How to Raise Prices without Losing Customers

In this episode of The Faces of Business, we welcome Mark Stiving, Ph.D., the mastermind behind Impact Pricing, to share his insights that can help B2B companies get more revenue for their products and services.

In this episode of The Faces of Business, we welcome Mark Stiving, Ph.D., the mastermind behind Impact Pricing, to share his insights that can help B2B companies get more revenue for their products and services.

Few voices resonate with the clarity, insight, and expertise of Mark Stiving. With over a quarter-century dedicated to demystifying the complexities of pricing, Mark helps organizations navigate the turbulent waters of market dynamics. His profound understanding of buyer behavior, combined with a unique ability to distill pricing strategies into actionable insights, has cemented his reputation as a sound advisor in the realms of pricing and value maximization.

Mark’s journey is a testament to his dedication to empowering businesses. As the author of pivotal works such as “Impact Pricing,” “Win Keep Grow,” and “Selling Value,” Mark has equipped countless professionals with the tools to harness the true potential of strategic pricing.

Download our free business valuation guide here to understand more about business valuations and view our business valuation FAQs to answer the most common valuation questions.

Impact Pricing is a go-to advisor for private equity firms and SMBs, crafting strategies that pivot on customer value to secure market-leading profits. Mark helps clients master the art of value-based pricing and packaging. Mark’s insights have helped businesses find hidden value and profits.

Mark’s approach is not just about numbers; it’s about understanding the psychological underpinnings of buying decisions and aligning your offerings to the perceived value. Whether you’re grappling with pricing dilemmas or seeking to understand the nuances of value proposition, Mark’s expertise is sure to clarify the path to growth and sustainability.

Damon excitedly begins today’s session by welcoming Mark to the show. He requests Mark to share the journey of how he got to where he is today. The host is curious about where to begin, acknowledging pricing involves more than just calculating costs and desired margins.

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Mark, in his maiden livestream session, recalls a childhood memory of questioning pricing tactics at a grocery store, which later inspired his research during his doctoral program at UC Berkeley on the effectiveness of prices ending in nine. This experience fascinated him with pricing’s impact on purchasing decisions. He introduces the concept of value-based pricing, and its profitability for any company by charging what a customer is willing to pay. He acknowledges the challenge of determining customer willingness to pay, stressing the need for strategies to approximate it.

Damon inquires about the interesting questions or challenges Mark has encountered while working with clients on pricing strategies.

The pricing wizard expands on the complexity of pricing beyond simply assigning a number to a product. Charging must be based on what customers are willing to pay. Mark considers scenarios where customers receive varying levels of value despite paying the same price, suggesting factors like use cases, market segments, and usage differences as potential reasons. There is the necessity of diving deep into understanding customer value to develop effective pricing strategies.

Get the most value for your business by understanding the process and preparing for the sale with information here on our Selling a Business page.

Mark outlines a comprehensive approach to pricing, including defining market segments, building product portfolios, determining pricing metrics, enabling price segmentation, and training salespeople on value.

Similarly, the guest talks about the psychological aspect of pricing, when businesses fear losing customers when considering price increases. He dismisses across-the-board price hikes as risky due to potential customer backlash. Instead, he suggests a strategic approach to raising prices, focusing on which customers, products, and situations are suitable for adjustments.

Mark uses examples, like a gym membership or Netflix subscription, to illustrate how different customers respond to price increases based on their usage and loyalty.

Damon poses a thought-provoking question, asking Mark to estimate how much businesses are typically missing out on in terms of potential revenue when they encounter pricing challenges.

Mark acknowledges the difficulty in precisely quantifying missed revenue opportunities for businesses struggling with pricing. However, he asserts that it’s rare for him to work with a company without achieving at least a 5% increase in revenue, which translates directly to profit.

The guest shares an example of a client who raised prices by 180% on a product with no competition, resulting in a substantial increase in revenue without impacting sales. He recommends a two-phase backup plan, first offering a grace period or loyalty discount, and if necessary, reverting to the original price to retain customers.

Damon seeks Mark’s reflections on how often he encounters instances where companies realize overlooked aspects of their offerings. He thinks such discoveries could lead to significant opportunities, perhaps even creating a blue ocean strategy.

Mark responds by introducing a four-column framework—solution, problem, result, and value—to help companies identify what value means to their customers. He discusses the challenge of articulating the problem that the product solves and attributes it to the curse of knowledge, where companies know so much about their product that they struggle to empathize with customers’ perspectives.

The pricing guru explains the process of connecting the solution to the problem and the resulting value, particularly in the context of B2B companies where value is measured in incremental profit.

Damon suggests that pricing sessions led by Mark likely generate a wealth of additional ideas for features and services that enhance the value customers receive from the product.

Mark elaborates on Damon’s point, discussing the segmentation approach, where different market segments are targeted with varied pricing tiers to match their perceived value. Mark recommends training salespeople to effectively communicate the value proposition to customers, facilitating collaborative value conversations.

Damon reads a question asked by Beatrice, one of the participants. She wants to know about leveraging AI, specifically ChatGPT, to streamline her research and data parsing tasks. However, she faces a challenge as he doesn’t want to decrease her monthly fee structure, which is based on hourly rates. She seeks advice on how to accommodate the time-saving benefits of AI while still delivering value to her clients and maintaining her current billing structure.

The guest advises Beatrice to reconsider her billing structure, suggesting that she stop billing hourly and focus on selling results instead. In his view, clients are more interested in purchasing solutions to their problems rather than paying for hours.

Damon asks Mark about further exploration into the various ways customers perceive value in a product or service.

