SPOTLIGHT: Solving SaaS Pricing Challenges with Pricing I/O Founder Marcos Rivera | with Marcos Rivera, Founder and CEO @ Pricing I/O

0:11Sam Jacobs: Welcome to Topline, the podcast for the best founders, operators, and investors in B2B tech. Every week, A.J. Bruno, Asad Zaman, and me, Sam Jacobs, will break down what's important for you to know to be the most well-informed professionals in the market.

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1:18Now back to the show.

1:25Sam Jacobs: Hello, everybody. It's Topline Spotlight. You know Topline Spotlight. It is that short mini segment of the Topline podcast released every Thursday. Each episode features a one-on-one interview between a guest who is an operating executive, an influencer, a thought leader, somebody that knows go-to-market inside and out. And one of our hosts today, it's me and Asit Zaman. I'm Sam Jacobs, the CEO of Pavilion. Asit is the CEO of Sales Talent Agency. And with us today is Marcos Rivera. Marcos is the founder and CEO of Pricing.io. I've known of Marcos for a long time, and I've also known him for a less amount of time than that.

2:06Sam Jacobs: But I've known him because he's a pricing expert. And I've seen Marcos give really incredible presentations to rooms of CEOs about the power and the leverage that you have when you think about how to price your product. And it's not just Marcos that says that a lot of the pricing firms underscore that the companies that regularly revisit their pricing tend to grow much more quickly than companies that look at it every couple of years. And that is why Marcos is going to be doing a project for Pavilion, in the company in the next couple of months because we need that help. Marcos is also the San Diego chapter head for Pavilion and is just a generally good guy.

2:43Sam Jacobs: I think originally from New York City, if I'm not mistaken. Marcos, welcome to Top Line Spotlight. Sam, thanks for having me, man. It's going to be a lot of fun. Love talking to smart people like you. Did I miss anything in your bio? No, you hit all the big points here, right? I come from the private equity world, did a lot of pricing for Vista, did it myself as an operator. I was a product manager, actually, is where I learned all my pricing ninja skills, just building value, trying to get people to buy it, people to sell it. And over time, just got really good at it. So that's the little bit deeper lens.

3:16Sam Jacobs: I love it. And pricing, Io, just tell us about your organization, how big it is, what kinds of projects and engagements you do, who your ICP is like. If someone's out there listening and they're this sweet spot customer for you, who is that person? Yeah, so the short of it is we help B2B SaaS companies charge for their stuff in the best way possible, right? So we go in there, we break down their pricing, their packaging, their go-to-market, even things like their positioning, you know, how do they handle discounting, all the stuff. We look at pricing as like a whole end-to-end system. And we just help them get the best system in place so they can grow, monetize, do what they got to do.

3:56And we only work in the tech space. So we don't do pricing for toothpaste or candy bars or anything like that. We only do tech. And it's a lot of fun because these companies are changing very fast, especially nowadays with all this AI stuff going on. And they need to figure out how do I capture all this new value I just coded over the weekend? How do I figure that out? So it's one of those things that keeps us on our toes, and we love it. The team right now, I started all by myself, just me. And now we're about 20. We'll be 24 here soon.

4:28Sam Jacobs: So we're pretty cool quite a bit. That's amazing. And before Asa jumps in, we were joking before we started recording that Asa loves interrupting people and Marcos loves interrupting people. I love interrupting people. So, you know, it's a high wire act to manage. shot on that spotlight. But that said, before we jump into the heart of the business problem, I do want to ask this one question, which is what's the most common misconception? What is misunderstood about pricing and relatedly, what's one insight that somebody can take away with them after listening to this show? Yeah, I have more than one.

5:04I'll give you one big one though that I see all the time, which is pricing is one and done. I just talked to a CEO last week with lunch. And he said, yeah, I kind of see it as a once every couple years event. Isn't that it? I said, is your product changing once every couple years? I mean, you need to really sit down and make this more continuous. And he looked at me like I was crazy. But after, towards the end of when we finished our food, he was seeing it my way. So you definitely have to. Is that because if you're changing it regularly, obviously you're increasing the value you can capture, but also you're kind of training your customers that this company's price goes up.

