A guide to building a smarter pricing strategy | with Carrie Osman (Founder & CEO, Cruxy)

0:00Randy Silver: Hey, welcome back to the product experience. I'm Randy Silver. And you know, one of the topics that comes up again and again and again for us right now is how do you protect your mode? How is everything changing with AI? And if everyone can copy your features in 20 minutes, or so it feels, how do you deal with pricing? And pricing is one of those things. It's kind of a mysterious dark art anyway. So we're very excited to have an expert on this topic and someone who's really interested in it. Carrie Osmond. Carrie, welcome to the show. How are you doing? I'm awesome. Thank you so much. Carrie, can you just do a quick introduction to yourself?

0:39Randy Silver: What are you doing these days? What is Cruxy? How did you get into this world? Yeah, of course. So I started this business 13 years ago. I didn't quite realize how hard it would be, but we are where we are, 13 years later. And I came from the consumer goods world. So that was where I trained. I was at the Mars Fast Track Management Program and ended up running a big P &L of, you know, about 27 different P &Ls actually that constructed up to one. And, you know, you own the P &L, but you're in charge of product, research and development and innovation and, of course, sales, marketing, etc. So that business unit lead, I guess, really at its heart was products.

1:18Like, what is the market that we're selling to? What is the product that we're selling? Why does it have the right to win? And why should anyone buy it? And how do we compel them to act by grabbing with their hands or paws, because I worked in pet food, to grab that product kind of on the shelf. So started the business thinking there must be a way to do this differently. I'd hired Bain a lot. And I thought, you know, surely or Mars had hired Bain, thought there must be a way to do this differently. And ultimately then plummeted into the world of tech and fintech. And through that, realized that my obsession with markets, data, product and price was something that was really missing in the world of tech.

1:55And just not something that they really think of in the way that I was trained to think of it at all. So, yeah, now Cruxy, we specialize in B2B tech. We help people work out what the product really is and what the market really wants from their product. So interrogating product value. And then we help them work out how they should price that value. So how do they package and price in a way that compels the market to act? We do it as an absolute specialist. All we do is B2B tech with a lot of data. We've built something called Cortex, which unifies all augments and models. A lot of data, everything is underpinned with data.

2:29And then obviously we believe, as you can tell by my energy, in impact. Impact is P &L. Impact is not a deck. Impact was never meant for PowerPoint. Impact is human beings doing something different and achieving a P &L outcome that they wouldn't have without us.

2:47Randy Silver: Fantastic. Okay, so you're definitely the right person to be talking to about this, because for most of us in product, we came from design and research and business analysis and coding and things like that. We come from places of we saw a business problem or a user problem, and we want to solve it, and we want to build it and get it right. Pricing is this mysterious other part of all this. So let's start at the very beginning. How do we know when we've got pricing right in the first place? Yeah, so, I mean, you can say the very scientific or the very artistic answer. I think part of it is, you know, you've got it right because you're like, this feels, you know, that intuition is like, I feel like this is priced in the right way.

3:32What does that really mean? I mean, customers are valuing the way that you talk about the product and they're saying, wow, this makes complete sense. You guys understand the value this is going to bring to me. you understand the ROI, you're talking about it in a relative term. If it's a very small feature that should be freemium, you're making it that. And if it's a very big, significant purchase that should be over a million and a significant investment for a business, then it has that weight to it. Obviously, this shows up in a lot of numbers. So win rate will be over 30%, which is the B2B tech average.

4:09Churn will be low. People will be churning because they go through M &A and they have to take the product of the incumbent that they've been bought by, but they really didn't want to. They wanted to stick with your product. They kind of feel like it was the right one for them. Obviously, NRR, so people buying more, spending more each year, and then GRR, the people that are sticking with you. They're not leaving, which of course plays into churn. So I think there's a lot of data that demonstrates that you've got the price right, But there's also that hunch, that kind of dumps in that agency, that feeling that you're like, this is I know my customer.

4:49I know what they value. I know why they value it. And I really understand intimately why this thing is meaningless and should be not expensive to them or pivotal. And they walk over broken glass to buy it.

5:02Randy Silver: OK, I've got so many questions from this. So you're talking about all of these kinds of data points and metrics, and a lot of those are lagging metrics, and some of them don't come for churn, often doesn't come one or multiple years into the cycle. How quickly do you know that you've got it right? Is it signals from the market? Is it emotional? Do you have to wait for the data points? When do you start tweaking? Do you start tweaking within days, within weeks, or do you wait months and years to start tweaking your pricing? Yeah, so I really believe that you need a framework for most things because I love structure.

