Set the perfect price for your SaaS-tool, by Felix Mörée, Partner at Axholmen

Wilma Eriksson: [00:00:00] Hi, you a warmly welcome to fail and grow the home of pricing and profitability. This is where you get to learn and love from the best within the topic and the ones. Who dare to share their fucks. If you love what we do, share this episode with a colleague or a friend who shares our nerdy passion about pricing and profitability.

I mean, who doesn't? My name is Ilma, your host and the co-founder and the CEO of Vox, Q-C-P-Q-A perfect fit. When you're CRMs quoting, functionality isn't enough, but enough of this sheet. Lets tune in into today's episode. Here we go, and today's guest is. He is very, very experienced when it comes to pricing.

He is actually written four books and one of them [00:01:00] I've just tried to read fully, but I understood that I read it and need to read it, uh, full, full through, and it's called How to Charge, and he was previous employee of Simon Kutcher. A global leading pricing and marketing consultancy, but now switch to a more boutique consultancy based in Stockholm called Ax Holman.

But they have a very international customer base with customer, both in Europe and the us and I just love, because I always ask my guests. How should I, like brag about you and your business because it's better that I do it and you can explain what you do. And then he said, uh, we ensure that all customers, uh, base decision on data.

So I wouldn't say that it's bragging, but it's still music into my ears. Felix, it's great to have you here. No

Felix moree: pleasure to be here.

Wilma Eriksson: So, uh, tell me a little bit about yourself and of course, and maybe also books upcoming.

Felix moree: So I'm a partner at Taxon and my focus areas is [00:02:00] regard related to, uh, simply speaking, how can a company earn as much money as possible through marketing, pricing, sales.

And the foremost my focus areas has been within pricing, which is, uh, one of the least, still one of the least explored areas for many companies in how to work with that professionally. And, uh. For most, for tech and sales companies because when you have these intangible assets or products, uh, pricing becomes much more difficult because, uh, the old pricing sin of, uh, having a cost-based pricing works much worse when you have, uh, products where the marginal cost is zero.

So that's, uh, where I spend most of my time and, uh. And, uh, Axel is, well, as you also put it quite nicely, it's a boutique consultancy here in Stockholm. And, uh, we, we split [00:03:00] roughly 50 50 between what is called commercial excellence, a commercial strategy, and, uh, operational efficiency, which is more about health, more efficiently run your organization.

And, uh, despite being local in Stockholm, we're, uh. Have quite international customer base. So it seems that, uh, what we're doing seems to resonate with a customer base outside of Stockholm as well.

Wilma Eriksson: It's very interesting and, uh, it's tricky for me to imagine someone more suitable than joining fail and grow that, uh, that, that really focus on pricing and profitability.

So I just, I just love this. I'm looking forward so much to this recording and your ideal customer who.

Felix moree: It could be a, a sales company or something that we access a service so that there is a, a clear, uh, subscription component and, uh, at least typically around, uh, 10 million euros in, in a RR. Although [00:04:00] we, we've done projects for much smaller customers, usually it could, it would start, it, it would start making sense to have an, have an external consultancy, uh, assist already if you have.

5 million euros in a r given that the, the return on an, uh, project is usually quite significant because there's a, uh, in particular for, there's a large upside in general for pricing, but in particular for, for sauce and tech, there's, uh, usually double digit, uh. A RR increase that is possible from the project.

So usually there's a quite significant, uh, payoff from conducting a, a, a more forward pricing exercise.

Wilma Eriksson: Wow, that's amazing numbers. I'm looking forward to really get nerdy in a couple of minutes, but beforehand, I'm curious to know what you would pour in your drink if you were maybe to celebrate something, celebrate life, or just have a great uh,

Felix moree: yeah.

Uh, for me it would be, uh, I would go for sparkling wine usually. [00:05:00] So, um, either, well, if it's a very special occasion, would like, could be champagne, but, uh, that normally probably more cover or a criminal,

Wilma Eriksson: something that's, uh, that's bubbly. Yeah, exactly. That's, yeah. What

Felix moree: about you?

Wilma Eriksson: Well, uh, I agree with you. I agree with you.

I love something that's sparkling. I just feel that, uh, it just, uh, I know some. Everyday luxury, but it feels a bit special when it's, uh, when it's sparkling and when it's dry. And uh, actually my longtime goal is to have my own sparkling wine from the south of England because I've learned, when I was in Champagne a couple of years ago, I've learned that, uh, uh, like you say, the soil, yeah, like the soil consistency or something.

Specific, uh, uh, mineral within it, uh, in champagne, but also in, in England. And since it becomes warmer, unfortunate, and then apparently champagne doesn't get bigger. [00:06:00] Uh, but it will be a very good environment for this in the south of England. So that is my long time goal and it should be named Moray. So let's see.