Mark introduces the concept of “Will AI versus Which One;” mentioning how consumers approach purchasing decisions. He explains that most people first decide whether they buy in a product category before selecting a specific product. He exemplifies buying a new refrigerator or replacing a broken iPhone to illustrate this concept.

Damon asks Mark about his experience in pricing. He inquires about the most intriguing aspects Mark has encountered while working on pricing strategies.

While talking about the challenges he faces when his established frameworks don’t apply, Mark explains the difficulty in selling value with platforms due to their broad applicability across various industries and use cases. However, he suggests a solution by advising platform sellers to identify the most valuable use case and create a tailored solution for it, allowing for differentiated and value-based pricing.

Damon, interested in exploring Mark’s recent experiences with AI and a custom GPT model, seeks Mark’s insights on the intersection of AI and future pricing strategies.

Mark reflects on his initial skepticism towards AI and his journey toward utilizing it more effectively. He describes his development of a custom GPT model tailored for pricing queries, which has enhanced his ability to provide reliable answers to pricing-related questions. He also touches on the growing role of AI in dynamic pricing and data analysis, particularly in B2C. He also mentions businesses’ concerns about transparency and the “black box” nature of AI algorithms. However, he sees AI as a valuable tool with significant potential for improving pricing strategies.

The show ends with Damon thanking Mark for his time.

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50:21
SUMMARY KEYWORDS
customers, pricing, price, product, selling, ai, people, company, talking, gpt, find, buy, salespeople, today, solution, netflix, raise, platform, pay, value based pricing
SPEAKERS
Mark Stiving, Damon Pistulka

Damon Pistulka 00:00
Cool. All right, everyone, welcome once again, the faces of business. I’m your host, Damon Pistulka. And I am excited for our guest today because we have marks diving with us today. And we’re going to be talking about how to raise prices without losing customers. Mark, thanks for being here today. Thank

Mark Stiving 00:23
you, Damon. It’s gonna be fun. And by the way, this is my first live stream ever any. So this pretty fun. Nice.

Damon Pistulka 00:30
I feel honored to have be the first this is cool.

Mark Stiving 00:36
Well, hundreds of podcasts but never live stream. So yeah, do it.

Damon Pistulka 00:39
Let’s do it. Let’s do it. So your mark, you got a company formed a while ago impact pricing. You’ve been helping people for a while now teaching people on pricing, helping companies work on their pricing. So we always like to start out with how did you get doing what you are today kind of give us the history and how this really evolved?

Mark Stiving 01:10
Okay, you asked for it. Right? There we go. I remember being 12 years old, and going to the grocery with my mom and seeing prices that ended in nine, right 6999 Captain Crunch is $1.99. So why do they do that? Do they think we’re stupid. Or we know 199 Is to box. So 20 years later, I’m in a doctoral program at UC Berkeley, I get a chance to play with scanner panel data. Now this is the data that grocery stores collect when you use your loyalty cards. And I got to test whether this nine cent thing really works or not turns out it does. And it works because we are lazy subtractors I became addicted to understanding how people use prices to make purchase decisions. And from there, it’s just gone on. And I can give you the whole history. But that’s the fun part.

Damon Pistulka 02:10
No, let’s let’s hear a little bit more though. Because you know, you don’t. I mean, you just don’t run into people that that have studied pricing, applied pricing and worked on pricing like like yourself. So what I mean, so it was interesting as you’re young, and then you talked about that you were in your you got a PhD in pricing. So you you you’ve studied this a lot, what really interests you so much about this, that you continued your education and now as as a professional career?

Mark Stiving 02:43
Yeah, I think the thing. I also have a podcast that I talked about pricing on a lot. And when I have people who are in pricing, I asked them the question, you know, how’d you get into pricing, and everybody falls into it, Oh, I gotta sign this job, oh, I just had this role. And I didn’t fall into it. But we all come to the same conclusion. And that is that nobody understands it. And it’s possibly the single most powerful thing any company can do. And the idea that people don’t understand it is insane to me. Think about how much time and energy you spend deciding what product you want to put together, or deciding what marketing program you’re going to put out there or training your sales force. And now how much time do you spend on your pricing. And yet, pricing is a much more powerful lever than those other three. So it’s amazing to me that people don’t understand it. And it’s just has so much power.

Damon Pistulka 03:45
Yes, there’s just a ton that’s gonna come out of my brain here really fast, hopefully not too fast. We talked about before we got on that you’re helping people. And usually you’re gonna help a company that’s best your own company portfolio, private equity portfolio company, you’re gonna help tech related could be software, those kinds of people pricing, and I was thinking about that as you were talking. And I’m like, Oh, my goodness, it’s not like I have $5 in cost in this widget and $5 in this cost. And I want to make a certain margin. So I put that together. It’s a lot more complex than that when you’re working with some of these, especially an end product kind of thing. Where the heck do you really start?

Mark Stiving 04:31
Well, I have a lot of Mark isms, truisms that I just use all the time. And the one that I will that is implied by the question that you ask is what is value based pricing? Right. So value based pricing is the most profitable pricing technique that any company could ever adopt. And I’m going to define it for you really simply charge what a customer is willing to pay. Right has nothing to do with your call costs. So if a customer is willing to pay you $100, if it costs you 10, you charge 100. If it costs you 50, you charge 100. If it costs you 150, you don’t sell to that customer. Yeah, right. But but it’s that customers willingness to pay the driver pricing. Okay, it was really easy to say, it’s impossible to do. You can’t read a customer’s mind. So now the question becomes, what are the things you can do to get closer and closer to capturing each customer’s willingness to pay? Yeah, and it takes work, right. It takes thought?