5:43I'm a structure girl. And I think that you need a structure that you fall back on because, of course, the market punches you in the face. You go into a meeting and it's awful. Like all these things happen to everyone all the time and it's just rife. a new AI product comes out and you think all of a sudden we should be free or no one's going to be willing to buy the product. So I think you should fall on a structure which is something along the lines of this is a hugely significant data point. I've gone to a meeting and someone has said I was literally expecting this product to be a tenth of the price you're charging or I thought I had budgeted 600k and you're telling me it's 60k that's weird so something that's that important that's really significant you should obviously weigh accordingly i've been on the other side of

6:34Randy Silver: that with working with some amazing procurement people and that is their tactic to drive down the price and get a good so how seriously should i take that i think you shouldn't necessarily take procurement too seriously because of course a they're incentivized by the reduction in the list price and B, they don't understand the value of the product. So I'm talking about the person that's the real, you know, they are going to get the significant value of the product. You know, their workflow will be shifted. Their accounts will be delivered 30 days earlier, you know, probably not 30 days, but 10 days early.

7:08So I think that you shouldn't take that as seriously, but you should wait accordingly and almost, you know, in a lost deal review or in a deal review, get the team to score. What is it that, you know, is this a five out of five? You know, this was a really senior person who really loves us, who's bought loads of product from us, who I've got a really good relationship with. And they were like, you guys are seriously underpriced. Take that one as a five. If this is a new person we've met and we've had one call with them and they saw a demo and they thought it was cool and they've not got budget, take that person as a zero.

7:44Right. So weigh them accordingly. And I'm not just saying, you know, not just about the people with the budget. But of course, you know, you've got to think about who is it that's giving me this feedback. I get very frustrated when people weigh all opinions equally, because of course, in product and pricing, not all opinions are equal. That is life, you know. So the budget holder is more important. The user is, of course, critical. But of course, it's to do with, is this a spunk or an Atlassian, is this the kind of product that really is going to get a user base and then we're going to dominate?

8:21And I think that you've got to pilot and you've got to make sure that you're listening so deeply and critically to every point of data. And you are actually putting some of them in the bin and saying, thank you so much for this insight. Thank you for your opinions. But they're actually not that meaningful for me. These are the people that never believed that an iPhone was possible because they just can't imagine what something could be. They are the people that you want to say, thank you very much, but no, put them in. And then there's the people that you think, actually, there's something in what they're saying.

8:54You know, let's listen to it. Let's see if I hear this another 10 times this week, you know, depending on the sales motion, let's start to take that more seriously. And then, of course, there's the people that actually really, you know, you are weighing the opinion of deeply. and I think piloting to the right people and trying but then listening extremely intimately to the feedback is obviously critical for pricing because no one is going to tell you that the product is underpriced and no one is people will all claim it's overpriced and that's where you've got to get the metal detector out and you've got to wait until it goes off I love gold mining.

9:36So it shows anyway. And you've got to, when it goes off, be like, right, let's dig there. Oh, it's a metal can. No, it is irrelevant. So hopefully that gives you a feel for the way you've got to really glean and think about what am I seeing in the data? What am I hearing? Why is the usage not where we expect it to be? Why are the buyers, you know, calling up? Why are the tickets at the level they are? Why are the integrations and the API volumes down? You know, It's triangulating all this data and really, yeah, getting out that metal detector, Randy.

10:11Randy Silver: Okay, so that's a career's worth of experience talking about how this all works. I'm curious about how the last couple of years have changed things. So we've got a world now where switching costs are going way down, where features can be copied in days to weeks. how do we approach pricing now? How have things changed? How are you seeing this affect the way you approach this? Yeah, it's so interesting. I mean, I think really we're just seeing people lack the fundamentals, I would say. It's like people skip the base principles to kind of whack the AI sticker on, which we discussed previously. and they forget that the customer is our boss and they give us the right to be in business because they pay us something for us to deliver a service good tool to them.

11:11And hopefully we can do that for a price that's lower than that which it costs us to make it. Very basic. We are generally running businesses for profitable ends. One would hope. People kind of, yeah, one would hope. It's not five years ago. But I think people forget that that means that the customer has to really believe that the product is of value. And this identification of value in the product, like why? Why does someone walk over breaking glass? What is it that their expectations are of this product? What is it that are the base expectations that they think of as standard? What are the things that would blow their minds if they knew it was possible?