Yeah, all sounds good. Good. So, uh, is your, uh, funniest work related fuckup that you dare to share with us? What is that?

Felix moree: Uh, this one is a bit, uh, a bit tricky. Uh, so this is, uh, this is more like. One of the most bizarre situations I've had, uh, in, in, in the best part of the, of my work life. Yeah. I, I'm, I'm not firsthand, uh, uh, I say I'm not the main character, but I was there and more, maybe more bystander, but, uh, it, it was such a fun situation, so I, I would like to share that one.

So this is in, uh, five, six years. Mm-hmm. So.

Pitch for a manufacturer. Mm-hmm. In, uh, uh, that is outside of ro. [00:07:00] Yeah, so it's, uh, well, a couple of, uh, kilometers outside of Stockholm. And given that it was quite a remote location because it's, we had to go to RO and then outside of ros, we thought it was easier to, uh. Uh, drive there.

Wilma Eriksson: Yeah.

Felix moree: And, uh, we fought for the long situation is should we rent a car or, I mean, how should we efficiently go there?

And then, uh, uh, the partner of my former boss, he came with the idea that Will, will will just take my car because, well, he was the only one of us that was go going there that had a car.

Wilma Eriksson: Yeah.

Felix moree: And, uh, everyone was fine with it. But, uh, what it turned out was that the only car that he owned is, uh, Porsche. Uh, Porsche Panama.

Wilma Eriksson: Yeah.

Felix moree: So we were then going to this manufacturer.

Wilma Eriksson: Yeah.

Felix moree: Outside of Ster was Porsche. And, uh, we thought that, uh, well maybe we can park it somewhere else so it's not, uh, so it doesn't [00:08:00] PORs. But it turned out that, uh, it, we need some like manufacturing area. So you have a lot of factories and all of the factories have like their own, uh, uh, parking lots that you, that you have to, that, that is gated.

Yeah. So when we came there, we realized that, well, we can't, we will not be able to park anywhere else then. Right next to the factory in, in the, in the area. So then it was noticeable, uncomfortable atmosphere in the car when we started to realize it. Like, shall we roll in with a Porsche to this, uh, factory?

Uh, which is in the end we did. Yeah. And well, uh, it wasn't more comments or anything about it, but it was just a absurd situation is going during that car and that kind of moment when we just realized that, oh well. We'll just have to roll in there and park this car in, in, in their area.

Wilma Eriksson: I thank you for [00:09:00] sharing.

I have, uh, I'm very into cars. I love cars. I watch Formula One. Oh, uh, Porsche. Target is my dream, dream car. I know that's not super fancy, but it's just like a great car from my point of view. And the Porsche Panama, of course, is one very great car too, and me and my friends that are, uh, into cars and as nerd as I am, we have talked about this so many times.

Because if you, uh, well, we, being in Sweden, Volvo is a quite common car here, but it's. Also very expensive, but you don't talk about it. So it could be like buying a new Volvo or arriving with a Yeah. Uh, a Porsche Panami that you bought secondhand or, or similar, yeah. It doesn't have to be more expensive, but we had this in Sweden that you shouldn't, you shouldn't brag, you shouldn't stick out.

You should be humble and so forth. I can just imagine how wrong that.

Felix moree: About, but it's not promising. I think, I hope next to your, uh, uh, your, uh, winey yard where you're gonna have [00:10:00] a sparkling wine. Yeah. And then you can have your Porsche Taiga there as well.

Wilma Eriksson: Yeah, I hope so. Then I don't, I don't think they will.

I don't, they they don't, they won't care, uh, if we have sparkling wine and a Porsche. And I often actually, uh, so, so, uh, me and my friends talking about this, we are always ensure that if we have a car, you know. The work, uh, or using it in work, we have more low key or more Okay. Brand. Uh, and then when you arrive, it's, uh, quite common.

I feel that it stands something similar. It could send the Ferrari because the boss has one and he, he doesn't care, so he drives it to the office. So I don't know if that was the case here. Maybe it was more low key brands.

Felix moree: Uh, no, I think, uh, no. In this case it's, uh, I. It was only the, we are, I think for everyone else that was at the factory was, uh, usually well was more what say regular cars, uh, to that extent.

Right. But I mean, it's, uh, also mean given that we arrived a little bit, uh, in the, in, in the middle of the, uh, [00:11:00] uh, a couple of hours. Hours before lunch. Yeah. I mean, no one was out there and no one was watching. I hope. As, I guess we're as being a stereo, stereo, stereotypical.

Wilma Eriksson: Yeah. I think they knew it was your car, but whatever.

Whatever you survived. I hope the meeting went well as well. Yeah, of course. I hope it went well. Yeah. So thank you for sharing.

No, no, no. Now we should get all nerd about pricing for SaaS, uh, and we are gonna talk about. For strategies for SaaS to increase their prices and also became more profitable. Become more profitable. And what you said now in the intro really blew my mind that you can double your a RR by looking into the numbers and what, uh, I find personally very interesting about this.