Damon Pistulka 05:37
Why was it is it’s a great point, because that that really, yes, we’re talking about tech companies and the kind of ones you were you work with. But it also it’s about anything is could be the end product of a pen, or it could be the car, it could be whatever, it’s really not the cost as much as is. And margin is really about what does someone want to pay for that?

Mark Stiving 05:58
Absolutely. Right. Yeah.

Damon Pistulka 06:02
So as you’re doing this, what are some of the some what are some of the interesting questions or some challenges that you’ve had to work with people on?

Mark Stiving 06:15
Oh, boy, that’s a really tiny question. Thank you. So I think of pricing as so much bigger than how do I put a number on a product, once you start saying, hey, I want to charge what a customer is willing to pay, I want to ask you for a second to think about for a product or company, two different customers that buy from that company. One of them gets a ton of value, the other one doesn’t get as much value. But they both pay the same price, because they bought the same thing. Right? Now, can we figure out why they get different value. So it could be different use cases, it could be different market segments? It could be different usage? How much is one using versus the other? It could be just the size of the problem inside the company? And what are the what other situations they find themselves in? The more we start to dive deep into? Why is it that one company values this way and another company values it that way? We start to create these strategies that make a ton of sense. Yeah. And I think about pricing so much more than putting the number on the product. It’s really, have I defined the right market segments? Have I built the right product? Portfolio? Good, better best with options? Have I defined the right pricing metrics? So what is the rate of charge for? Am I enabling people to do price segmentation? Have I trained my salespeople how to value? So you think about all these things? And now we can finally get to Oh, and what price? Am I going to charge?

Damon Pistulka 07:48
Yeah, cuz there’s a lot, you’re, you’re breaking it down, you’re breaking it down into the pieces that make a difference? And what we can do just like you said, are we able to segment the market between people that have higher and lower value perceived value of our products? Where are we going to sell it and really communicate that value? The right way? Wow, different use cases. There’s so much in that. So when you’re talking with people about pricing, how much overall, how many times when you look at someone that’s doing pricing? Do you feel that they’re missing the boat and not charging enough compared to overcharging?

Mark Stiving 08:33
would 100% be accurate?

Damon Pistulka 08:35
I didn’t, I didn’t want to go all the way there. But I was just thinking that it. It’s almost like human nature, I think as we create something, to be worried about charging too much for it. And I don’t know if that’s just human psychology or what it is.

Mark Stiving 08:53
I think a lot of it is human psychology. The other thing is, once you get a product in the marketplace, you get a price on it. You’re starting to win customers. Now you have this fear, oh, if I raise prices, I might lose customers. The single thing that keeps people from raising prices today is they’re afraid. Now they don’t know what they’re afraid of. But they’re afraid. Right? They’re afraid they’re gonna lose customers. They’re afraid their customers are gonna get mad at them. Yes, many will. But, but it’s just fear is holding them back.

Damon Pistulka 09:27
Yeah. Yeah. So as we’re talking about it today, how to pray raise prices without losing customers. What are some of the things that you’re typically going to be talking with these these people about? You’re coming in. They would love to raise prices. But they’ve got this fear, what are some of the things that you’re going to be examining with them?

Mark Stiving 09:53
So the first thing I want to get across is that I am not a fan of across the board price increases. Yeah, right and across the Word price increase, I can understand why you’d be afraid of that. Right? You have no idea what’s about to happen. And some of your customers are going to have a really become really mad at you. So what you’re thinking about when you’re thinking about price increases, is what people aren’t going to raise prices on, or customers, what products am I going to raise prices on? And what situations can I raise prices in? And if we think about those three things, then it makes sense for us to say, Oh, how is it that I’m going to raise prices the right way? So let’s talk about which customers first if that’s okay. If assuming that you’re selling recurring revenue, or reoccurring revenue, either one, I’ve got customers that are buying from me on a regular basis. Yep. Some customers love you. Those are the ones that are going to take a price increase. Some customers are thinking about leaving you anyway. Those are the customers you don’t want to raise prices on. So imagine that you are a you’re a gym owner. And you’ve got a customer who comes in every single day and uses the gym. And you raise the price from 50 bucks to 60 bucks. The gym. Patriot says to oh man, I don’t want to pay more. But he pays more. Yeah. Now imagine someone paying 50 bucks. They never use the gym. You tell them? Hey, we’re raising your price from 50 to 60. What are they gonna do? They’re gonna leave. Yep. If you’re a Netflix subscriber within the last few months, Netflix raise your price. And I can assure you these, this thought went through your head. am I watching Netflix enough to justify the increase in price? Guaranteed? Now most of us said yes. Some people said no. But But Netflix caused that question. Yeah. Now Netflix also has the data to know how much Netflix am I watching. And they could have selectively raised prices on people who watch Netflix a lot and not raise prices on people who rarely watch Netflix. Right? That just makes all the sense in the world. And we think about which customers don’t want to raise prices on?

Damon Pistulka 12:13
Yeah. Do you see people taking more advantage of the fact that that there’s a lot more data that we can use now and analyzing it’s so much easier when we’re doing these pricing considerations?

Mark Stiving 12:30
In the b2c space, yes, it’s okay to be space. No, they should be right. But But sadly, the b2b folks don’t collect all the data they should be collecting. A lot of software companies when they first launched their products, they fail to put metrics or meters on their features to say, How much is this feature being used? And if they would do that, then we actually had the knowledge to say, Okay, now I know which customers get the most value, by the way, that one capability to know which features which customers use also helps us in our market segmentation, it helps us in our product packaging. Why everybody doesn’t do that from the get go. I mean, I get it, it’s a little harder, it adds a little bit more complexity. But oh, my god, the flexibility and information it gives you, you need to do that.

