AA236 - Why Product Managers Should Own Pricing (Not Sales or Execs) - Arguing Agile

Episode Transcript
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Brian (00:00):
so what you're telling me is the person responsible
for the productroadmap, feature,
prioritization, and customeroutcomes, they should not be
in the room when pricingis discussed.

Om (00:10):
Yeah.
Look, most product managers,lack financial literacy.
They don't understand theworld of finance.

Brian (00:17):
But that is a symptom.
That's not a diagnosis.
Like if the product managercannot do pricing
research, then youhired a backlog administrator.
You hired a Jira admin.
Oh, I said Jira.

Om (00:28):
Yeah, I agree.
But of course now you havetrust problems.

Brian (00:32):
Hey, hey, hey.
I don't need this abuse.
I got plenty of people waitingto abuse me.
Welcome back to Arguing Agile.
If this is your firsttime welcome.
I'm your host product manager,Brian Orlando.
This is my co-host EnterpriseBusiness Agility consultant,
Mr. Om Patel.
And as we know, the exile onMain Street.
That's

Om (00:50):
That's a thousand years ago.

Brian (00:51):
If you're looking to help the podcast, and
if you enjoy our content, likethe podcast and subscribe to
it on YouTube and on all theaudio platforms and wherever
toys are sold! today we'retalking about product managers
and pricing.
And what you'regonna learn about
product managers and pricing ishow to diagnose whether pricing
authority belongs to the productmanagement in your organization
or not.

(01:11):
You're gonna learnthat real quick.
And also how to build the casefor the PMs owning pricing.
And then we'regonna spend a good
amount of time talking about theorganizational dysfunction that
leads to PMs not being trustedwith pricing.
And maybe we'll talk aboutframeworks and whatnot
along the way.

Om (01:28):
Well, let's just go for it.

Brian (01:29):
All right.
And to kick us off,pricing determines
which customers you serve, whichproblems you solve, and which
competitors arein your landscape,
are in your rear view mirror, orI guess in your windshield, in
your living room.
Yeah.
Up in your business.

Speaker 4 (01:43):
Yeah.

Brian (01:44):
Sales executes a strategy.
Product management defines thestrategy.
That's the way it workswhen we're all happy together.
But there's a 2016 book calledMonetizing Innovation,
and there's a number in thatbook that says 80% of companies
set pricing based on costsor competitor benchmarking
rather than on actual customervalue research.

Om (02:03):
Yeah.
I think the one industry thatmight kind of, be out there
outside of the, the bell curve,so to speak, would
be probably like jewelry, right?
Nobody's price isjewelry based on
market, et cetera.
It's what the market will bear,so if the market
will bear a higherprice, so be it.
But, but we're not talkingabout that.
Most product managers aren't inthat space, right?
But there are there are businessdomains where, what we're

(02:26):
gonna talk abouttoday is kind of topsy-turvy to
say the least.

Brian (02:30):
So let me right away in the podcast.
Let me jump straight intothe Steel Man.
I need a

Om (02:34):
steel man icon.

Brian (02:35):
I don't have a graphic.
Maybe in the post I'll adda graphic.
For the steel manof the category we're talking
about now, which is the pricingof, of pricing is product
strategy, not a sales tactic.
The two things topoint out, sales
owns the customer relationshipsin a lot of companies, right?
That's just the way it is.
Om like, that's not, not to, notto dump Tupac on you this early

(02:56):
in the podcast, but that's justthe way it is.
Some things are never gonnachange in these organizations.
Sales needs everylever and pulley and wheel and
dial or whatever for negotiationtactics that they
can leverage to get the sale.
There's plenty ofpeople out there
that will say, ifwe're not selling,
we basically don'thave a business.
And then everything collapses.
So this is a strong one.
Well, bits off at that point.
Yeah.
The, the other side of that isfinance owns the revenue model

(03:18):
and the margin requirements,and they're the ones coming down
and saying like, you have tohave 60% profit profitability
or 70% profit, whatever itis, right?
In the AI world, nobody has.
Everyone has islike scraping 60%
from the bottomof the barrel over
here with their,unbridled tokens.
Unbridled, yes.
Exactly what it is.

Om (03:35):
All, all the, all the burnt bits left at the bottom.

