The How-To's of Utilizing Usage-Based Pricing and Discussion of Subscription Pricing Problems with Marcos Rivera

Marcos Rivera is the Founder and CEO of Pricing I/O, a training and coaching boutique helping high-growth B2B SaaS companies accelerate ARR growth and market share. Marcos was the Operating Executive for Product Management and Pricing of Vista Consulting Group, and is the author of the book "Street Pricing: A Pricing Playlist for Hip Leaders in SaaS".

In this episode, Marcos shares his insights on some the common problems in the subscription industry. He also talks about the different ways to approach pricing adjustments in relation to software innovations, and discusses the hot topic of usage-based pricing.

Why you have to check out today's podcast:

• Find out what the three biggest pricing problems are when it comes to subscription and know why you shouldn't do those
• Discover why people don't pay much attention on the expansion part of land and expand, and learn how to go for it if you want to
• Understand why it's a good step to raise prices on the subscribers with highest usage first

"Go out there, get data, experiment and raise your confidence, and the pricing problem gets so much easier."

– Marcos Rivera

Topics Covered:

01:32 – How Marcos got into pricing

02:33 – Biggest pricing problems in subscriptions: (1) Pricing without aligning their package of value to their clients

04:00 – Why decoupling pricing and packaging is difficult

04:47 – Enhancing your pricing when introducing software innovations

06:31 – Biggest pricing problems in subscriptions: (2) Underpricing

09:08 – Biggest pricing problems in subscriptions: (3) Overcomplexity in the model

10:55 – People not focusing on the expansion part of the commonly used phrase in SaaS, "land and expand"

14:02 – Understanding usage data in providing better value to your product

16:17 – Getting things to levels of sophistication and sophistication at scale

18:29 – Where, when, and how to utilize usage-based pricing

24:38 – Pricing table topics: "Raise prices on the subscribers with highest usage first."

26:12 – Marcos' pricing advice

Key Takeaways:

"The way to start with pricing, especially if you already have an existing model and you're looking to enhance it, believe it or not, is not where most companies start, which is "how much should I charge with this new thing?" It's the first thing on their mind, the first question on their mind, but that question doesn't get answered until you understand how your value is being changed..." – Marcos Rivera

"There's nothing wrong with land and expand, but what often happens is that it's mostly land and very little expand…. When you place so many of your chips on the land part of it, you start being overly generous with your limits or overly generous of what you're including. What ends up happening is you put so much of your expansion opportunity into the land that your expand opportunities are limited. Overly heavy on the land makes it tougher to expand." – Marcos Rivera

"Be a little bit careful about over indexing on what they're doing in the system because you don't want to inadvertently discourage them from using the product." – Marcos Rivera

"Value is not in the people using it. The value is in the machines doing, and the volume and frequency with which it's doing it." – Marcos Rivera

"Remember, perceived value gets stronger and better with more usage. That correlation works out really well." – Marcos Rivera

People / Resources Mentioned:

• Pricing I/O: https://www.pricingio.com/
• Vista Consulting Group: https://vistacg.com/
• Vista Equity Partners: https://www.vistaequitypartners.com/
• Netflix: https://www.netflix.com/
• Slack: https://slack.com/

Connect with Marcos Rivera:

• LinkedIn:https://www.linkedin.com/in/marcoslrivera/
• Website:https://www.pricingio.com/

Connect with Mark Stiving:

• LinkedIn:https://www.linkedin.com/in/stiving/
• Email: mailto:mark@impactpricing.com