Damon Pistulka 13:22
Yeah. Well in product development, and, you know, end of life kind of things, that decision. While we don’t really you know, two thirds of our users don’t use that. Do we really want to keep supporting? You know, there’s so many different things that would help and then overall usage, just like your Netflix case, if we got a power user, that organization is just they’re really using the heck out of it. To them, it’s a valuable tool that they would pay more for. Almost certainly. Absolutely.

Mark Stiving 13:52
Right. Absolutely.

Damon Pistulka 13:55
Hmm. So this is a kind of a loaded question, too. But I’m going to ask it anyway. When you when you’re in this situation, you’re talking to someone like this. How much do you think they’re typically leaving on the table?

Mark Stiving 14:13
Oh, I think that one’s really hard to answer. But I would say it’s almost impossible for me to engage with a company and they don’t increase revenue by 5%. Yeah, all profit, which is all profit, it’s all profit at that point. Yeah. And that’s a no brainer. Not some product, some company some products. It’s much, much more than that. One of my clients, we identified a specific product, there was no competition. They raised prices 180% on that route, zero impact on sales. Yeah, it’s like that is all free money. Yes. And it’s because we were able to identify which products our customers getting way more value than they’re paying for. And it depends on how we define value in that case, but yes,

Damon Pistulka 15:04
yeah. What is so important, as you said, to look at these different factors around usage and segmentation, and who really is getting the most, even if you’re using the same product in two different industries or applications, there’s huge value differences there. So what are some of the most important things you think someone could look at when they are going to undertake? Less and less, we’re past the fear, we have to do something.

Mark Stiving 15:42
So if the question is just raising prices, I would focus on usage or find some way to estimate how much do different customers value our products. And then I would focus, my price increases on a subset of customers, and watch what happens. And then after we’ve done that, assuming that subset of customers are the ones that get the most value, odds are good, nothing bad is gonna happen. And then we start to move down the chain until we get to the point where customers leave us get really mad at us, whatever, whatever happens. And we say, okay, got it, we’re gonna stop going any lower right? We’re not going to raise prices on that gym guy who never comes to the gym. Hmm, we’ll never get that low. Yeah. But the other thing you want to do, is you want to have a backup plan. So what if someone calls you and says, Hey, you just raise my price? I’m leaving you. I’m going to quit Netflix today. Right? So you can have a backup plan? Yeah. And the backup plan I recommend is to step a two phase backup plan. Phase one is, oh, you’ve been a loyal customer, we really like you to tell what will hold the old customer, the hold the old price for another six months, before we raise your price. If that doesn’t work, we’ll just take you back to the old price and leave it there. So we don’t have to lose a customer.

Damon Pistulka 17:04
That’s right. Yeah. And that’s a good is. Because you will get a lot of customers that will just pay the price. If they’re seeing the value. Almost

Mark Stiving 17:16
all of them, very few customers call you and complain about it. By the way, every customer inside complaints, right? I get I get a price increase from Intuit for my QuickBooks account every single year. I say to myself, Gosh, darn those people. Right? And then I write the check. It’s just the way it is. That

Damon Pistulka 17:36
is that is it. And it’s because you’re getting value from it. So how many times when you’re working with people, or? Or do you see just in general, that, hey, we’ve got this great product. And we’re starting to go down this road, and we’re looking at pricing. And you discover things that they may be missing, like you talked about features you talked about added sir added in or added service or things like that, they’d go, Listen, we were working on pricing. But as we were talking to our customer, we realized that we don’t address this value point that if we did, it would allow us to really, or maybe even hit a blue ocean kind of situation there. How many times do you discover new things like that as you’re working on pricing?

Mark Stiving 18:26
So I’ll say every time but it’s not blue ocean? Huge every time Yeah, so So what happens without a doubt is when a company starts thinking about what does value mean to their customer? We start thinking in ways they’ve never imagined before. What typically happens is you’ve got a product, you create a widget, right? And, and I have a special tool that I use with clients to say, how do you figure out what value means to your customer that has four columns. It’s the solution, the problem, the result and the value. The solution is your product. So we’ll call that the widget. Or it could be a feature of your product, something that you’re really proud of. So you want to sell when you talk about it. The second step is the problem. And this, by the way, is the hardest thing to do when you’re trying to define value. You built a widget because it solved a problem for a customer. But believe it or not, most people can’t articulate what the problem is. If when I ask people, what’s the problem? Why did you build the widget is because when my customers need a widget, okay, put it in first person format, right? Oh, I’m talking to my customer. I need a widget. But that’s not true. That’s not the problem. Right? There’s a problem a reason we built a widget. I have too much turnover, right? I’m spending too much time sorting through paperwork. I can’t find this document when I need this document. I mean, whatever it is, there’s a million I lose track of customers, and I don’t follow up with them when I need to. But there’s a million problems out there. And every feature every product is built to solve problem. Yeah. So So do we actually understand what that problem is? Oh, by the way, the reason companies can’t do that, is they have the curse of knowledge. They know so much about their own product. They’ve forgotten what it’s like to not know. Yeah. Yeah. So once you can start to think in, but by the way, one of the reasons I’m so good at what I do is I don’t know your product very well. Just

Damon Pistulka 20:28
thinking that that perspective, outside perspective has got to help a

Mark Stiving 20:32
lot. It really does. That really does. Yeah. So once you find someone you understand there’s a problem, you’ve got a solution. So someone with the problem has a problem buys your solution, what’s the result they might achieve? And if I’m working with a b2b company, that result is numerical. And it’s, it’s a KPI. What’s a KPI you’re going to move for this customer? You’re going to reduce turnover, you’re going to increase, click throughs. Or you’re going to increase conversion, what are you going to do? Or what’s the KPI that we’re striving to change. And then the last column value in the world of b2b value is always measured in incremental profit. So if I can move that KPI, we should have enough business acumen to figure out what’s the incremental profit generating for that customer? Yeah. Now, now, once someone can think this way, it is amazing how it opens up their mind to where the value really is in their product. And they start to realize, oh, my gosh, we have so much more value than we ever thought we had. It’s amazing.