11:54What is the dance between the two, which, of course, is a price to value to market size dance, which is obviously something I find fascinating because I've marshaled my life in that direction. But I think that really what we're seeing with AI is people have lost sight of a lot of the base principles. They're jumping on a lot of people jumping on the bandwagon and thinking that because something's got AI in, they can now charge up and they can price more in the market.

12:24Randy Silver: I mean, that's what our boards and our CEOs are telling us. Just say now with AI, throw in a chat, add another 30, 50%, right? Yeah. But I find it crazy how few people really want to go back to the fundamentals and look at why is someone buying your product? And I know this sounds very basic, but what are the expectations that they have that are just table stakes? You know, actually, I buy your product to deliver reconciliation. So I have an expectation that the reason I'm buying it is to do that. I'm not paying extra for you to sell me an AI bot that auto wrecks. You know, my expectation is that's just something you're going to embed in the product.

13:09You're probably putting the price up 6 % to 8 % a year saying it's the innovation of the product. Like my expectation is that that's something that's baked in. And I think what we're seeing a lot of people do is conflate AI with things which are the base table stakes requirements of the product. And then they're not necessarily spending the time or doing the critical thinking on what is it that's really possible with AI that could transform the workflow? Like, could we take six steps of the workflow and make them into one? Could we get rid of one section of the product because we could say that actually it's not needed and we can skip that and we can move from, you know, delivering a dashboard to a predictive score or a predictive forecast model?

13:55There's lots of things which obviously AI enables. But I think at the moment, it's a bit of a race to the bottom with a lot of people just trying to get AI into the product as quickly as possible. Claim it's an intelligence platform. and, you know, what is it that actually is going to really drive and delight the customer? And you obviously want them to say, well, of course, I'm happy paying more. The value that you're bringing to me, to my business is such that I'm delighted to pay you more. I know that's an ethereal aim, but I like to keep it front of mind because I don't think price should be something that you buy hook or crook, with one arm behind the customer's back, you force them into a pricing change.

14:41I believe that it should be something that they move towards because they believe in the product value.

14:47Randy Silver: Okay, I've got questions. So I'm going to go in a slightly different direction than I was originally thinking. So in terms of pricing though, there's two aspects to this. There's the aspect of I change the number of how much it costs or I change the business model of how I charge. And the example I love on that is the way Intercom introduced FIN and they went from a per seat model to a success-based model. So they went from a cost center to an outcome-based, results-based model. When you look at pricing, is that something that you bring into account? Is it just about the sticker price or is it also about the sales approach?

15:31Oh, it's I mean, it's definitely the sales approach as well. But I also believe that if the product is constructed wrongly, e.g. if you're packaging the product in a way that downplays some of the strengths that one cluster or one segment of the market are really compelled by. And another segment might say, I don't actually need that at all. It's irrelevant to me. I don't need that integration or, you know, that feature is irrelevant. I'm not in a, you know, Cruxy is only operating in, you know, from a financial accounting point of view, one jurisdiction. So multi-jurisdictional access or multi-jurisdictional FX rates beyond US dollars and pounds or euros would kind of be irrelevant to us, right?

16:21So I think it's the construct of the product and whether it's packaged together in a way that really lands with that customer segment. And then, of course, once you've got that right, it's OK. And how does that segment translate the value of what we're selling them into the outcome? What is the outcome that they want and what is the outcome that they get? And obviously, can I price to the outcome? And would they like me to? Because you can price to an outcome, but it's a highly flexible model. You know, we're seeing this with AI where token models, everyone's saying, oh, we'll have a token agentic calculator and that will be amazing because we can change the tokenized price.

17:05It's like, yeah, but most CFOs and most procurement teams don't want to sign off an agentic calculator with 70 variables. That isn't how people buy. And I think people often lose sight of the customer being their boss and being someone that actually really, you know, ultimately is signing on the dotted line to say, yeah, I bet my career or I bet my time at this company, this is the right decision. We're mainly working in enterprise software and a lot of enterprise software is that significant to buyers. So I think it's not just to do with, you know, the way it's sold. It's also to do with the construct of the product itself and how it hangs into the needs of that specific segment.

