The Dirt ep 78 Raw Unedited Transcript, solocast

Welcome back, everyone, this is Jim barnish and you're listening to the dirt, your go to source for strategies to grow your business and maximize the value of your business. Last time, we discussed how to create value based pricing versus the more traditional cost based pricing that way too many companies use, we also honed in on where companies get it wrong when it comes to pricing and packaging. Well, today we're gonna flip the script on how to get pricing and packaging, right, buckle up and get ready to learn how you can leverage pricing and packaging as a strategic tool for growth. Okay, so why is this important? Because pricing is not just about covering your costs and making a profit, as we talked about in the last solo cost. It's about communicating value, positioning your product in the market, and ultimately driving your company's entire valuation. So stay with me as we explore this critical aspect of business strategy. So before we dive in, I want to make one comment. And that comment is that way too often, people will fixate on the pricing, part of pricing and packaging, but there are so inherently interconnected. So I feel the need to emphasize that they are equal parts in getting this area of a business correct. If you are too focused on keeping your existing packaging, and simply shifting pricing, you are doing it wrong pricing and packaging. Okay, so with that said, here are the three keys for doing a pricing and packaging strategy correctly. Number one, set a strategy for your pricing and packaging. Number two, validate your pricing and packaging strategy with customer research. And number three, prepare a launch plan and transition plan for the new pricing and packaging strategy. So let's dive into key number one first, set a strategy for your pricing and packaging. Alright, let's start with a real life example. One company that I worked with a few years ago realized that they had a pricing and packaging problem and they they knew they needed a strategy. If they were going to properly update it. They came to me because of a few key issues in their business. Number one, they were early innovators in the space and had grown to become the market leader. However, competition had entered and eaten away at their market share over the years, and they were sick of it. Number two, their product portfolio had become increasingly complex over the years. And number three, any transition will cause Aza for a traditional long standing customer base that had become accustomed to the term bass licensing models that they offered. Okay, so these were pretty big problems. These solo casts are meant to be short and actionable. So I'm not going to go too into the details of how the organization solved all of the underlying issues. But the key takeaway is that they identified an area of their business that was outdated and underperforming pricing and packaging against the market. And they put the wheels in motion to set a strategy to change that. That's important primary goal for the project was to develop options for repositioning the product from a license based pricing approach to a user based subscription program. So the takeaway here is that you need to make sure to have an end goal in mind when starting a prices and pricing and packaging project. In the end, that goal was achieved but not before completing the next two keys. Alright, so key number to validate your pricing and packaging strategy with customer research. Alright, let's talk about customer research that you've you've probably heard me rant on this before, but you really need to understand what your customers real needs and wants are. This should be at the core of any pricing and packaging strategy or any strategy in general. What do your customers want? How do they perceive the value of your product? How does your packaging make sense for their needs? etc, etc, etc. All questions that should be in need to be answered as part of a pricing and packaging revamp. An example here is that Adobe, let's just take Adobe So Adobe used to sell its software including Photoshop and Illustrator inexpensive, one time purchase packages. I'm sure many of you remember those. Back in the day, however, they noticed a trend in customer behavior, people were holding off on updates due to the high cost causing a significant revenue dip between product release cycles. Adobe listened to its customers transitioned to a subscription model and introduced Adobe Creative Cloud. That change made their products more affordable and acceptable to a broader audience. And as a result, Adobe saw a steady increase in both revenue and customer satisfaction. Alright, key number three, prepare a launch plan and transition plan for the new pricing and packaging strategy. A critical aspect of implementing a new pricing strategy is how you introduce it both to your existing customers and potential new ones. By the way, these are almost always two very different motions. So I don't mean to combine them. New customers are simple. They don't know what they don't know, if the only pricing and packaging they're aware of is what you're rolling out now. And assuming it makes more sense based on the strategy you executed against the customer feedback that you incorporated in competitive research that you did, they will be content, no need to bother them with the old. But then you have existing customers that have gotten used to your current pricing and packaging. And while it might not be perfect, it's the devil they know. So any changes can cause stress, even if it makes all the sense in the world for both you and your customers. That's why a transition plan that incorporates over communication, transparency, and a reasonable runway to transition is so important, so important. Have your customer success team ready and aligned to make this transition as seamless as possible, especially for your highest priority customers. Let's take a look back at MailChimp and in 2019 about MailChimp introduced a major overhaul of its pricing and packaging. They were transparent and communicative about all the changes, giving existing customers a grace period to transition to the new plans. They also offer comprehensive resources and support to help customers understand the changes. This well planned and executed transition, minimize customer churn and lead to increased revenue. Boom. All right, so let's bring it all together to reiterate the three keys. Number one, remember that getting pricing and patching right is a strategic exercise. It involves setting a pricing strategy that aligns with your value proposition and the long term goals of your company. Number two, validate your pricing with customer research and competitive analysis, customer feedback and specifically, their perception of the value you provide is incredibly important for getting this right. Number three, prepare a launch and transition plan for your new pricing and packaging. Again, these are two plans, one for new customers and one for existing customers that will require a little more tender love and care. So what's your next step? I mean, I'd encourage you to take a look at your own pricing and packaging, is it truly aligned with your value proposition? And long term goals? Are you learning from your customers how they really get value out of what you provide and what that value is? And if you are in the midst of evaluating your own pricing and packaging? Are you preparing a sound strategy for launching and transitioning to new and current customers? Good things to think about. If you know a fellow entrepreneur that is currently struggling with this or any of these things, don't be shy, please share the episode with them and get them thinking about their pricing and packaging the right way. Feel free to have them call me if they can't figure it out themselves. And if you haven't yet, be sure to subscribe to the dirt on your favorite podcast platform for more insights and strategies to grow your business. Goodbye for now. Thank you for listening to this episode of The Dirt JV out. I hope you all enjoyed this episode of the dirt. I want to invite you to listen to our other episodes where every week I am interviewing business leaders who are crushing it in their field and finding out exactly what makes them successful. We will see you next time on the dirt