Damon Pistulka 21:43
Well, I, I would imagine to that, when they’re taking that look like you bring to them. That even when you’re talking to them, not knowing what they know, because it’s like a f1 driver Formula One race driver. And someone that hasn’t seen a car before starting to learn how to drive. You know, the formula person, they just know what to do they get in and do this. And they don’t even see how difficult it is to put this key where I’m supposed to put it because I got no idea. But that could be the biggest value point of their entire product to the user that they’re trying to sell to. Yep,

Mark Stiving 22:21
that is absolutely right. That is absolutely right. And they just don’t see it. Yeah,

Damon Pistulka 22:26
yeah. So I suppose you’re, you’re generating a lot of extra knowledge. We’re sitting here today, we’re talking about pricing, and raising pricing and things like that. But I’ve got to imagine your pricing sessions, generate a plethora of other Feature Ideas, service ideas around the product, that that really helped them to increase the value that their customers feel from using the product. And and you know, we got we started out we think, hey, this, this raise the price a little bit, but realistically, we just opened up, instead of going, I’m going from $1,000 to $1,200, I’m not only did we do that, but now we’ve got another product that’s another $500 or whatever kind of thing, they’re just these new revenue opportunities that come up out of it.

Mark Stiving 23:15
Yeah, let me let me actually add on to what you just said. So we’re gonna raise our price from 1000 to 1200. But we’ve also identified this market segment over here, which gets a lot more value. So we’re going to create a version of our product and sell it for 3000. Then we’ve got this $1,200 marketplace, but not everybody is willing to pay 1200 There’s some that would buy at nine, but they won’t buy a 12 There’s some that would pay 15. How do we create a good, better best product portfolio? So yeah, get those people to buy at the right levels, then it’s how do I train my salespeople to communicate the actual value, because in truth, my customers have no idea how much value they’re going to get from our product. And by the way, my salespeople don’t know how much value any individual customer is going to be able to get. So we need to learn to have this value conversation so together sales and customers can figure out how much value is really here. Right? Is there value here? Is it worth it? Is this a good decision for you or not? So much that goes on once we learn to think the way our customers think.

Damon Pistulka 24:28
Yeah, cuz I was sitting here thinking about this. I’m like you were going to start with value based pricing. We really need our salespeople to understand how to talk with that end customer and go okay, Mark, tell me how you intend on using this product to really understand to help that customer feel figure out what how it might help them and how much

Mark Stiving 24:54
and so if you’ve done the value table I told you about what we discussed a minute ago. Imagine that you’ve created a list of 20 different problems that we solve for customers 20 real important problems, we’re not going to walk into any customer and say, Hey, we solve these 20 problems. Let’s figure out where you are, we would walk in and say, Hey, what problems are you facing? What are you trying to achieve? Oh, that’s row three. godets. Now I know where I’m taking the conversation. Yeah. And then oh, do you have problem in row five? Got it? No, you don’t have out row six. So we’re now thinking about problems. We’re talking to customers about problems. The KPIs and the value that comes later. Yeah, but that’s individual for each customer, by the way. Yeah.

Damon Pistulka 25:40
So cool. So cool. We’ve got to just say, hey, to Ronald, real quick, hold on to your customer value separates you from the competition, identify and solve their problems. There we go. Thanks for stopping by today and then be interested got a question? Oh, well, that’s a long one.

Mark Stiving 26:00
I know. But yes, I’m worried. All

Damon Pistulka 26:02
right, you know, be interested. All right. So I’m definitely a portion of my research and data parsing is now done using GTB GPT. For I don’t want to lower my overall monthly fee structure, but I’m hourly. So how do you suggest I accommodate this time savings? So I can boast about the power of AI and help them elevate their game with the results without reducing my monthly hours? Oh,

Mark Stiving 26:34
Beatrice, we’ve got a big problem. Beatrice, give me a call. Here’s the problem. Never Bill hourly, just stop billing hourly, people don’t want to buy your hours, they want to buy your results. So when you heard me talk about solution, problem result value, at no point in time, there was an hour involved, they have a problem, you have a solution to their problem, then selling the solution to the problem. And it’s not an hour. So so it’s you’ve got to find a way to restructure what you’re selling. And now, chat GPT, what it can do for you is make you smarter, help you give even better solutions, but people are willing to pay you for the solution. They don’t want to pay you for an hour of your time.

Damon Pistulka 27:29
100% there i because it really is around the problems you’re solving. Really around the problem you’re solving. But that’s a good it’s a good question, though. Because there are a lot of people that still do. I mean, you look a lot of industries, they’re still hourly look at the legal industry and look at how that may not be a great example. But you know, AI can help help a lot of industries a lot. And if they’re hourly based, it just really kind of goes against it.