17:50And that's why I really don't. I find pricing kind of crazy, to be honest, in the market. People treat it in such a silo and it's like, but it is the manifestation of the value of your product in a given market for a given customer. Like that is all it is. So how could you possibly do it without understanding the market, the customer and the product? But everyone does. So I'm like screaming at the world, you know, as I am now on this podcast.

18:22Randy Silver: Okay, I definitely want to follow up on that. But there was something you said earlier that I can't skip, which was talking about what features you have in the product and making sure that it is attractive to the right people at the right time. So you were talking about the things that need to be in there that are table stakes. And the way I've always been taught to think about this was the Kano model of, you know, you have your stuff that's absolutely necessary. You have a couple of differentiators and then you also have some delighters in there. What's your approach to that in terms of pricing?

18:51Randy Silver: And do you have to have all the table stakes? Do you how much do you focus with people on differentiators and delighters or do you have a different approach that you use? No, that's a really, really good point. I think what we always try to do is really go very deep on understanding how the workflow differs for those different customer segments. So I'm obsessed with customer in workflows, not product out workflows. And I think that that means that you get a feel for what are the integrations that the product has to work within, because otherwise it doesn't sit neatly in the workflow for the customer and the end customer and the end user.

19:37What are the different integrations? What are the different steps of the workflow? Where do all of these things go? Where does the product end up? And what's that last mile, et cetera? And I think that if you work through that lens, it does mean that often table stakes features, quite a lot of the product can end up being necessary just for it to be able to work effectively. And my argument would be, I don't think you can charge the customer differently to have the product just effectively work. I think if there's something that really takes the product from a six to a nine and you know that one cluster or one group really need that and it's something that's distinct to them and that they have a willingness to pay for that in a kind of add on way.

20:29I do agree that that can be either something that you can price a premium for or, of course, you can charge an add on separately. But I think that everything should be included in the base product that gives the customer a good experience. And it's broad. It gives every customer, you know, the good enough experience. And then, of course, you have these specialized spikes where I think that's where you can really use packaging, pricing, tiers, etc. to really access that willingness to pay. But I do think you've got to stand behind the fact that your ICP comes along. They're the perfect ICP for this base product.

21:11And they have everything needed in that base product for a good price that drives value for them.

21:18Randy Silver: When you say customer in rather than product out, I think what you're saying, and I just want to make sure that I've got this straight, is basic service design. looking at this, how does this product fit into the way that they actually work, not the way that we intend they work? Because a lot of times we forget when we're focusing on a thing. Our product is how we spend our entire day. We are thinking about it all the time. We imagine that our customers are using it as obsessively as we are, when the reality is it's a means to an end for them. If they can use it for five to ten minutes a day, they'd probably be delighted.

21:55Randy Silver: so it has to fit into their flow and solve a problem. Is that what you mean? Yeah, it's all about if we were sitting with the customer and we were shadowing them in their day and maybe that might be their year, it might be their quarter, it might be their month depending on the product itself and its usage and its dominance in their life, I guess, day in the life of the customer. But it's something I learned from the consumer goods world. You're just completely obsessed with, you know, chihuahua owners who live in, you know, Highgate and how they differ from golden retriever owners who live in Hertfordshire.

22:33And exactly like, oh, they feed in this way. They feed at this time. You do day in the life all the time. You think about this obsessively, because if you understand them and you understand how they think, then you're listening so deeply to these subtleties of friction points the subtleties of oh well I close over the pet food and I put a clip on it and then I leave it in the fridge and it's gross okay well then let's do smaller pack size like you're completely obsessively thinking about what is this telling you that no one's ever going to say because that's not something they can realize. And so that's how I think about thinking about that day in the life of the customer, but from a process point of view and a workflow and a technology, and where does that mean data moves and where does that mean diagnostics end and where, like, what are the points and the friction points and what is the pain that that then creates?

23:30And yeah, I always think, you know, day in the life of a door goinger, because that's how I was trained for 10 years. But I think it's quite a healthy way of thinking about where are those friction points because as we know that's the most amazing thing about product people don't have the ability to think about what they want because we couldn't imagine a world where we wanted 15 000 songs in our pocket because you had one cassette player and one cassette and that's why i think product is just such an amazing function because you're taking the unsaid, the unwritten things people never ask for because they can't believe that they're possible.

24:10And you're translating that need, want, desire, pain into something that you're imagining in a way that they can't.

