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How to make pricing a positive part of your customer experience

360 Magazine 
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How to make pricing a positive part of your customer experience

The marketing can be great. The process of buying can be smooth. The service and support can be top-notch. If customers are surprised or offended by how much something costs, though, it becomes a memorable part of a poor experience. Marcos Rivera is here to help you avoid that.

Based in San Diego, where he is the founder of a consultancy called Pricing I/O, Rivera has authored a book called Street Pricing: A Pricing Playlist for Hip Leaders In B2B SaaS. As the title suggests, Rivera noticed during his time in product management roles how often those in the software-as-a-service (SaaS) space are challenged to ensure pricing is a positive part of their customer experience.

Marcos Rivera,
Pricing I/O

“It’s not just a matter of factoring in all the users of your product — there’s also the buyers as well. And in B2B, they tend to be not the same person,” he told 360 Magazine. “You’re having to satisfy both audiences, with a pricing model that is easy to understand. Feeling like you’re getting a fair value for what you’re paying, that you can predict what you’re paying or you can control it to some degree — all things matter in the full experience of the product.”

Rivera provided more detail on the connection between pricing and CX during a recent call. This interview has been edited and condensed.

You talk in the book about the art of “packaging.” What do you mean by that in the context of pricing?

I use packaging with a capital P to mean more than what you might think. When I think of packaging, I think of the offer mix, which is the experience that you’re selling to that target audience. That experience includes how they get started: training, onboarding, implementation, the product itself, and then of course, you know, how you support them over time.

There are different ways to approach that kind of packaging. There’s the hamburger technique, where you have a base fee — which is your top button.  You have your meat in the middle, which is usually usage based pricing, and then you have your bun on the bottom, which can be services. There are many different ways to architect your entire pricing model and the packaging is all about creating those experiences.

If it’s a SaaS product that any employee can buy with a credit card, you might see a page with a basic/pro/advanced pricing grid. But for the most part, many B2B companies are notorious for never listing pricing on their web site or other digital channels. Is there a good rule of thumb on how to make pricing a more visible part of the early customer journey?

If you’re looking at $100,000 or bigger spends, you typically have more than one person in the process. You’ve got to get the budget approved, go through procurement and all that kind of stuff. And those customers typically have what I call “snowflake” or special needs. They need to make sure you could meet them because these bigger spins of the wheel also come with bigger risks. When you publish your pricing in those cases, you may not be able to capture all those nuances and specifics that come into play. And you may end up artificially low-balling yourself or throwing out a number. Then it’s a bit of miscommunication.

But what if you’re in the middle in terms of purchase size? This is where it gets a little bit fun. You can say, “Starting from or as low as” to get them going and then it scales from there.

One thing that I think really helps is to tell them what your pricing is based on. If pricing depends on the number of users, the number of API calls, the number of emails or the number of text messages.

We’re having this conversation in the midst of a recession. How can companies address tough conversations with customers that want to renegotiate their contracts, especially if they need to increase prices to address their own financial uncertainty?

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One of the things that I’ve been seeing is a lot of SaaS providers going out there and actually asking for an increase to cover some of the increased costs on their end. The right way to do it is to frame it with, “By the way, we have already increased some efficiencies and innovation to offset some of our additional costs.” You have to show you’re also increasing the value. Some of your bigger clients, the ones that are really relying on you, usually find an increase understandable in that context. But what about the ones that don’t? What about the ones that are maybe in hitting a tough industry and are seeing revenues drop and getting pinched?

One of the techniques you can use there are what are called step downs, where you can actually step them down from their plan to a lower plan. They can save a little bit on their funds, which means you keep them as a customer, but in exchange for that step down, they have to sign up for another year.

In other cases, the volume of what they’re buying or using from you is going down because, frankly, their transactions are going down. That’s when you can consider giving them a bump up in in support and onboarding. You can give them a high value service that helps them use the product more or better to get more value. If they truly need to pause, charge them a very small amount to keep their data around, keep it secure and then bring it back up at an agreed-upon timeframe.

How can companies capture the voice of the customer in a way that helps a company ensure they’re offering true value for the price they’re charging?

Man oh, man, that is a great question, because it hits into the heart of the contents of the book. There is actually one chapter that talks about analyzing what customers are doing and another one about what customers are saying. And you have to be able to reconcile both. One of the biggest mistakes companies make is they’ll straight-up ask the customer: ‘So how much are you willing to pay for this?’ What happens is that customer will either mislead you and lie, or they honestly don’t know. They just understand the pain and the problem that they’re experiencing.

In your structured interviews – and product managers and marketing people are really great seats to do this – d as you’re asking them about their problem and what and how they’re approaching it, also ask, ‘What’s it worth to you? What does it mean to you? How much would it cost you to make this right if this product didn’t exist?’ Instead of asking the customer about the price to get a lie, ask the customer about value to get the truth.

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