Mark Stiving 28:02
No, that sounds right. And so if you think about it, take take AI out of the story for a second. If your hourly based, when you first start and you’re horrible, and it takes you a long time to do something, you get paid more. And as you get better and more efficient. You get paid less. Yeah, no, that makes no sense. Yes,

Damon Pistulka 28:21
but it’s the truth. It is, it is yeah. Good stuff. Well, thanks for the question be addressed. And she said, she said, thanks. I can do that. That’s awesome. Good. So when you’re, when you’re talking with people, and we’re we’ve already mentioned value based pricing. So what are some of the things that people ask you, and you go, Oh, this backup, let’s don’t start there, that we really need to go over here. Because they’re gonna talk to you about something, what they think we should be discussing and pricing. And you’re like, let’s let’s, let’s just focus over here and start where we need to start. But they’re going to ask you some of the wrong things.

Mark Stiving 29:09
Yeah, probably the single most common thing that is wrong is what price should we charge? Right? How do we figure out the price? Yeah. And, and what’s so funny is I work on pricing a lot, but I rarely tell anybody what price to charge. And the question is almost always, before we can do price, we have to understand value. You have to understand what does value mean from your customers perspective. And there are many, many different ways to think about what value means from our customers. I’d be happy to go through some of them if we want, but there’s a real key is understanding the way our customers think.

Damon Pistulka 29:49
So you start where your customers are thinking. So that’s, I think that’s a great segue into, we’re talking about value. What are some of those ways that customers really feel that value? Yes,

Mark Stiving 30:00
so one of my favorites. And this is one of the one of the fundamental concepts I always start with. And that’s what I call will AI versus which one. So most people, when they make a new purchase, they first say, will I will I buy something in the product category? And then they go on to say, okay, which 1am I going to go by? Right? So for example, your refrigerator just broke. So you just say, Yes, I need to go buy a new refrigerator. Now you go shop and figure out which new refrigerator you’re going to buy. Yeah. Now, sometimes, people don’t go on to make a which one decision, they just say, am I gonna buy this or not? Meaning there was no competitive alternative. So you just dropped your iPhone, and it broke? And now you’re gonna go look at an iPhone or? Or that’s it? Right? You’re not going to switch to Android gearing yet? Right. And so when you buy a new iPhone, that’s a will a decision. Here’s what’s fascinating about that, is when we make a will if decision. People are not price sensitive. Price isn’t driving that decision. Android has 72% market share worldwide of the mobile phone marketplace. 72%. Apple makes 85% of the profits. Wow. Why is that? Because Apple sells at much higher prices. Because we who use iPhones make will AI decisions. And were willing to pay more. There’s no competitive alternative.

Damon Pistulka 31:38
The will AI decision? I think we just need to stop and think about that just reflect a moment. Because you’re absolutely right. When you when you go. You know, if you’re an iPhone person, you’re not going to change your skill. Am I going to buy or not? And if I do, it’s, you’re gonna buy? It’s

Mark Stiving 32:00
1000 bucks. There you go. Yeah, yeah. Well, so let me since you’d like that one. Let me take it a little bit deeper for you. Whatever you sell today, call that a platform or a base level product. When you sell an upgrade, or an accessory. People can’t buy it from anyone but you. They’re making a will AI decision.

Damon Pistulka 32:27
Who Yeah.

Mark Stiving 32:28
So now the question is, can you sell the value of the product? And when we think about value, and the difference between will and which one for a second, when someone’s making a which one decision, they’re saying, let’s imagine there’s two products, and one is more expensive than the other? They’re asking themselves is the more expensive one worth it? So they’re comparing two prices and two feature sets. When someone’s making a will I decision? What they’re saying is, is the value of solving the problem worth it? Now we’re talking about the value of solving the problem, not the value of how our product is different from our competitors products. Right, very different sale. Yeah, we need to understand that what depending on what products we’re selling, what situation we find ourselves in really important concept.

Damon Pistulka 33:27
Well, yeah, it’s that was seemed to be the fundamental question you need to answer first because it would affect everything after that.

Mark Stiving 33:36
And people who don’t understand that go into every sales situation thinking they have competition. Yeah. And that’s the wrong thing. Wow. Yeah, because they do you care? Yeah. Yeah. So So I like to smoke. I like smoking meats. And and I had this the smoker that wasn’t very good. I like and I was walking through the Reno Rodeo. I live in Reno, Nevada, everybody walking through the Reno Rodeo, and there’s this company, they’re selling wood chips, smokers. Yep. And again, I go up and I talk to the guy knock this really cool. And he’s like, oh, yeah, you know, I’m excited. I want to buy this thing is, this is just as good as a trigger, but at half the price. And I’m like, Well, what’s a trigger? And he goes, Oh, it’s another brand of smoker. Like, okay, let me let me go think about it. So of course, you know what I did? Right? I went home, I looked up trigger. I said, Oh, that’s like the brand name. I gotta buy a trigger. And that’s what I did. I bought a trigger. Yeah. But but because he was selling against trigger. He lost that sale. Yeah. And had he just sold the value of pellet driven smokers. I would have had one of his smokers in my house.

Damon Pistulka 34:58
That’s a great that’s situational to vary. Because you have to understand how if your customer is aware of the other brands and the brother solutions in the first place, because that that’s a multifaceted program. And it doesn’t matter if I’m using the most specialized software to read, you know, results from a breast a breast exam, you know, and detect for cancer or something. I mean, because there’s so many solutions that that an individual would not know about, that you could be selling against the competition, or really all you’re doing is informing your customers of the competition. That

Mark Stiving 35:40
is exactly right. Let me let me help you. Here’s, here’s what I always recommend salespeople do? We’re gonna go in and sell the value of solving the problem. Right, so what’s the value of a pellet driven smoker? Right, that’s, that’s what I’m selling. And then if you want, here’s the question you can ask your customer. Never ask, what else are you looking at? Right? Ask the question. If you don’t buy from me, what are you going to do? And the implication is, there’s no other solution. And now you’ll get to hear oh, if I don’t buy from you, I’m gonna buy a trigger. Oh, well, let me tell you why this is better than trigger. Now, I understand my sales situation.