24:21Randy Silver: So let's talk about retention and really breaking through and being special because pricing is a piece of this and it's almost a reward for doing things really well. But as you said a moment ago, a feature might be recognizing that the pack size of the dog food is too big, so you're making lots of smaller ones and it's more convenient. But now that is very copyable. That is something that other people can roll out in days. So how do we establish a right to win? How do we distinguish ourselves? Is it purely on features? Are there other dimensions like service and marketing and reputation and trust that we can distinguish?

25:06Randy Silver: What are the types of things that we should be thinking about beyond just does this do some cool widget? Yeah, yeah. I mean, I think on the right to win, it all kind of, as we've discussed, it all starts with the market and the customer. So I think if you can find that cluster of a market and customer segment and that narrow slice being uncomfortably narrow to find that aspirational ICP that you really believe need to solve this problem, obviously that's a really big start to solving the problem. Then of course, the product elements, which we've discussed a lot. I do think that then the means to reach the customer, be that partnership, be that marketing, be that direct, you know, it really depends how you're engaging with the customer.

25:55But of course, I think that can become a right to win that can become a moat because you have a dominance with a partner channel or you have, you know, a really clever bottom up motion. Like we know Atlassian and people, I know I've spoken of them twice now, but we know people like that did very effectively. So I do think things like that can become very smart mechanisms to kind of cement that right to win. I also think culture. I mean, ultimately, culture, we all say culture eats strategy for breakfast, right? That's a famous saying. And I think you can smell it on a company when they're customer obsessed.

26:31You can smell it when they're, you know, they want to solve the problem. They want to find an elegant path through. They want to find the minimum lovable products and they want to find a solution that isn't just, oh, the customer's moaning and they want this. They want to think about what is the way that we can solve that problem. And you can see that in product teams that we work with. You can kind of see that within them. So I think there are ways to dominate and create that right to win. I also think there's a lot of muscles in the go-to-market arena. Product marketing is an area that I think is hugely underdeveloped.

27:08I mean, even just, you know, excuse me, but the shit hot demo where you watch it and you're like, your jaw drops. You're like, this is elegant. This is thoughtful. This is not a full demo for three hours. This is, here's how this product will make a difference to your life. Here's why it will, you know, create commercial value for you. Here's the enterprise value that will translate as a result of this product in this way, solving this problem. For me, that's a really big gap in particularly Europe. I think a lot of the American businesses we work with are a bit sharper on that side often. But it's this connective tissue.

27:45I think the right to win cannot just sit purely near products. We all know the products that were fantastic. We go back to VHS, Betamax, you know, but I think it's showing my age, Randy. But I think that it's the i'm with you exactly it's this dance between the market the customer the product and then the translation layer how do you translate that through i think product marketing and enablement are two areas that particularly in pricing but i think as well in like defensibility of products which we do a lot of as well like these are huge challenges like well how would you sell this to a customer how would you talk to them about it how would you talk to the ROI what would the demo look like that would blow them away oh we haven't really worked on that we haven't really focused on that okay what do you want the salesperson to pitch when it's a 3 ,000 person fortune 500 business that operates in manufacturing versus the nimble a hundred person series b company in cyber like how are those two customers different and how are you going to translate the message?

28:57And I think that's a really big gap from what I see in creating that right to win.

29:03Randy Silver: What about pricing is signaling in that, you know, in consumer goods, we've got, well, consumer goods in tech, let's go with Apple. You know, their technology isn't that different from lots of other people, but they tend to charge a huge premium and have massive profit margins on their stuff. Carlsberg Beer here in the UK used to have the slogan of reassuringly expensive. When do you use pricing as a signal of quality versus trying to follow that race to the bottom at the moment? Yeah, I think it's to do with what you're trying to achieve. I mean, obviously, if you want to dominate a sector, and there are businesses where I think they're really trying to get land grab because of the amount of data that they want to capture and because that data will become the business.

29:54So I think if that's what you're trying to do, then of course, you know, you can argue that pricing can play a role in helping you achieve that because you could, you know, simple supply and demand if the price is lower, the volume of supply and those people interested will be greater. I do think that there becomes that fallacy of when something's just too cheap that you stop believing that it can be the quality that you think it is. And I do think that runs true in B2B as well as B2C. People argue it doesn't because, of course, they're all in negotiation. But I think we can all say that, you know, big checks have been written for McKinsey.