Brian (03:37):
The, those are the two things.
Like finances got numbers andthey're just like drawn a
line in the sand.
There's no budging there.
And then on the other side, likesales is pulling all the wheels
and levers anddials or whatever.
So like, how canyou ever set any kind of thing
based on research when they getto do whatever they want?
You know, that, and, and, andit sounds crazy to say, but my
experience tellsme most companies are like that.

Om (03:58):
They are.
So the poor product managerbasically has their hand tied
behind their back.
Yeah.
You know, tied in a sack andchucked into the Deep Pacific.
So how, how do you get out ofthis, right?
I mean, this is the rest ofthis podcast.
But two things I wanna sayhere as far as the steel end.
So finance have there.
Guidance.
For what it takes to stayabove water.

(04:19):
They're gonna invest a certainamount of funding over a period
of time, and they will figureout what needs to be done in,
in terms of how much money needsto be made for this product to
be quote unquote successful.
Yes.
And what that looks like inpractice would be things like
what's the net present valueof this thing considering let's
say a time period of three, fiveyears, whatever your product is.

(04:40):
Things are liable to change thecompetitive landscape changes,
new technologies come out, newcompetitors come out.
You can't just say a year beforetoday, here's our target and
we're gonna just go afterthat blindly.
You have to keep your eyespeeled left and right to see
what's going on.
But finance doesn't do that.
Typically.
A product managerwho has awareness

(05:02):
of these kinds offinancial ratios.
They have, they have theirfinger on the pulse, first
of all, right?
They own the product.
But they also know thesegmentation that exists in your
market, right?
Based on that,your margins could
differ, probably should, if youhave multiple segments, right?
So the product measure, I wouldargue, is ideally positioned

(05:24):
to deliver to that, to theguidelines that
finances dictated, occasionallyyou will find that if it's a
product that is groundbreaking.
There is no competition for it.
This is just an innovation.
You're the first one on themarket with it.
There's nothing to go on.
Then finance is not gonnahave that.
All they're gonna have is justsimply a return on investment

(05:46):
or return on capital employee,those kinds of ratios, right?
So there are these factorsto consider.
Now, I started talking about youbeing like, new
to the market witha new product.
So let's just takethat to the other
extreme, right?
You're an innovator.
You came up withan idea, you don't
have a product yet, but youneed some seed corn funding.
So you secure somefunding from a vc.

(06:08):
What are they gonna do?
Right?
I mean, they'reputting money into
the picture here.
And so what, what ratios arethey using over what timeline?
Yeah in practice, honestly, mostVCs will just use
analogous projectsor products that
they've financed before and say,this amount of money over this
period of timeshould net roughly
between X and Y.
You don't even have your marketdefined yet so how do you

(06:30):
navigate these choppy waters?
A savvy product manager coulddefine the path
in this situation based on thesegments that they're targeting.
Yeah.
But they have to have financialwherewithal.

Brian (06:43):
What I think I heard was product managers conduct the
research, and theymake their pricing
decisions basedon positioning and
customer research and customerselection, like, maybe
competitor analysis isinvolved in this.
but look, I always heard inpricing, there's a
principle that youwanna be close to
your competitor.
Like you never wanna be realunderneath your competitors.

(07:05):
You wanna be close to them orway above them, because then
you can position yourself as aluxury brand.
But it the point is like yourpricing and your marketing then
merged togetherto be, become this
special thing.
So, so it's likeit's positioning
that your productpositioning goes along with your
pricing in that,in that instance.
And again I don'tknow, maybe your salespeople can

(07:26):
do that and maybe they have themarketing talent to do that as
well, but you're,you're basically your product.
It strikes me in that, in what Ijust said, that strikes me as.
It's product, delegating thismarket research and pricing and
all that kind of stuff off tosales, not the other way around.
It's like product'sgotta beg to be involved in that

(07:46):
kind of thing.

Om (07:47):
I don't think it has to be binary like that.
I think sales and product canwork together.
and the pricing strategy willvary per product.
Or at least per product line so,yeah, I agree that you wanna
be on the radar when it comes toyour competitors,
but not always.
You could be feature driven toa certain degree if you have an
edge on the marketwith things that you're bringing

(08:08):
up in your productthat no one else has, maybe you
can have a bit of a premiumdifferential on your pricing.
But it depends, right?
I mean, product alone will notbe able to do this and sales
alone will not beable to do this.