5:40I ask because the firm I run, we hadn't changed prices for 12, 13, 14 years. And since then, we've changed prices a lot. And what I'd noticed was initially when we did it, our customers were like, so it was so hard for them to come to terms with it. But now it's like second nature. It's conditioning at the end of the day, right? And think about people who wait for discounts and don't buy until the discount season comes around, right? You condition your buyers, they figure it out. Once you start changing things, they're like, oh, okay, this guy's changing every year. And then they get used to it.

6:12They kind of get a little ticked off at first, but then afterwards they adjust.

6:17Sam Jacobs: Is there best practices in terms of communication around that? Because one part of me wants, like I want to optimize, of course, and that's why we're going to be working together. But we also haven't touched pricing in three years. And at the same time, I'm sensitive to your last point, which is there's there, you know, you shouldn't, well, this is a disagree with me here. You shouldn't have to make your customers experts on how to buy your product. You shouldn't make it so confusing that they don't understand. And also there's this complexity of the more often you change prices, the more skews you're going to have, then there's going to be some kind of technical debt that you're going to accumulate unless you're changing all skews all the time.

6:59Sam Jacobs: But, and I'm sure there's a system that you've built to manage this, but it does seem like customer comms are really, really important in terms of how you manage, particularly if a company goes, like in Asit's case, from never having change to, hey, we're going to have some new packages every year that you can consider. Yeah. I think the changing in pricing, I want to break down the word change a little bit, right? Because you can do something massively and change your packages and bundles and all sorts of stuff, or you could just nudge a couple of prices up, include a feature and be done, right?

7:27So I think that revisiting your pricing is probably the better way to describe it. And it really matters on two things. If you think about how fast you sell and how fast you're changing as your product or services, if you're never ever changing, that really doesn't change the value equation in the minds of the customer. And so you don't really have to go crazy, maybe just some inflationary adjustments and be done. But if you're adding tons of value, which a lot of these software companies are, then you really have to step back and say, how's the experience changing for the customer? And when I say experience, I mean more than just features.

8:02I'm talking about how you onboard, how you support, all these other things. Because in reality, you're not pricing the product, you're pricing the experience. And if that's changing around, then you have to capture that. Pricing can also be a feature, right? So if you think about counter-positioning, a great way to counter-position is actually pricing in the market. That was Salesforce against Siebel. There was a pricing difference that they heavily leaned into. And what you find sometimes is that companies just have their pricing and they just show that and they're like, it's gone up this much and not up this much.

8:35But if you can explain to them what your philosophical view on pricing is, why is it this way? I've noticed. So we do that now. And on top of our pricing, we have a point of view on pricing. And that has been huge for us.

8:47Sam Jacobs: I love that. That's like Bob Cialdini influence, which is if you just say because. People that want to cut in front of you a line and people that cut in front of you a line say, I want to cut in front of you a line because. And sometimes all you have to say is because I'm really in a hurry and I don't feel like waiting. It was counterintuitive. One question, Marcos, and then again, I mean, I think we have enough to just talk about whatever we want. But we do want to dive into one particular problem. But one question I have is part of what I'm hearing you say is for companies that have, especially we're coming out of 2023, right?

9:24Sam Jacobs: We're coming companies with sometimes they perceive themselves to have GRR issues, meaning gross revenue retention. Like they've got churn problems or they think, you know, or they want churn to be better. And there's a very obvious thought process of, well, let's not futz with it until churn is better. We really haven't earned the right necessarily to futz with pricing because clearly our customers aren't super happy as things are. And then there's another – so just walk with me here. So then the thing that happens from there is that you as an organization decide you get used to not charging for new stuff that you build.

10:01Sam Jacobs: You build new stuff and you just say, well, we should just put it – we should just include it. We should just include it because we're doing anything we can to get gross revenue retention. it. And I think you'll tell me if I'm wrong, but my hypothesis is that that's probably a flawed thought process. And additionally, that you should be in the habit of as you roll out major new features and new experiences for your customers, you should be thinking as part of that, how will we charge differently for this major new experience, as opposed to everything should just be included. So love your reaction to that idea.

10:33Yeah, I have a couple of reactions to that. The first one is if you're seeing a lot of churn, that tells me there's a misalignment somewhere. And it could be, by the way, it may not even be a pricing problem. It could be an onboarding issue where they're not getting a value and they're spending too much time trying to figure this thing out. And like, you know what? I'm out. I don't want to deal with this. And that could be another issue. So usually when you have a pricing problem, dig a few layers deeper. You might have another problem behind that one. But nonetheless, if you have a lot of churn, you're right.