Damon Pistulka 36:24
Yeah. That’s a great question. That’s one to write down and people that you didn’t get that whole question need to back that up if you’re in sales? Because that’s, I mean, well, it helps you so much, because you just you just identified are there other options that someone’s looking at it? And if so, you know, act appropriately, blah, blah, blah. That’s awesome. Yeah.

Mark Stiving 36:47
And if we take this directly to pricing, imagine you’re a salesperson b2b sale, relatively large sale, and your customer is not looking at anybody else. You do not have to discount in the negotiations. Yeah.

Damon Pistulka 37:04
Yep. We just where I’ve worked, we’re offering the right solution. We don’t talk about discounts. Yeah. Yeah. So you’ve been at this for for a bit, a bit, a bit? What are some of the most interesting things that you’ve been able to work on pricing?

Mark Stiving 37:33
Oh, that’s a hard question. So I here’s what I find most fascinating about what I do is that I have 1015 20 frameworks that I use. And this is how I explain the world right? You asked me a question is like, oh, that’s this framework. Let me pull that out. And sometimes I get in a situation where my frameworks don’t work. Oh, I love this. Because what it says is, I haven’t thought of something yet. Right. So one of the first things I do when I work with clients is I try to figure out, what are the market segments we’re working with. And so there’s a tool that I use, I call it the valuable features tool. And it’s it’s an amazing tool. But I was doing this with a client, and it just didn’t tell me anything. And I’m struggling to find the solution, what the heck is going on? And it turns out that what I found was that they were selling a platform. So think of zoom as a platform, right? So it solves lots and lots and lots of different problems, lots of different industries, lots of different use cases. Right? And so they were selling a platform, and I was looking for solutions. So I could go sell value. And it’s really hard to sell value when you’re selling a platform. And so, wow, that that’s just helped me so much in my realization, when I helped this client figure out what to do. And by the way, this is a great lesson for everybody selling a platform today. Yeah, well, first off, let’s talk about selling a platform. Zoom. Can it can be used to talk to your mom, and it can be used to close a multimillion dollar deal. Hmm, one of those we would pay a lot for. And the other one we wouldn’t, right? Yeah. Now, the problem was Zoom is you can’t differentiate, you can’t charge one a lot, and one a little. And so with a platform, what ends up happening is prices end up driving down towards cost because we’ve got other competitors and we’re trying to get as many people to come into the market and use our platform as possible. So we can’t differentiate these use cases. So what zoom does what LinkedIn does, what every platform that’s really successful does is they figure out how to layer a vertical on top of that. So zoom, turns out that you can buy a version of zoom for telemedicine, so you can do Not you and I, but a doctor could buy a version where so they could do doctor’s visits over zoom. Now, here’s what’s fascinating. It’s more specific, it probably solves fewer problems. But it’s more expensive. Because it has some specific solutions for the doctor. And we can we can decide how much value are we actually delivering to the doctor when we do this. And so now we can charge more for it. Yeah, so if you’re selling a platform, I’m not telling you to stop selling your platform, go find the most valuable use case, and see if you can craft a solution for that use case and sell that solution.

Damon Pistulka 40:46
Yeah, it’s an it’s interesting, though, when you talk about that, and bring that example of a platform because it is so much different than a specific product or anything like that, because the wide variety of uses that you would have with the platform?

Mark Stiving 41:01
Yeah, it’s really it’s really hard to do value based pricing. Yeah, platform. Because there’s so many use cases, and, and the value of each use case is very different. Yeah.

Damon Pistulka 41:11
Oh, that’s awesome. That’s awesome. So I want to I want to, we’re getting closer to the end of our time here. And I want to cover a couple things I want to cover before we do it. Before we get to the end out. We before we got on. You said everybody’s talking about AI. And you you kind of had alluded to the fact that you had not done much, but you’ve done some stuff recently and made a custom GPT. And let’s talk about that a little bit. And what do you think your your thoughts on AI and future pricing? How that kind of ties together? Yes.

Mark Stiving 41:50
So I have what’s the right word? I’ve been an antagonist on AI. And the reason is, I don’t know what to do with it. Right? Everybody says, Oh, look, it’s going to do everything. It’s going to change the world. It’s you know, you watch a presentation, they give you 100 things you could do. And it’s like, it’s just it hasn’t solved my problems for me yet. Yeah. But I thought, wouldn’t it be great if I could find a way to upload? I’ve written three books. I’ve been blogging weekly for 1014 years now. Wow. So I was thinking if I could upload my content to AI, so that people could ask questions of me. And then if I don’t know the answers, can I give a list of pricing professionals that I trust, and then publish a lot of stuff? Or do I trust their answers? And so I did, I was able to put together this pricing GPT, you’ll find it on if you just go to chat GPT it’s to find more GPT is look for pricing GPT. And you’ll find it. But But it’s so cool, because now the answer is it gives. I trust them more than the normal chat GPT answers. Yeah, right. Does it still come up with something I don’t like? Yeah, once in a while, it comes up with something I don’t like. But it’s better. And I keep tweaking it. I keep trying to make it more interesting. Yeah, for me, that sounds fascinating. The other thing that’s happening with AI and pricing, by the way, is in the world of b2c, because there is so much data. A lot of people are using AI to analyze data, analyze price sensitivities, doing dynamic pricing very, very rapidly to say, Hey, should we change the prices at at Hertz Rental Car today? Or this hour? Because yeah, whatever the reasons happened to be. And that’s a huge advantage to AI. Most of us in the b2b space, we don’t have the data that we can go do that with yet. Yeah.