Uh, something you also mentioned earlier, it, it feels like it's very uncommon that you actually work with pricing as strategy. Um, is, is, would you agree on this or what's your take on this? [00:12:00]

Felix moree: Yeah. Um, first maybe just, just to question a little bit is, uh, so it's not, uh, so it's more rather double digit growth that you would see in, in a R.

So it's not necessarily double just to also not, uh, in inflate expectations of it. I mean, it can, there are cases when that, when that is possible, but, uh, I, I wouldn't dare to say it, uh, uh, out loud. Uh.

There was a study in, uh, if it was last year, a couple years ago, where they, where they asked the sales comp or executives within sales companies how much time they spend on pricing on average in a year, and it was somewhere around 10 to 15 hours. So it's a. Extremely limited time that, uh, people spend on thinking about pricing, which is actually quite bizarre when you think about it, given that, well, pricing is, I mean, the core, the core reason why you get revenue is that you're actually selling something to a price, and then of course there's [00:13:00] more than just a price point, but thinking about the architecture around it.

Uh, it's usually, well, people spend too much, too little time on it, and that, that was why there's usually a significant impact from revising it and, uh, working with it systematically.

Wilma Eriksson: Hmm, right. And why do you think, uh, you don't prioritize more time to this? Is it, uh, due to lack of knowledge or other things that are for some reason more important?

Or what's, what do.

Felix moree: Uh, due to that, there's, there's a lot of other things to prioritize. So, to, to a certain extent, it's understandable that, especially if you are relatively new and fast growing companies, there are a lot of things to think about besides social pricing. So it it's also how we get the product to work and also, uh, get the sales motion to work and, and all, all these things, so understandable to certain extent.[00:14:00]

Challenge is also likely that it's a bit, people do not really know where to start. If you set the price and it works, then it's seen as a non-issue because you may have other things that you have to address. Uh, so it, it, it, it, it easily one of the areas that are put on hold. Mm-hmm. Uh, but it, but, uh, but there is, uh, well a lot of potential from, from working with it.

So that's also when, when you have, when you found the more the basic product market fit, then you should start more actively thinking about, uh. How, what is it that we offer? Who are we targeting? What is. What, well, what price level is it that we gonna charge? Hmm,

Wilma Eriksson: definitely. So a combination of, yeah. Too many things to prioritize, uh, a bit, maybe lack of knowledge, where to start.

Yeah. Uh, and I have, I have an assumption here, so, uh, uh, [00:15:00] correct me where I go from where I go wrong. Okay. I believe that people think they work with pricing. So the management team, they, they are like, yeah, but we work on this on a reg. We, we, uh, yeah, it's a prioritize for us. We work on this on a regular basis.

Like you, like talk about your bundlings or your packages, uh, and then you don't assure that you actually have data for it. That the sales rep actually do, uh, price as the management board has decided upon. Uh, and you don't follow up and analyze the data. Both, of course. I mean the re result, how did we sell, what did we sell to what price, to what discount and so forth and to what customers.

But you don't do analyzes of the data that comes from the quotes. Is this just because I'm selling a CPQ tool and wants everyone to use a CPQ tool, or is this something that you have noticed as well or. Please correct me where, where I went from.

Felix moree: Yeah, I think it's, uh, I think, I think that's also contributes as well is that, uh, I mean, [00:16:00] revising your pricing doesn't have to be an, a very large exercise, but it, it, it depends on your ambition level.

I mean, usually there is a significant, potentially if you start looking into your existing customer base and see what is it that they, what do they have and what are they paying? Because usually there's potential to just. Lift up customers from the current price level to, well, more recent price levels, right?

So the, so that's one aspect. And then the other one is also that, uh, you also, when you work, pricing is a cross-functional question. So it's usually it. So it's involves, uh, product, sales, marketing, so there's multiple persons that you need to involve. Uh, and that also likely makes it a little bit more.

Challenging or to start working with, or start working with it because you, well, you need, you need to collect, assemble a, a little bit larger team. Mm. And then lastly, I think it's, uh, uh, also due to [00:17:00] that, uh, a, a successful pricing is also that you talk with you or that you have more dialogue with your customer or that you gather customer feedback.

And, uh, there could be that. Not doing that actively and thinks it's a little bit scary to ask customers and also to, they, they avoid to include, uh, pricing questions as part of them, the market research. Right. Because there's usually a large difference in understanding in asking about if they need something versus if they're willing to.

When you actually have to pay for something, then it, then it, then you really have to, well then customers have to make a decision is, is it actually worth that much that I actually would like to pay this amount?

Wilma Eriksson: That's very interesting. And too very hands on. I mean, how. How to start gather data about this, how to start making it maybe not more prioritized, but the more, uh, a topic you know, [00:18:00] more about, uh, based on your customer base and maybe also your dream customers and your prospects to make it a part there at as a customer service and, and similar.

