How To Price Your Way Back Into GrowthMay 22nd, 2020
Pricing can be one of your most effective tools for retaining customers and winning new business in the midst of a downturn. Peter Zotto, General Manager of Profitwell, and Kyle Poyar, VP of Marketing Strategy at Openview, shared their pricing strategies that lock in revenue without sacrificing future growth.
- Think about which of your customers are just asking for discounts and don't need it and which customers a discount would make a huge difference for. It's important to figure out how to differentiate and price accordingly.
- When customers come to you asking for a discount, always ask "why" first. What is it that you need the discount for? If its financial, then try the Give and Get Method where you take a piece of the product away and offer a lower price.
- Many businesses have dated sales processes: BDR to give demo, sales rep to seal the deal, then a trial period and proof of concept. This works in a great economy. But the economics of this aren't in your favor right now. Think about how you can automate. How can you adopt product led growth tactics?
- Can you add value to your product by piggy-backing off of other super-growth tools? Let's use Calendly as an example - they made integrations with tools like Zoom on their free plan.
- You should always keep a pulse on what the market wants. Talking to your customers is key - what's happening in their world? What's changing? This is ultimately more valuable than a handful of market research projects. If you are not changing, your competitors are. As an example, Profitwell integrates with 10 platforms but they originally thought 1 or 2 was good enough until they noticed their competitors were consistently adding more.
- In regards to Freemium Models, ask yourself if this was a good route pre-COVID-19. If it wasn't, it still won't work. A product needs to be set up to succeed with a Freemium model from the get-go.
- Freemium is just an acquisition play - you'll get customers in who will never convert and are using your resources.
- Consider trying out a Faux-Free Trial where you can use a certain amount of the product and it resets each month. You'll give the fully functioning product but with usage limits. Zoom's 45 minute meeting cap is a great example of this.
- If you're selling monthly or annual packages, consider offering non financial discounts. An example, "If you buy a 12 month plan, we'll give you your 13th month free."
- When possible, avoid offering discounts on long-term contracts. It'll eat into your perception of value, your margins, and more.
- Companies value some level of support (phone support, 1:1 account management, and on). Try decoupling support from premium plans and offer it as an add-on in the contract. Do you have implementation fees? Consider waiving implementation fees as a negotiating tactic.
- With so much uncertainty, contract terms and payment structures are a great way to negotiate with customers. If you have an annual payment paid up front, think about moving this to annual contract paid quarterly. If possible, add in a 4 month cancellation notice for the first year. Adding in flexibility will be a great way to negotiate while retaining the bones of your original contract.
- Position your product where you can show customers that you can save them money in the long run. Many companies are focusing on short term savings so it's important to try and switch that narrative.
Big thank you to Peter and Kyle for the time to share your expertise with the greater Venture Lane community!