May 6, 2019
Why you have to check out today’s podcast:
- Find out how subscription-based pricing works for software B2B companies
- Discover the metrics and criteria you need to track your SaaS subscription business
- Know the pros and cons of feature-based pricing model for SaaS
Ryan Glushkoff founded Fraction8, a consulting firm
focused on delivering pricing and product marketing expertise for
business to business (B2B) software companies. He worked in
the software industry for a massive 20 years and has relevant
experience in both pre-sales and post-sales for the mass-market and
custom-enterprise type of software companies. These
opportunities gave him an advantage in understanding how SaaS
(software as a service) companies need to position, price, and
market themselves for success. He was a student of Mark who
took the first Price class in his Pragmatic Marketing
course.
In this episode, Ryan shares the foundations of his career in pricing and his exposure in the B2B software market which paved the way of starting his consulting firm catering to the same market. His insights into the evolution of pricing, risks in changing the pricing structure, and the concept of feature-based pricing model.
Get an in-depth explanation of the pricing metrics of subscriptions – the three essential criteria and the process of identifying the appropriate metrics for customers.
“Talk to your market, whether that be your customers, your prospects, your churn customers or your white space prospects that you’ve never spoken with before in your town. Get out there and talk to them because there is no substitute for hearing from them firsthand.”
– Ryan Glushkoff
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Topics Covered:
01:35 – Ryan’s core beliefs in pricing and how his pricing career started
02:15 – Working at Disney where he was first exposed in pricing and where he met his wife
03:01 – His experience in B2B software providers in a marketing capacity and eventually starting his own company
04:07 – Focusing his market on software subscriptions in B2B companies
05:53 – How Disney figure out how to offer their packages to families with the B2C approach
07:20 – Subscription pricing vs. normal pricing
08:36 – Defining the concept of metrics in software subscription
10:07 – Three (3) important criteria of pricing metrics: Alignment with business, easy to understand,and scalability
11:54 – Walking through the process of identifying the right pricing metrics for customers: brainstorming, surveying the market, segmentation, and pricing evaluation
15:59 – Ryan’s thoughts on pricing evolution and his advice on that
19:13 – Why companies need to be cautious when updating their pricing structure
22:43 – The strategy of raising prices with new customers and the risks involved
24:20 – Two (2) important pricing advice to the audience: Get out there and talk to your customers and choose a pricing metric that is not feature-based.
26:23 – Citing an example of a feature-based pricing metric
Key Takeaways:
“One of my core beliefs is that pricing is a blend of art and science together. You got to be good with numbers of course because it is pricing after all, but you have to also be very good at discerning behavioral patterns that you are not easily visible in the market.”– Ryan Glushkoff
“Subscription pricing means that you as the buyer agree to pay a fee in perpetuity or at least until the end of your contract term in exchange for a product or services that are rendered to you. (While) Non-Subscription pricing means that you're obligated to pay only once, or at least according to the payment terms of your contract.”– Ryan Glushkoff
“How the customer pays do not necessarily have to align with the value derived. Although I would submit to you that it works out better economically for the vendor if the pricing is aligned to the value created by the product per surface. And that's the whole value metric side and software subscription.”– Ryan Glushkoff
“You have to be careful with customers though because a paying customer is better than a churned customer even if they aren't as profitable as you'd like them to be.” – Ryan Glushkoff
Resources Mentioned:
Monetizing Innovation: How Smart
Companies Design the Product Around the Price
Connect with Ryan Glushkoff:
Connect with Mark Stiving