And you also said something that, uh, if I understood it correctly, that SaaS companies are a little bit afraid of asking about the price. Did I understand correctly? And would you in that case, like to develop it a little bit further? Yeah, but I think, I mean, they have a great business model or we have a great business model.

We like lock our customers up if we do it in a very ugly way.

Felix moree: Yeah. But I think that, uh, that's also beyond the sales companies, I mean, in general is to, is to have a more systematic. Pricing research, and it doesn't have to be that complicated either, but, but to the better ask about, well, if you are, if we're adding this functionality, how much more value would that bring?

Or how much more would you be willing to pay? Uh, or asking more other. Classical pricing methodology question such as vestment, or we ask what is, uh, [00:19:00] given this functionality, what would you see as an acceptable price? What is an expensive price, et cetera, and or to ask a couple of these questions and, and oftentimes you, you do not need to ask that many customers in order to get well already valuable feedback.

And the same is also. Different when it comes to packaging and also both the package configuration, but also the different functionalities and service elements that are included. Eh, the, the same applies there is to ask customers about, well, would you prefer this type of packaging setting versus this one?

Or, what value do you see in these fun from your perspective, or which functionalities are must haves versus nice? Their view, view on, on the product, because usually there's a discrepancy between what, uh, the internal view is on, uh, value and what the willingness to pay is versus what customers actually value.

Wilma Eriksson: Well, if we didn't know it already, we can hear that you [00:20:00] have a lot of experience here. So how did you become so interested within pricing and was it just as many of us ending up in something you work with and you don't really know how it happened or have you,

Felix moree: is there a reason? I think, yeah. No, I think that's, uh, I think that's usually how it goes is that you, that you are, that you're, that you're starting to, well you, you start quite broad and then you narrow it down throughout your career.

Um, and then, uh, so, uh, I started as a management consultant more. After graduation.

Wilma Eriksson: Mm-hmm.

Felix moree: And then, uh, it was almost when I switched to summer for, uh, several years back when, uh, well, I, I started to work with pricing and, uh, I just thought it was very, it's very an interesting topic because it, in my background is within engineering and economics and, uh, I think it pricing combines both these more.

Economic, more [00:21:00] qualitative things as well, because it's a, it's an interesting combination of both. You have like the, well, you have the more statistics of what do customers actually pay, but then you have a lot of these behavioral phenomena that is becoming more and more well known. Recently, uh, that is also affecting how customers make decision and in pricing.

All of these are combined, so it's kind of an, uh, uh, well now I'm biased, but I think it's an interesting to work with because it's. So you spanning over so many disciplines?

Wilma Eriksson: Uh, uh, really, I'm taking notes here, uh, when I'm recording because I think it's so interesting and I really agree with you. My point of view, why I believe pricing and profitability is interesting.

It's because I, um. Uh, from the customer point of view, uh, I mean, I've been working with sales like too long, uh, I believe, but from the customer point of view, I feel that customers perceive you as more [00:22:00] professional when you have like a legit pricing. Uh, and very seldom that the two high price, it's what, why they shouldn't.

Buy from a vendor or choose from someone. Of course, some of them definitely. Absolutely. But then in my experience, customer are quite frank with that in the beginning, like Al uh, almost a bit apologize that like price is very important for us. Then of course now in the tougher, uh, economic that we have, uh, currently everyone is a bit more aware about this.

But what I feel is that customer, uh, yeah, they see you as more professional. They see. Uh, if you buy a SC or if you buy Ferrari, you know what you get. And that is how customer are in general. Um, would you agree on this or do you have another point of view of this?

Felix moree: No, I, I agree. And, but, but if all it falls back to, I mean, there, there is one golden rule in pricing and it is that price is equal to value.

Uh, which can maybe easily be, most easily be remembered [00:23:00] as back in, uh, back in ancient, back in ancient time in Latin, uh, the word for price was actually the same as value. So back then there was no difference. Mm-hmm. Uh, but this, this should be, if, if you have that kind of the, then usually. It, uh, it's easier to make pricing decisions and, uh, and having, having that in mind as well is that is also why usually if you have a very, if you have an, an port out or logical and structured and uh, uh, systematic pricing, it's.

It, uh, well, it doesn't ultimately give you satisfied customers, but it at least would reduce customer dissatisfaction because the, the whole idea is then that you charge based on the value that they get and the the needs that they have, then they are not paying for too much or they're not paying too much for too little.

Wilma Eriksson: [00:24:00] Right.

Felix moree: And also it's scales based on how we use it. So. So in, so in, in an, in an what say ideal pricing, the price could really be like, well, that they feel that I get something out of this and then I pay something that is also corresponding to what the value that I see that I get out of it. So it's, uh, so with the kind of price, equal value, you, I mean, if you have, if you just think about that on a daily basis, you.