30:32And I'm sure that it's partly because it's McKinsey and it comes with the brand. But I'm sure it also comes with, well, if we're paying, you know, a few million, then it's got to crack the problem, right? So I think that there's a little bit of that that definitely happens in B2B as well. I do think that you are still signaling. You are still signaling to the market about the segment that you dominate, the investment that you're making in the product, the quality. And I personally think if you're going in cheap with a view that you just want to dominate the market, that needs to be a very upfront.

31:11And again, we come back to product marketing, but that needs to be an upfront. You know, we have spent years developing this product. We think the product is strong and it's in this way. We want to get to 80 % of the market share for these reasons to be able to bring the product to you in this way. So this is why we're, you know, willing to, we want to make it really economical for you. But I don't think that just being in that race to the bottom and hoping that sales improve. I've seen a lot of businesses say, oh, pricing's too expensive. And it's like, well, no, you're not understanding the value proposition.

31:48You can't talk to a customer. The team are not enabled and they don't even understand the problem the product solves. So even if it was free, go rock up to the wrong person selling the wrong thing in the wrong way, you know, free is expensive, right? Because free is still onboarding, training, you know, tech stack, security risk. There's a lot of things which mean that B2B tech carries a lot of weight, even if it's not necessarily in the price point itself.

32:20Randy Silver: And that's not even getting into the attitude that some companies I've seen have recently have, oh, this is too expensive. I'll just build my own. I can get AI to code this for me. And it works up to a point and then they realize they have to maintain it, which is a whole separate challenge in many cases. But you were just talking about get big fast on this. And that's a classic SaaS playbook of start out freemium, start out cheap, dominate the market, get as much out there as you can, then monetize and try and reap the rewards and ultimately sweat the hell out of the assets and then shitify it.

33:00Randy Silver: We've seen time and time again. Is that really the best way or what do you tend to recommend to your clients as a pricing strategy to go into places? Start that way and try and reap the reward later? Or do you try and go out earlier and make a higher margin sooner? Yeah, I think it's, I mean, it's very nuanced. I definitely wouldn't recommend doing that as a strategy generally. I don't like, you know, if the world's sexy, you should zag, Randy. That's what I think. So I think from my perspective, it's just anchored in where is the value in the product and who is the customer that you really want to serve and that really gets value from the product as we stand.

33:44And then I think it's thinking about what is the way that we want to access that value. Do we want to go in cheaper? And we know that we've got the competitive comparisons. We've got what it will cost for them to build themselves. We've got a view of their willingness and their interest in the product. I mean, if it's like the 10th thing on their to-do list and the problem is mediocre, you've got to be realistic about the fact that it just isn't a significant enough problem for some people to even bother taking a meeting. So if you if someone's willing to take a meeting and they think, well, actually, this is nudging up to a six for us, maybe you do need to be a bit cheaper to make sure that you remove a bit of the friction from them thinking, well, hang on a minute, this is not necessarily something that, you know, I want to spend my time and calories on.

34:34But then, of course, you should go back to the product and say, well, why did we build a product no one cares about? So it's obviously a dance, but I don't think that it's quite, you know, anything that seems simple you know there's that great meme isn't it where it's humans queuing up for the simple wrong answer and people queuing no one is queuing up for the complicated right answer and pricing is extremely similar to that it's everyone wants the simple wrong answer where they can just clunkily charge a price and away they go and it's a one size fits all and it's eat all you can or whatever the all these statements people throw around and the answer is that they're normally wrong.

35:13Doesn't mean that I understand why they're compelling. I too am intoxicated by simplicity. But often with pricing, it's not always going to be the most effective path, albeit that it's an extremely enticing one.

35:29Randy Silver: So you say lots of people go down the path of this simple but wrong answer. And I think you've said when we chatted before we turned the camera on about the fact that you're doing a lot more work that's focused on defensibility right now. So what does that mean? How do you approach that? And when do companies get to the point where they start thinking about it? Big question. I think defensibility ultimately is what is the product's right to remain in the stack? And how much can it dominate its position? and how much can it protect and continue to bring value to that customer or that workflow or whatever it is in a way that means that it's highly unlikely to just be ripped and replaced.