11:00customers they're leaving freak out the founders freak out the companies and they want to give them as much as they can here's the dirty little secret though okay is that they really don't want more value your customers really want the right value and so by piling in more and more and more you might be thinking hey look I'm giving you all this stuff right this isn't as good but now think about it from their lens it's like look I really just want this one thing and you give me all this other stuff now I'm paying full price and I'm only using one-tenth of everything you're giving me. I don't know if this is for me, right?

11:30Let me go somewhere else where they can meet my problem head on directly. Give me what I need. And this is where I think they fall into this trap and they give, give, give. Now people are still churning. Some of the ones that stay, frankly, are just, some of them are zombies or some of them are just waiting for the better deal to jump to. And so I think fixing the right core crux of the problem, which is aligning to the value they really want, is the real play, not piling in more and more features. I think that's a trap a lot of founders fall into. Do you think that some of this also has to do with sometimes underpricing things, that if you underprice something, the way somebody perceives it is different compared to if you price at a premium level?

12:10And then even the way that they onboard themselves, the way that they try to get value out of it is different compared to if they thought this is a flippant purchase. We'll get to it. so people do associate um quality with the price a lot of times you see something that's really cheap they're like ah is this thing really legit or versus too expensive wow that must be good that that generally uh if you think about veblen goods and things like that's a little nerdy term but like if you walk in this is luxury clothes 20 shirt you're like no it's not right exactly and humans are always making these associations it makes it makes it easier to think right at the end of the day.

12:48But here's the thing that you got to be a little bit careful with, right? Which is going out the door, nine out of 10 of these founders are undercharging. And that is not necessarily a bad thing at that stage, because you're trying to figure out, is this the right value? Am I even selling to the right person? All those things are still kind of question marks, even your customers don't know if this is the right value, they're still trying to figure things out. So undercharging in the beginning, it's actually pretty common. And it's okay. it's once you start realizing that you have some kind of you know product market fit or you're starting to realize hey i'm actually we got something here and you're starting to grow and get more customers here's where they go wrong is they keep plowing more stuff similar to what sam just says they keep plowing more stuff in they don't relook at the model they don't readjust the experience because now they're they're they're double downing on certain areas they're building in certain uh use cases they're ignoring others and now stuff's changing but the model is still Well, the same.

13:42And so you start to see it, but it doesn't rear its ugly head until later, until you start seeing, you know, growth plateau or people aren't upgrading or expanding. Then you're like, oh, wait a minute, what's going on here? And so I really, when in this high speed environment where you're changing and you're training to take advantage of the traction, you need to go back and make sure the model keeps up pace. You have to make sure it doesn't fall behind. That's so interesting. Okay. This has been great, but let's click into your business now. So we are here to talk about a problem that you've solved in your business in the last 12 months that was a hairy, intense, and important problem to solve.

14:23Tell us what comes to mind when you hear that question. So there's no shortage of problems I've had to solve in the last couple of years, right? We share that. I need to make sure I pick one that I think is relevant to the audience here. And the big one that I want to talk about is my big problem in getting the right talent in a company that is a niche offering in a niche industry. I'm like double niched, right? And so what I found is that finding people who understand the pricing and the value problem and software and tech and can come in and also want to work in a fast-moving founder-led environment, freaking hard, man.

15:06freaking hard and I made some missteps on hiring and who should be on the team I'm just being vulnerable right I did not know how the hell to figure this thing out and then finally I said you know what I'm going to sit my butt down I'm going to grab a glass of wine I'm going to figure this out so here's here's what happened so I was trying to scale a founder led so a founder more like founder doing everything and then you have to start building out the components to scale you need people to do that right so I well let me just bring in somebody who knows pricing and all is well. That failed miserably.

15:36People had different philosophies that came with bad habits. They were more cost plus pricing versus really the nuances and value-based pricing. And they didn't understand the software like SaaS mechanics and the business model. So then I figured out that it isn't pricing talent I'm looking for. It's actually the ability to recognize value, communicate, and connect that to strategy. I need someone who can connect the dots. And that was a big sort of revelation for me, but it didn't stop. Did you get that revelation because you had like an AB test essentially playing out in the business? Maybe not in real time.