Not due towards the right decisions.

Wilma Eriksson: Yeah, definitely. And that's a very, uh, nice segue of you to, to, to move over to Yeah. What you wanna share with us today. Like for, for, I don't know if it's for advisors, but for things that sales companies could really benefit of implementing in their, in their work and their pricing strategy.

Felix moree: Yeah, definitely. So there are, uh, so typically we work with sales. There's usually four areas where, uh. Which [00:25:00] we would, which we typically work with within, within a more of a packaging and pricing project. And, uh, first one is related to segmentation and the other one is about packaging. Mm-hmm. The third one is about the price model as such a, the metric and structure.

And then the last one is about price level. So the first area within, uh, segmentation is, uh, that. To, to create more, to, to ensure, to have a segmentation that is both based on customer needs, but also that is, uh, based on what, what our, what our customer's willingness to pay. Because oftentimes we see that, uh, companies are.

Having a, they're looking too broadly on, on the customer base. So they see that a lot of customers are price sensitive, uh, or that they are, they, they're not looking for any very niche type of, uh, functionalities in the product, but that is usually because [00:26:00] they. Maybe do not dig maybe one step deeper, because usually there are differences in what, uh, in, in, in, uh, needs such as how fast implementation you want or what, uh, depths of different functionalities are you looking for.

And then you have price. And then there are, then there are usually some customers that are more price sensitive and then there are some that are much less price sensitive. And to get an understanding of what is it that actually makes a customer. Uh, less price sensitive and what makes it price sensitive is usually something that we, we do not see that is at least not documented or at least well spread.

Usually salespeople know, know this. Uh, partly, or they have it in their, they think about it when they quote, but it's something that is not more systematic or, well, well spread to all salespeople or also youth in the organization. Uh, because you oftentimes, a segmentation could be that, [00:27:00] well, you have small, medium, large customers, and then of course you have some differences in needs within them.

But within each of those, it could still be that someone are using the product. For some, the product is. Critical or that they have a lot of comp high compliance standards, or they have certain, certain requirements where your product fits in much better than competitors, and they are then well willing to pay much more than the ones where.

Maybe have more basic needs and are, could it compare your, your solution with five other ones than a different situation? So to understand those parts is, uh, is uh, quite fundamental because that will then both inform how to package, package your product, but also how to price it because, well, you want to try to have a maybe higher price for those that are less price sensitive.

And also have be a bit stricter when it comes to discount, for example.

Wilma Eriksson: Right. Very interesting. So you would [00:28:00] encourage companies to do a quite narrow customer segmentation then, and then have a suitable pricing and package for different segments or,

Felix moree: yeah. So, uh, at least it's a, and with narrow, we do, we do not mean that it needs to be that you have hundreds of segment.

It's, it could still be that you have. Quite few of them. Mm. Uh, it's more to, to also think about what it actually thrives to willingness to pay.

Wilma Eriksson: Yeah.

Felix moree: Uh, and that could be a little bit differ, a bit slightly from the more generic needs of, of a product because, uh, because oftentimes we see that there are, there are different sizes and that they have different automate.

If there's a soft product that is automating something, it's usually that they have maybe different automation needs. But then well, you have this additional dimension, which is. The willingness to pay dimension. And they, it could just be that you, that you split your, if you have three segments today, it could be that you split it into two sub segments for each, that is like high and low willingness to pay or high, [00:29:00] medium, low, right?

So it doesn't need to be, so it doesn't have to be much more complex, uh, just because you're doing it. And uh, and then you can think about, well, how do we then capture it in our packaging and pricing? Because it could be that. Then are they have different needs or that they, they are automatically buying different products.

So if you are look that someone buys a more, a package more and other one with less, then you may capture it there,

Wilma Eriksson: right? But it could

Felix moree: also be that you, that you have to capture it from. Uh, discounting perspective, for example, or enterprise model.

Wilma Eriksson: Okay. Very, very good hands-on advice. You are making it at least reasonable to me, and, uh, it really, you know, twist, twist my mind a little bit because I love what you said.

Uh, to start to know what drives the willingness to pay. And you also said if it's more like specific function or a shorter implementation time, or there's something in specific in your, that you could, uh, add to the value as a customer or if [00:30:00] it's more just basic. So, uh, from my point of view, I would, uh, I would guess that if it's more.

Uh, specify needs, then it's easier to have higher prices because it's, uh, also yeah, a bigger pain point for the customer to solve this. Then it, uh, if you compare it with more basic needs, it's like, yeah, we need it, but it's not like that challenging or, or maybe it's a very. I don't know, thinking out loud here, there's a lot of competitors.

The first thing I'm thinking of is e-sign. You know, everyone needs it. Yeah. But maybe it's not that specific. It's quite basic needs.