36:23So what is it that really makes the product have that right to win or, you know, to be that loved, you know, must have? And it might not be a loved product, but it might be something you just simply can't live without. I mean, obviously, both of those are great. We'll take both. But I think the defensibility comes back to why does this product have the right to exist? Why does it have the right to win? What is it that it has and dominates and brings that, you know, as you say, someone vibe codes over a weekend or a new startup emerges from Y Combinator or A16s. what is it that actually gives this product its dominance?

37:07And of course, means that it isn't something that's just highly replaceable.

37:13Randy Silver: Most companies don't know where they actually sit in the stack. Most product managers have never really done the analysis of where their feature, where their product sits in driving last mile value for their customers. So how do you work with people to diagnose that? Yeah, I think it's all, I mean, all of these answers. I never used to think I was a detailed person, but I think that like most really good answers in the B2B tech world take you going completely into the weeds, a level of precision and detail and then zooming back out. So it's all about, you know, mapping out the workflow through the market's lens and through the customer's lens.

37:53And then, of course, looking at the pain and the friction, then overlaying the product modules to that and seeing where there is significant gaps, etc. et cetera. Overlaying churn by module, overlaying usage by module, looking at, you know, service tickets, really looking at these different clusters of each customer. How are they buying the product? What are they gluing together? What are they putting us with? If you can get their tech stack data as well, which we love to do in Cortex. And what is it that you can do to really enlighten yourself about the way that they are utilizing and getting value from the product.

38:32And you kind of have to become slightly obsessed as you, you know, I am, you know, violently obsessed in a great way with the discipline of drilling into those different layers. I'm really thinking, hang on a minute, why would ARR for this quartile of this customer segment be at a 160 index to the median, but then they all churn and they don't use the product in the way that we thought and they never have, you know, the integrations, like what is going on there? And I think that they say that it's something called CEQ, curiosity quotient. And I think that that is something that from my perspective, it's turning on that curiosity and getting really obsessed with those layers and not stopping at layer one or two or three.

39:23And it's kind of the five whys. And that's something that I think is really missing because people seem to want, as we said, the kind of more vacuous, broad, but shallow level of depth or product, you know, product roadmap or product management description. And they don't necessarily dig really deep. And I think that most of the really thoughtful insights come from getting very deep and then kind of lifting yourself back out and seeing how they glue together.

39:55Randy Silver: How do you handle it when the discussion you have to have with the customer on this is a bit uncomfortable? I mean, I think I've learned to be quite empathetic because Mars were like, you have no empathy. So I read a lot about emotional intelligence and empathy and I was listening to - Oh, you know, men are from Mars. Yeah, I was listening to the Mel Robbins podcast on this actually just this morning. And I think it does come down to empathy, not I'm going to obsess over what you're thinking. That I think is weird. But the kind of, I'm imagining this is tough to hear. You've lived your life or you've, you know, especially for a founder, it's like, you know, we've given up everything.

40:37Like I've not not looked at my emails and gone on a holiday and not worked for 13 years. Like, of course not. That's crazy. Like I'm obsessed with what I'm doing. So to handle it with grace, handle them as thoughtful, considered people that want to do the right thing and be intellectually honest, but also do it with an elegance and a thoughtfulness about the effort that they have put in. And I think that man in the arena says it all. It's like they are the people in the arena. They are fighting. They are working really hard. And we all come to work thinking and trying to do our absolute best. And so handling them with that thoughtfulness, but of course, also handling them as an equal and looking them in the eye and saying, I have no agenda here other than for you to win.

41:27Randy Silver: I think that's one of the things that you as an external consultant can do in a way that sometimes employees can't. So let's go back to something that product managers working in the company might be able to do besides calling in somebody like yourself, obviously. Most consultants are evil. Don't call consultants. Most are awful. So speaking as two consultants, yes, I agree with you most, but not all. And sometimes we are useful. But one thing that you can do on your own as a product person is start to integrate pricing and pricing strategy into your roadmap. And this is something I didn't expect for the two of us to talk about, but it came up in an earlier conversation.

42:16Randy Silver: Roadmaps without a size of price attached are a red flag. What do you mean by that? Yeah, so I mean, I think that you should be able to estimate the size of prize of the effort, energy and budget that you are putting towards a feature or a component or a product. So what I mean by that is you should be able to say that either you are building this feature to mitigate churn in this way and you have evidence that of the 800 businesses that churned in the last 24 months, 600 of them, this was one of the challenges for them. you have evidence from sales calls, e.g. Gong or something like that, that backs that up.