Damon Pistulka 43:46
Yeah. Because when you look at you know, like selling a product, or even like you said, hurts an airline, somebody like that, if you could let AI work in a segment, just say, Okay, we’re going to take Reno, for example, where you live, and we’re going to, we’re going to let an AI try to optimize our pricing by looking at how we’re going to raise the rates on flights, given times of day over the course of six months, you don’t know you could really change your your profitability of your organization, just because of the the, the almost infinite, and just so. So things that we wouldn’t even think about trying, you know, definitely

Mark Stiving 44:28
right. The one fear a lot of pricing people a lot of companies have is they don’t want to they don’t want to give their pricing to a black box. Yeah. And AI appears like a black box most of the time, clients. And so it’s like, well, can you tell me why? And you know, I really want to approve it, or I really want to say yeah, let’s try this. So yeah, the black box thing holds them back a little bit. But it’s, it’s a great use case. Yeah,

Damon Pistulka 44:55
it really is. Well, that’s cool. You’re starting to see how that’s working. So But you also mentioned I believe that you are finishing a third book now.

Mark Stiving 45:06
Working on my fourth book right now fourth book now, yes. Who?

Damon Pistulka 45:10
So you’ve written these books, what what inspires you to put put it down again? And and I continued dropping this information for people to to garner from from your work.

Mark Stiving 45:27
And I think I’m an educator at heart. I just love sharing what I know. And so I, when I finished the third book, I said, that’s the last book I’m going to write. And then, and then of course, I couldn’t stop. Yeah, it’s like, oh, no, no, it’s the third book called selling value. I wrote that for salespeople, right. It’s like, what I understand about how customers perceive value is so important for salespeople, they should, they should all know this. And it’s like, that’s why I wrote that book. And now I’m stepping back in I’m working a lot with SMBs and portfolio companies of PE firms. And it’s like the executives of these companies really need to understand value, and what it does for their companies. So I’m taking essentially the same content and selling value, and retargeting it to executives and CEOs and not talking as much about sales and salespeople. Yeah.

Damon Pistulka 46:21
Well, that’s very exciting. First of all, I think that’s a great way to apply your knowledge. Because those people that are running those investor owned companies or executives, board members, whatever it is, in those companies, that is that is life or death, it’s continuing to make the profits go the way they need them to go. That’s so cool.

Mark Stiving 46:43
Yeah. And real quick. I hate pitching myself, I just want to say this, because it’s so cool. The reason private equity firms hire me is because their whole goal is to grow the valuation of their portfolio companies. Yeah, if I can move the revenue by 5%, which is all profit, right? Yeah, that’s a no brainer. Right? So every 1% If it’s a SaaS company, that’s like another million dollars in valuation? Yeah. Like, why wouldn’t you spend the time to a get the price up quickly? And then B structure the rest of your company so that we can continue that growth path?

Damon Pistulka 47:20
Yeah, you’re right. Every, I mean, assuming you’re profitable today, if you move it up by $1, you’re $1 more profitable, every dollar is more more profit. And that turns into a multiple of exit value or multiple value of your company. It’s, it’s, it’s a, and honestly, I think that, you know, while you’re working with the investor owned, the companies that we’re working with are usually found around and when they can think that way, it makes so much difference in their overall success to building valuable companies.

Mark Stiving 47:49
So when I find, let me say, I’m gonna say it’s sad, if that’s okay. Yeah, and a private equity firm buys a company. And the company did such a horrible job at understanding their value, and how they could price it and how they could package it. They just handed all this money to the PE firm, where they could have done this themselves before they sold the company. So I just I find that so sad. Yeah,

Damon Pistulka 48:14
that’s a great point, maybe a new market for you to never know, never know. Well, Mark, we’re winding down here. But if someone’s out there, they’re in that portfolio company there, they’ve got this SAS product or tech related product, what’s the best way to get a hold of you?

Mark Stiving 48:31
That’s thank you so much. By the way, Damon, I just so thoroughly enjoyed this conversation, you can always find me on LinkedIn, I’m very, very active on LinkedIn. And if you don’t mind, I’ve got I put together a landing page just for your listeners, very cool. The landing pages impact pricing.com/faces I wonder where that came from? Slash faces. And if you go there, you’re gonna find three different downloads, there are three different access to three tools. One is the valuable features framework I talked about a little bit, there are some instructions on how to do it and how to interpret some of it. So it’s the beginning of probably the most important piece of homework I use with my clients. You can subscribe to my newsletter, I put out tons and tons of free content, so subscribe and take free content. And then fire if you want to set up a discovery call. There’s a link there where you can reach out to me and do that. So that’s impact pricing.com/faces. And Damon, this has been a blast. Thank you very much for letting me share my my thoughts. Well, Mark

Damon Pistulka 49:30
is great to have you here. We’re talking about how to raise prices without losing customers. We are all across the board here. And I want to just say first of all, Beatrice says thank you both huge value today. She appreciates it. So thanks for being here today. Beatrice. Thanks, Ronald for your comment earlier to thanks everyone else that was listening. If you didn’t get to hear marks from beginning to end, go back to the beginning because Mark was dropping tons of value about pricing. Really good. Not even pricing but understanding value so you can really understand what your customers want to pay for your product or services and get your maximum value from them. Thanks so much, everyone. Mark, hold on for a second. We’ll end up we’ll finish up when we’re offline.

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