Felix moree: No, exactly. And, but although you have basic needs, it's a, usually it's a core product that is, that is quite that There, there where the competition is quite, uh, but then you.

Demands around it, which could help you because it's, I mean, oftentimes there are, even though you buy, if you buy a commodity, there are [00:31:00] something around the deal or the specific with the customers that usually still allows you to charge that you could maybe charge a bit more. It could be that you have, uh, if you have special SLA requirements or.

That you have, if there are other add-on functionalities that you, that you want to have, that you're willing to pay more for,

Wilma Eriksson: right?

Felix moree: So oftentimes, uh, it could still be that if you have an. And, uh, uh, quite more commod commoditized product. Mm. Usually there are something around it where, where you have an edge and that's, uh, uh, and this is where you're able to charge a bit more.

Wilma Eriksson: Mm, right, right. Okay. So segmentation first. We are already start talking a little bit about packaging, but, uh, exactly. I mean, it's, I hope it's something worth the packaging here.

Felix moree: Yeah. You, you automatically move over to packaging when you start talking about segmentation. Yeah. But that's, that's the foundation is really think about.

What are our customers looking for? And I mean, what are they willing to pay for it? Um, so yeah, regarding packaging, it's, uh, mm-hmm. There are, the key is to, well, uh, [00:32:00] there, there are two parts to packaging. First one is to think about, uh, uh, because there's an, there's a trade off in how you package, which is between, uh, complexity of your offering versus degree of monetization.

And this is. Quite common trade of in, in general that you have is usually if you, if you want to earn, if you want to kind of earn the perfect amount of money from a customer mm-hmm. Then you normally needs a bit more complex offering because it's, uh, in, if you think about it in, in an, in, when you took the, or if in theory, if you, if you, if you want to extract, if you're gonna sell to all of your customers and get, extract as much willingness to pay from them.

Then you have to have a very tailor made offering for each of them. And you need someone that can kind of sell that offering to them. And that is why where the complexity falls in, is in, [00:33:00] in, in, if you have very few customer, that is possible because then the, the revenue you get from each customer is, is significant.

So then, uh, you can, uh, have that are a very complex offering. Uh. Well, you have a very low complexity of the offering, which means that you have, like, you have, well, just one product, and you sell the same product to all of them. Mm-hmm. That, and that makes it, to certain extent, easy to sell because then you go to each of your customers and then you maybe discount a bit because, uh, to reflect their willing to pay.

But then the challenge with that is usually that you, if you, if you. And then if you're gonna price it, so the price fits everyone, you are likely gonna price it somewhere in the middle. Uh, so then what happens is that you have some customers that are. All the value in your product [00:34:00] and willing to pay for that.

But then the price is too low. So for them it's, it's a bargain. Mm. But then you have also the other side, which is the customers that are, they have very basic needs and then they pay a too high price. So then you have to discount. Uh, and that is usually why you end up, well, given these two extremes, that is often why you end up somewhere in the middle, which is.

Like a use case packaging or a good, better best, because then you have, then you allow for, uh, for different variations of your packages, but it's not over really complex. So then you, so then you, uh, kind of, uh, offer a little bit of, well, the theoretical monetization. In order to make it easier to sell both on well through self-serve or through for the, for the sales team or partners.

Interesting. Then, so that's kind of one key consideration in the packaging. The other one is about understanding what is the roles of the different functionalities, [00:35:00] because there are, uh. There are, broadly speaking, free types of, uh, functionalities or services. Uh, so a classification that we usually have is, uh, we call them must haves, nice to haves and uh, and add-ons or don't needs.

And, uh, we usually, usually compare it. Yeah. I mean, we, we usually compare it a bit with, uh, with, uh, a hamburger menu, for example, as, uh, McDonald's or Max's similar. So then a master function is, uh, it would be like a hamburger. So that is the key reason why you're buying a product. So, as you mentioned, it's e-sign, for example, that is, well, that is, that would be a must, one must have functionality is that that's something that you have to have in order for the order to be complete.

Uh, then you also have these lifestyle functionalities, and those are, well, maybe I, where is here is, there are, there are functionalities that are, it's not the [00:36:00] main reason why you buy it. It could be, for example, well, an SLA agreement in our example, uh, or in the, in the example of a Burger King is like price and a Coke.

You would likely not go to McDonald's Yes. To buy fries. It happens, but it's, it's, it's not the main reason why you, why you go there. So when, when, when you bundle the nice to haves with the must haves, then you don't mind that the nice to haves are included. And those the must haves and the nice haves, those are the ones that you want to include in the package.

And equally important as to know what to package is also key to know what these, that we want to have outside of the package. And there, there are some functionalities where most customers. See a very limited to no value from them. But there are some customers that think that this is the most important functionality for them.

