to think, you know, what's the opportunity there? There's some hurdles, there's some challenges and it seems like a perfect place to run some experiments. Like what is that sweet spot to where you're, you're maximizing revenue but not deterring customers because the price point is too high. And how do you that out? And the types of hurdles I'm thinking of is we've got, you know, data, data, Schema challenges, right? How do you implement like an abstraction layer that lets engineers and pms play with the pricing? Can you even legally charge customer a, a price and customer be a different price for the same service? Do you have any tips on lightweight ways of experimenting and playing with pricing to get valuable insights?
Patrick Campbell: So couple of, couple of fun, fun, fun things there. So one, um, normally what we recommend doing is doing a lot more research upfront before you do a lot more testing on like ab or multivariate testing on your price points in particular, not because of any like legal implications but because most of us, especially if we're in B2B, we don't have the traffic to truly do a multivariate test cause we're not talking about like price a versus price B. We're talking about package a, package B, package c, positioning, a positioning, the price a like there's a, there's a lot going on. Um, and so that's why normally to kind of avoid some of the problems you're talking about if you do a lot of your research up front, some of the methodologies that we've developed and that are also, there's some that are open source.
Patrick Campbell: Like you can get really, really close to what reality looks like. You're never going to truly know until like you put it out there. But normally you can hedge a lot of that risk just by doing some research, like our pricing. Um, our pricing product, like we can get to plus or minus 3% on a segment basis. Um, the ones that you can use just using excel and not really anything complicated. It can get probably close to plus or minus 20%, which I know is a big swing, but like you can make it more complicated to bring that swing down essentially. Um, and so I would normally recommend doing some research before you actually jump in and do something. Um, more testing like now around like the Schema problem. I think that's where a billing system, a really good billing system comes into play. And I know that it's a little oxymoronic to say a really good billing system because like, no one's ever happy with their billing system.
Patrick Campbell: Right. Um, it's because billing is really hard. I know we all are like, oh, screw that billing system, et Cetera of a billing. Like making it like 100%, like from a service level is really hard. And so those products, they tend to look very enterprisey, but if you have a decent one, like normally a lot of that can be taken and taken away and non-engineers can go in there and like Futz with stuff. I'm now on the legal side. I'm not a lawyer. It's super tough. Um, there hasn't been a price discrimination suit that was as you described, that went anywhere, if that makes sense. Um, there have been price discrimination suits in like the finance space when people were very specifically targeting different like classes and races. Um, and those did go somewhere. But normally you're more avoiding a PR problem. Um, you know, Amazon has this occasionally where like grandma on the west coast, he's a different price than, you know, so-and-so on the east coast and they're like, oh, what's going on? Right. But Amazon's testing prices constantly. Um, and the orbits had a problem where it wasn't legally a problem, but they basically, if you're using a Mac just didn't show you the cheap options and that worked out well for them, but then it turned into like an issue. Right. So that's why the research I think hedges a lot of those problems I would argue. Yeah. Yeah. One last question. Yeah. We've written a shit ton on that. So like I'm more than happy to share like a bunch of stuff. Yeah. Hi,
Speaker 5: great talk and you, um, two quick questions. One is about willing willingness to pay. Yeah. What does that even mean? Like how do you there any methodology? Is there a property of the market or property of the, of the product? Like how does that fit? I find it to be like a big blob of uncertainty.
Patrick Campbell: So come, let me answer that quickly. Um, I can share some resources on how you can actually measure it. There are some questions that you can ask and there's some different types of methodologies. But the answer to what it means is you want to measure what's called price elasticity. So I don't know if you remember from like your high school or college econ class. Like it's basically a measure of if I change my price, what's going to be the gain or loss in my number of customers. And so it's, it's a nice curve and like when we look at something that's very commoditized, it's very rigid. If you look at something like AI, which no one knows how to value, it's a very, very broad, right. So that's what I'm talking about when I talk about willingness to pay is actually getting to a range of, of prices for a segment of customers essentially. Yeah.
Speaker 5: And secondly, maybe I missed the beginning, but can you elaborate a little bit about the, um, companies that were studied in this research? What type of companies? So we did you see any kind of, uh, different across segments?
Patrick Campbell: Question. So we work strictly with subscription companies and that means B2B, SAS, B to c, SAS box of the month, subscription, e-commerce, subscription media. Um, I would say most of this data, it, the reason we'll show aggregate data is because when we break it down in a segment by segment basis, not a lot changes. Like it might not be 150% increase, it might be 155% increase, but the trend still still holds. Um, I would say yeah, on a lot of the stuff we talked about, um, there aren't huge differences amongst a lot of the verticals cause we talked about a lot of high level trends. Um, but there I can, you know, share some like vertical specific differences that I think would be interesting depending on, you know, your business and what you're hurting. Thank you. Awesome. Thanks bro. Appreciate. Thanks everyone.
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