Are you leaving too much money on the table?

Pricing is not a "set it and forget it" task

Feb 08, 2024

Dear GTM Strategist!

I love to think of pricing as the only element of the marketing mix that makes money, and others spend it.

As a savvy business person, I am sure that you are as excited as I am about this post, which will be dedicated to pricing.

This is how I see pricing - it is a unit of value exchange that the product creates for the target audience. It is our job to capture some of this value to build sustainable business models.

Makes perfect sense, doesn’t it?

Then why, oh why, do many go-to-market companies treat pricing as a “set it and forget it” task and hesitate to change prices even though their products (=value added) got much better and everything else got more expensive?

The answer is loss aversion.

We are afraid that we are going to be rejected.

Or lost something that we consider to be already ours.

Here is the worst example of it:

I mentored an analytics company - Supreme Product. One of their first customers was a Fortune 500 company from the US - well, one of the top 5 Fortune 500 companies.

Yet, this team set up the most devastating pricing for them - a fixed fee of $10,000 a year.

In theory, this could be a wonderful use case and a foot in the door to many other lucrative deals.

But what it did for the team was to suffocate their product roadmap. They got so dependent on the client that they nearly turned to their internal agency. There was no way out. The deal was signed for a year and was a dumped game.

Everyone has a pricing horror story or two to share. In my 20s, I accidentally sold a full-stack marketing service to a US client. I thought $1500 was a lot of money - it really was not, after they put me “in charge of their sales” and called me at freaking 2 am in the morning on WhatsApp because they did not like the creatives in the newsletter.

You win some, you lose some.
As long as you are learning, you are winning.

So let’s hop in the nitty gritty of pricing and get better at it together.

Lesson 1: The Holy Grail of pricing is the Value Metric

A value metric is a quantifiable measurement used to determine and measure the value exchanged. It is a specific unit of measurement that aligns with the customer's perceived value and reflects the benefit or usage of the product. It makes it fair for a user.

Best-in-class companies use value metrics in their pricing. I did a study of the best examples and even verified some cases with product managers and growth leaders there.

Here are some great examples of value metrics:

Lesson 2: You can test pricing before your product is even built

To test the willingness to pay, you do not always have to run some fancy surveys. You can just go out and talk to your prospects, or better yet - presell to them. Most of the time, in GTM, if you are not a super-established company, the first attempt at price is a guessing game backed by competition, market, and customer research. You work from there onward. Instead of overthink pricing go out and do the job.

In this week’s extremely valuable GTM Strategist Podcast with B2B SaaS Pricing Expert and best-selling author Ulrik Lehrskov-Schmidt, we touched upon all these methods and much more. He also shared his frameworks on how to inform clients that the product will become more expensive. A great episode. Take it for a spin.

Listen to the insightful episode here: Apple Podcasts | Spotify

Lesson 3: Pricing is “not set it and forget" it” job

You set up a price, and the offer landed - now what?

Time to get into the wild waters of price experimentation, buddy.

Paddle’s research says:

If you increase monetization by 1%, you can see a 12 to 16% increase in revenue.

This is 4x the impact that you would have if you would optimize acquisition by 1%.

Your turn:

Listen to this incredible episode with Ulrik to fuel your price-setting engine
Listen to the podcast episode on pricing and packaging with Aakash Gupta
What could your value metric be? Comment or reply to this email to discuss it.
We are working on a reading list for pricing with Denny Klisch. Here is our v0.1. You are welcome to pitch in with suggestions. ✌️

My turn:

I want to hear back from you and your challenges with GTM strategies. I would be most grateful if you take this short survey which will take only 2 minutes of your time. Free gift at the end of the survey! 🎁

Take the Survey

I have a b-day this Sunday. My goal is to help 10,000 businesses with our take on science this year. Who could you recommend the GTM Strategist book to? Or just hit me a review.
Last week, I had a great webinar with Userpilot. There were so many questions that we couldn’t cover everything, so I promised them to return for another session. So later on today, I have a Q&A with Userpilot. Join here!

And that is all for this week.
Thanks for reading.

Next week, we will dive into an exciting world of sales, getting larger clients and account-based marketing (ABM).

Buckle up and let’s go to market!

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