16:08Yeah. Yeah. In real time. I'm like, Oh, so yeah, you know, pricing, but you can't quite solve the problem, right? You can't solve the problem. And that was the big one for me. So I said, all right, let me change the profile of who I'm looking for. And this is where, this is where the hardware comes in that most people will skip is actually sat down, rewrote the job description. Then I took it a step further and wrote what the success look like. And then I said, how are you going to be measured, which is really hard because you're just solving pricing problems. I wrote all this stuff down in the Google docs, just wrote all out.

16:39And I said, all right, now I'm super clear on who I want. How am I going to test for this in the interview process? And so I set up, I wrote a case study. I took an old client, totally anonymized everything and created a case study. I'm like, solve this, show me, or at least walk me through your thought process on how to solve it. Tell us a bit more about this case study, because I think people underappreciate how much time and energy they should spend formulating the case study. How deep did you go? How did you get it right? Oh, man. I even sent them a fake data set. I went the whole way. So I went the whole way with a client that I know what happened.

17:19I know the context. I know how we solved it. And then I anonymized a bunch of stuff and laid a couple of booby traps in there by putting, you know, some some scenarios. And I said, go ahead and solve this. And the real key here I was looking for is their thought process. And when once I realized myself, like, this is what I'm really hiring for the thought process. That's when I changed my whole approach to the interview, to everything. Even now, after the interview and if they solved it and they were able, of course, meet all my other checks with, you know, culture and everything like that. I had created a 30-day, 60-day, 90-day plan.

17:52You're going to watch these videos. You're going to do this. I made more fake mock pricing problems, and I said, solve these. I love this because I think in our ecosystem, we have confused onboarding with orientation. And so we think we've made a person understand how to log into whatever system they have to log into, and we're done, right? They've watched one or two videos, spent a week. Onboarding is the path to productivity. It's the things you need to do to get to a ramped up state. And what you've done is, instead of asking the person for their 30, 60, 90, you're like, let me map this out for you.

18:25I love that.

18:26Sam Jacobs: I love what you just said about onboarding as a path to productivity. That was a great little turn of phrase, Asit. There we go. Yeah, write that one down. Damn, that was good. But that was it. It was really becoming a lot more structured and intentional with how I hired, what I want, what I want them to do, showing me that they can prove to prove to me that they can solve the problem before then to go into their shadowing and other phases before they're ready to start tackling the real stuff with the client and that that whole process I started with sitting down with a glass of wine but it took months it's how did you get the right people into your process so this is an area that I'm still working through but the right people into my process meaning from the get-go in the top of the funnel is it's slow because I ask for a lot of referrals.

19:19Got it. And I disqualify a lot of people from the top. Like I would get three, 400 applicants. I'll end up making, you know, two or three in the finals and then offering one. Like it's a really, I don't like if you're not, if I can't see evidence of your progression and of your work, then I don't waste my time. So you're starting with this broad top of the funnel and you've got this really nice process that gets you to be able to truly forensically test people to see if there's fit. I really think that people underappreciate how much time and energy they should spend doing this, especially in a business like yours or mine, which I think are fundamentally craft businesses.

19:59And you're developing craftspeople and you can either pull them from the market and deal with the issues that you dealt with. and just essentially become the average of the market? Or if you're trying to do something special, you want to be the cobbler that builds a special shoe, you have to develop people out, but then how do you test if they can actually become the person you need them to become? It's really hard, and you seem to have gotten it right. What was the material difference in your business from your earlier stage to once you implemented this and hired people through this? Yeah, I think by the development, craftsman is a really great way to look at it.

20:34damn, this guy's smart, Sam. I think we're all pretty smart. So how's it changed? And so one of the key things, as I've noticed, is the ramp up period. So not the, you know, the old adage of hire slow and fire fast. It's actually one of those things that are really true, but easier said than done, right? And I think that I found that reality very hard as I was developing this process. But the good news was that I was able to really increase my cycle time in hiring the right way, meaning getting strong evidence that this person is going to be able to contribute to the team. And when you hire someone with high conviction, it feels good.

21:18Like you almost get excited, like little butterflies. Oh, I can't wait for this person to put that person on the field.