And an example from when it comes to the burger menu, it's for example, the coffee. So there's a reason why you don't have that in the menu, because it could [00:37:00] be that. Some people drink tea, and so for some people it's just they don't want to drink coffee at the Phos Food restaurant. So then if you start including these, if those are included in the packages, then there starts to be, uh, item in your packages that customers are not willing to pay for, which leads to, well, either lower conversion, because you see, I don't want to, I don't want to buy it because it includes these.

These feature functionalities, but also that, uh, or, or that lead it leads to that you start having a discount discussion because then they say, you have these things that I don't see any value in, uh, and I don't want to use them. So what can you do about the price for these, uh, for these packages? And it, uh, and, and what happens and what we see oftentimes is that, that you to simplified offering, we add that companies add in a lot of these coffees in, in their packaging.

And, and even though they do it for [00:38:00] free, they still end up discounting because they think that, well, we just give it away. But it is just that if customer, if, if customers are not want, if they don't want to buy it, they're not willing to pay for it.

It's better to think about just package, uh, functionalities that customers see a value in, which is already must have a nice functionality.

Wilma Eriksson: Don't need, don't bring too much coffee.

Felix moree: Yeah, no, exactly.

Wilma Eriksson: Once again, and sure you know, what your customer willing to pay for and package. After the must and the needs and leave the add-ons or don't need that.

Why I am like, have a hiccup on this because, you know, we provide with quotes and not, not everyone, but quite many of our customers ask of, we have like a quote, best practice on how to set up the quote to make it easy for the, their end customer to say yes and so forth. And, and we have, uh, but we are more.

More experts within, like ensuring the pricing strategy becomes out with the complications in the calculations and so forth. Uh, but we always [00:39:00] talk about, and here you can have like the add-ons or the optional parts or whatever, but I will definitely start joking with them, with my customers or the don't needs.

And you can listen to this episode with Felix is really good because I think this is very, very good intel. None depending if you are in SaaS or in some other industry. Because it's yet, you know, quite, uh, not to offend you, quite basic level. Yeah. But there's so many customers they don't know about this.

They don't, they, I think they struggle a bit to understand this. Me, myself, I mean, I learned so many things here and we, we are supposed to be some kind of pricing expert or at least making your pricing in action, you know, so thank you so much for sharing and make it. So understandable with a hamburger.

Yeah, I would definitely remember it.

Felix moree: Yeah. No, and that's, uh, and this is also going back to the, the, the, the, the importance of also, I mean, talking with customers because oftentimes there's, there's a differences what is perceived internally or by the product team, [00:40:00] for example, of. What are the must haves and nice haves versus what customers see?

Wilma Eriksson: Right, right. Ask your customers, right? Yeah, exactly.

Felix moree: So, uh, yeah, more customer research to the people.

Wilma Eriksson: Yeah. Uh, unfortunately the time is running here, but we have still some minutes left and I'm curious both know more about the price model and price. Level. So if we could, uh, have the juice stuff of that too would be great.

Felix moree: Yeah, definitely. So, so yeah. So after, after the segmentation and, and the packaging, then it's, that's when you, that's at the point when you can start thinking about, okay. What is it that are actually what, what are actually price level and the price model? Mm. And regard a price model is built off two parts.

Uh, metric IE What is it that you measure? Is it user or is it the number of documents or quotes or whatever it can be? And then is the structure, which means how, depending on how many of these units that you. Use or buy? How does it scale? Is it, can you have an [00:41:00] unlimited usage or is it that you have an decreasing price per unit, for example?

So those are the two components and foremost in, uh, what is maybe, uh, uh, mostly being discussed when it comes to sources regarding metric, because there's a shift from that. You have what we call it service input that you have based on number of users, or it's based on customer size or similar that. What is the outcome of, uh, of your, of your product?

And, uh, there, there are, you can say broadly two parts that you or, uh, two, two, uh, type of metrics. So either business output, which is to a certain extent, it's kind of concept.

Uh, it is really the what say, the full value that that is delivered from your product. So it's including, uh, it could be a lot of time savings. It could be com that you're [00:42:00] fully compliant to certain things, and there's a lot of, usually a lot of aspects there, which are very difficult to measure. So usually business output is that you want to find a metric that is aligned with that, but usually given how difficult it's to measure, you usually have to, is.

Uh, you could call it service output, which is, for example, how many is it? Uh, something that gives a good approximation. So it could be that in, uh, if you take a document management system, for example, it could be that the business output is that you are, well, all of the time savings that you have from, uh, uh, from, uh, from looking for the documents and, and being compliant.

But, well, given that it.

Such as number of.

To large extent move towards these business output, uh, area. We'll see. But [00:43:00] the shift is at least from moving from thing that is more like the input into the service, rather towards what is like the output and the, and the key and, uh, the key here when it comes to invest in, in investigating different metrics, it's, uh, it will be a similar situation to when we talked about packaging.