43:00You also believe that there will be a win rate increase for this specific segment and that you've got partner feedback that sales into this area are very difficult because this is a certain feature or function that's missing. That to me, with a number against each one of those, is getting to a number, e.g. an amount of money that will be saved or earned based on developing this feature. And to me, that size of prize assessment is something that should happen in the product management lifecycle very early on as a, you know, finger in air V1. You know, I estimate that this is the slice. I estimate this is the percentage.

43:40I've got some numbers behind it, but of course, it's not all bottom up. You know, they're going to be much more broad. I call it T-shirt sizing. It's what we call it, Cruxy. And then, of course, as you whittle down and you move much more towards the launch, you're then thinking about that's where you are really getting a grip on the pricing. How would this be priced? How will this, you know, actually make the lives of our customers better? Is it going to be something we price as an add-on? Is it going to be wrapped into the base? And therefore it's more of a churn mitigation and of course a conversion driver.

44:14And that level of rigor and discipline, I mean, discipline is my favorite word. It's just, you know, it's like the more disciplined you are, the easier life gets. Start the discipline of size of prize mapping and also love the compound effects. And it's like, well, if you start the size of prize mapping now and you start learning to do it on a few different features you're developing in a year, if you do it for half an hour a week, in a year, you will obviously have this huge edge where you are able to actually map out and really assess the impact of the different elements of the product that you're building.

44:51Randy Silver: That is a core part of a lot of road mapping, using rice or ice approaches to this and just assessing impact as part of it. I've never seen it done especially well in that people put their finger in the air, they inflate it and they put their thumb down on the scale for the things that they want. The best I've seen is, as you're talking about, in T-shirt sizing, our friend Rich Marinov has this wonderful approach to it. It's just saying, count the number of zeros. I don't care if you're going to make 20 bucks or 50 bucks. I care if you're going to make thousands, tens of thousands, millions or hundreds of millions.

45:28Randy Silver: That's the thing that makes a difference. So when you talk about impact, is that the kind of approach that you take or are you trying to be more precise? Yeah, I do think it's that. But I think it comes from really understanding why you're doing something that you're doing. I agree with you. I think people end up doing this where it's like the bigger the number, the better. I don't know. I've never been that kind of person. I'm like, why would you do that? Like that is just creating a rod for your own back. And also I don't like failing at things. So the idea, I mean, of course, ironically started a company and it's been very tough, but still going, all that discipline.

46:05And I think that people then become obsessed with hitting this number that they made up. And then they're annoyed and the board is like, well, why did you not hit the number? And it's like, well, it was a made up number. And it was insane. I don't like that approach. I think that's intellectually dishonest. I think it's trying to get the budget approved. I think it's political. I just think it's much better to be really disciplined and honest about why you're doing what you're doing, because then you can stand back and actually stack rank and think about the trade-offs. Because if you're always, you know, conflating numbers or inflating even better, then I think that you can't really be intellectually honest about the trade-offs that the business needs to make.

46:47And then you're not serving the P &L, you're serving yourself or your department or, you know, a senior stakeholder. And I just think we should all serve the P &L because I love the numbers.

47:00Randy Silver: Carrie, this has been fantastic. Thank you so much for your time today. One last question, just for any product people who have been fascinated by this, that want to get more into pricing, they want to learn. Is there anything you'd recommend to listen to, to watch, to read, where they should start? Yeah, I think a lot of pricing really starts with understanding the customer. So I think reading as much as you can about customer obsession, like how to get under the skin of the customer, different methodologies and research approaches. Of course, CORD can be great for that when you say, I've got these ideas for understanding how my customer thinks, what are the 10 I'm missing?

47:41Or, you know, obviously you need to prompt it appropriately, but I think it can be helpful for that. And of course, there's lots of really interesting stuff out there from the likes of AZ-16. I think psychology can be a really interesting angle to think about like the psychology of how people think. So yeah, there's a few. And then of course I'm online and love to connect. So anyone that wants to kind of connect and be a product friend and a pricing geek, come my way, love it.

48:09Randy Silver: Fantastic. Carrie, thank you so much for this. This has been wonderful. You're awesome. Thanks, Randy. The product experience hosts are me, Lily Smith, host by night and chief product officer by day. And me, Randy Silver, also host by night. And I spend my days working with product and leadership teams, helping their teams to do amazing work. Lou Ron Pratt is our producer and Luke Smith is our editor.