21:24Sam Jacobs: Yeah, I was like, Oh, man, I just, I want them to start tomorrow. But what happened was I still had a couple misfires, but the percentage was a lot smaller. It almost cut into like a third. So if I had 10 people, three misfires, then it went down to one. I mean, my point here is that the people who came, they stuck. Now, the misfires that I'm talking about, I'm just, again, maybe revealing too much here, but one just got a better offer. His wife moved, and he's like, I want to go somewhere else. Some things you just can't control. right at the end of the day um you can't bat 100 with hiring like impossible no one you can't bat 100 and and i realized that um you know there's a part of me that wanted to but then realized ah you really can't man this is just people right at the end of the day um in the ramp up period went down tremendously so what i meant was first hires before my process which took like six seven months to ramp up and that was cut in half with uh the new process because of all the diligence and the things that we've made them do, that time in the beginning was more productive.

22:27I have heard the same story from so many people where they say, we stopped obsessing about relevant experience, thinking that extreme relevant experience correlates with a fast ramp. And we started focusing on these other things and found that they ramped faster. It happens all the time. It even happens in the world of SDRs. Companies that want to hire SDRs with experience, they do that. It doesn't work. Then they start hiring high potential people and they find that the time to ramp difference is like marginal in the, in that case. And this is a person straight out of university versus a person with a year's worth of SDR experience.

22:59So I love that. Yeah. Sam. Amen. You've heard this problem and the solution. Give us your reflections. This has been a really interesting session.

23:09Sam Jacobs: My reflections are that it's time to go. But before we do, uh, we want to, we, we have two more questions for you, Marcos. The first is, you know, Richard Dawkins talks about how ideas are the same thing as genes. You know, there's an evolution to ideas and they spread throughout the world. Memes are that idea. Language is an idea that in some ways has the same characteristics of life. But my point is there's ideas that you'd like to share with us. There's books that you've read recently. There's mentors that you've had. There's great investors that you find yourself following and following their advice.

23:41Sam Jacobs: There's podcasts that you're listening to. So what's one great idea around, you know, what's a great book you've read recently? What's a great influencer that's really inspiring you? Let's pay it forward. Let's jot down some notes. Man, I'll give you two. I'll give you two. So a book that I read recently, Buy Back Your Time by Dan Martell. I've known Dan for a long time, and I was living what he was putting in the book because I felt like I never had enough time to do anything. Maybe I. He broke it down, and he was able to at least give really good practical tools in there. So anybody can pick it up.

24:14And the following Monday, like read the damn thing. It's a fast read. Following Monday, I'll play this one.

24:17Sam Jacobs: We like fast reads for our book tally by the end of the year. I read a lot of books. Okay. Second one, buy back your time, Dan Martel. Buy back your time. And then there's something that I kind of always knew, but it never quite like crystallized for me, which is I'm not really in the pricing game. I'm not even really in the consulting game. And not even in the people game. I'm in the trust game. Ooh, the lolly. I'm in the trust game. And everything I do, everything my team does, everything about our entire service ethos has to be about how do we build trust. And I never thought of it that way, but doing that now helps kind of change a little bit of my priorities.

24:54Sam Jacobs: I love that. And there's a great book by Stephen Covey called The Speed of Trust, which you may want to check out. If folks are listening and they want help on their pricing, they want to learn more about pricing, maybe they want to join the San Diego chapter of Pavilion, and what is the best way to reach out to you, Marcos? I'm easy to find. Find me on LinkedIn is where I hang out a lot. But you can always hit me up at pricingo.com. I see everything that comes in from my team. And so reach out. I've got questions. I'm happy to help. Awesome. And I think, I don't know, are you speaking at CRO Summit and GTM?

25:31Sam Jacobs: But hopefully we'll be featuring you at some upcoming Pavilion events. So I'm excited to see you in person. Yeah, and I'll be there. I'll be stepping up at GTM. All right, awesome. Thanks, everybody, for listening. Thanks, Asad. See everybody else. Have a great Thursday. Bye.

25:49Sam Jacobs: Thanks for listening to Topline. New episodes come out every Sunday. If you like what you heard today, subscribe so you never miss an episode, leave a five-star review, and share it with your friends. Don't forget to join our Topline Slack channel to connect with us and discuss the topics we cover with other listeners. Click the link in the show notes. Lastly, if you're interested in joining Pavilion, you can learn more about membership at joinpavilion.com forward slash membership. Thanks again for listening.