Customer input because, uh, there are, if you're gonna evaluate a new price metric, you need to consider both, well, the benefits to your own company, which, uh, most, at least, uh, think about. But then it's also about, well, the benefit to the customers. And because when it comes to value to your own business, it's, uh, it's more about that.

Well, you were able to monetize. Per the usage by the customer, that it covers potential costs at all times. So you don't have any done any risk there. And also that, well, you're able to measure and track it, and that's usually where some metrics, uh, fall short. Um, but then you have the other side, which is, well, the customer [00:44:00] perspective, which you shouldn't forget.

And that is that it should align with. The benefits that they get out of the, get out of the product because it's just because it's done something that worked from, from your company perspective. It's, it's not that necessarily that, that reflects the value that, uh, customers get out of it.

Wilma Eriksson: Right? So this one is a little bit trickier, right?

Or, uh,

Felix moree: yes and no. Um, so, uh, um, what you, I mean, usually if you're, if you're, if you're, if you're exploring to, um, uh. Which price metric or that you're looking into, which one to use. Uh, ideally you should long list many options and then, uh, uh, then you assess them ba both based on criteria of the, well develop your business and value to your customer, uh, and then choose the ones that are score the highest.

So it's a little bit tricky, but usually, uh, I think a good idea is usually to long list multiple different options because [00:45:00] there are. Well, there are always trade offs that you have to make. So then you have to decide is, uh, what is, what is more important and what is then the risk of, uh, choosing something that is maybe not a hundred percent optimal.

But if you go for something that is, I know eight or 90% is there, what is the risk associated with that?

Wilma Eriksson: Right, right. I feel that as a, such a poor host because typically I'm, uh, you know, uh, quite have, you know, control of the, of the watch, but I don't have it now. And we only have like four minutes left and I have two end questions, so that leaves it like two minutes for price level.

So, so sorry for keeping track of the time, not in a better, in a better way. So in, in short, what's the most important thing about price levels

Felix moree: and the most important thing is. Partly get input from a customer and then also, uh, use ideally multiple different sources so that you combine. So when we set price levels, we combine it by looking at historical data, if that [00:46:00] exists, uh, and pricing exercises with the sales team.

Um, and also. At benchmarking with, uh, potential competitors. And then lastly, last but not least, is, uh, uh, the customer interviews to get their input as well. And then by, by using all of these sources, then you get them quite four, uh, very four of you, of discussing what is. What is the price level or the super price level for, for your product

Wilma Eriksson: stressing you in the end here?

Felix moree: Oh, no worries. I think, yeah, I think the most, the most important areas are within, uh, I mean, if you get the segmentation and, uh, packaging and to some extent also the price model, right? The price level is usually that's, it's not, there's nothing as an easy part, but it's more, well then it's, it, it becomes, uh.

Quite straightforward to set those.

Wilma Eriksson: I agree. Very interesting. Uh, I feel all in all, uh, I would like to ask you, who do you [00:47:00] yourself get inspired by when it comes to pricing and profitability?

Felix moree: I think someone that is, uh, that I follow on LinkedIn, you know, on the topic is, uh, uh. He's, uh, he works for an, uh, private equity company called OpenView in, uh, in the us and he, uh, an operations partner there and works a lot with these go to market and pricing.

I think he's, uh, he have a lot of good insights. I can recommend him.

Wilma Eriksson: Oh,

Felix moree: great.

Wilma Eriksson: Great. Uh, would be awesome if you could share his LinkedIn profile with me afterwards and I could put it in, in the Yeah. Uh, in the, in the, in the episode. Of course. And, uh, who would you like me to invite to the podcast? You?

Felix moree: Um,

Wilma Eriksson: I think it would be maybe him or

someone

Felix moree: else.

Yeah. Uh, I would suggest, uh, Nicholas De. Mm-hmm. I think it would be interesting to talk with.

Wilma Eriksson: I was like, ha, has he been in the podcast? I was just, that's why I was a bit confused. But he, he hasn't, but of course I have to invite him. He has a [00:48:00] lot of knowledge about this, like Yeah,

Felix moree: exactly.

Wilma Eriksson: Let's reach out to him.

Uh, Felix, it's been huge pleasure. I've learned a lot. Thank you so much for sharing your expertise. I'm looking forward to even more books coming out in, in English as well. I really encourage you because I, I, I'm sure, obviously, I mean, you have customer base all over the world, so. Why wouldn't they be interested in your, uh, in your comic books in the future and for sharing everything with us today in this, uh, in, in fail and grow?

So we pour a glass of champagne. Yeah. Which she cheers and have a happy weekend. And what song will we then listen to to make you really, really happy?

Felix moree: Um. I'd go for, uh, seme of, uh, of, uh, Corolla. Ooh. I like to sing along in some perfect one.

Wilma Eriksson: Thank you so much.

Felix moree: Thank [00:49:00] you

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