Brian (08:20):
Do you have a story from your
career where thepricing authority set outside
of product.
And then what was the outcome?
What happened in that instance?
Because it's beenliterally every company I've
ever been at.
The last couple companies thatI've been at, it's
been more of atleast a discussion
that they know that productsshould at least be in the room,
if not heavily in influential inthis conversation.

(08:42):
And they know when they'redoing it without product that
they know they're missing out bynot having product
actively involved in doing it.
Because at a lot of thosecompanies, product
is like I'm not gonna say it'san afterthought.
That's not really the rightway to say it.
A product is they don'tthink of product in that way.
you know, they think of productas like somebody
that talks to thedevelopment teams and translates

(09:02):
the,, rather thanlike the product man thinking
of the product manager as agm and then all the employees,
even though theydon't work under
the hierarchicalstructure of the
product manager,they work for the
product manager, meaning theproduct manager's
running that wholesegment of the business and a
lot of companies are resistingcoming around to

(09:23):
that model MartyCagan talks about
mostly, like a lotof companies are resisting going
to that it's, this is not agreelike war story, every company
I've been at has been that way.
I would say like the, the, thesmaller companies
they get it they, they get it.
Larger companies, oh boy.
If you're even invited to thetable, like good,
good, good on you.
If you're even invited.

Om (09:43):
So I'll tell you what I've seen
in my experience, when you areinvited as a product person to
these discussions, it isn't fromthe standpoint of a holistic
pricing kind of discussion.
It's from the standpoint of,well, you're closer to the
development team, so give us thecost side of the
equation, Right.
So we'll decide, we saleswe'll decide.
To slap on a margin thatwe think is appropriate and

(10:04):
you just give us what's it gonnatake for us to deliver this?

Brian (10:07):
Is that the sales to product
equivalent of theproject manager?
Going like, I'm just going to,put my thumb in the air and
say it's gonna take you threeweeks and then hopefully that's
the same thing.

Om (10:18):
Pretty much the same thing.
Honestly.
I mean, sadly it's so closerto reality with this kind of
analogy because sales shouldat least know that there are
different segmentsof the market.
Right.
You know, with theproduct manager,
there's only one date that theycome up with.
But yeah, so I, if you areinvited, it is only to provide
the cost side ofthe equation and

(10:38):
which is a shame.
'cause you shouldbe able to say, here are the
different strataof our customers and based on.
You know, what their needsare, et cetera.
We can price differentiallyacross those.

Brian (10:50):
I think we're coming to some solid takeaways here
in this category.
You know, if you're product, ifyou're a product manager and you
can't explain whythe pricing is, what the pricing
is like, well I, I hate to bethe one to step into my office
close the door.
Like, 'cause you're not theproduct manager.
You are the feature factoryforeman.

Om (11:07):
Yes,

Brian (11:07):
Listen, I don't, don't yell at me.
I didn't, I didn'tlike, I didn't say it like Marty
Cagan was the one that sayingthat you're in a
feature factory.
Like lots of thoseother people is a who, who had
the, Melissa Perry is a featurefactory, right?
She's a escaping the build trap.
Yeah.
Yeah.
Like go yell at them.
I know you're not gonna yellat Melissa Perri,
, don't, don't yell.
I'm just telling you like youshould be in the room where

(11:29):
it happens.
Another Hamilton on the ArguingAgile podcast.
Thank you very much.
Some takeaways.
I got some takeaways thatI've kind of sketched out on
the back of a pizza box whilewe were talking.
Map your current pricing flow.
It requires you to do a littleorganizational mapping in your
organization.
A little flow documentation thatsays who conducts your current

(11:50):
willingness to pay research yourpricing research.
What will customers bear?
What will they not bear?
What are your competitors'pricing?
You know, that kind of stuff.
And then.
Who takes that research and doessomething with it
who consumes thatresearch and does
something with it.
'cause somebody has to producea pricing model.
Somebody comes out with like,this tier is this much money and
this tier is this much money whois that person?

(12:10):
Yeah.
Or people, I guessmaybe if it's a
group and then whohas the authority to change?
It may, maybe the authorityto change.
It's not the same person.
Or maybe it all comes from oneexecutive who does, like ju just
figure out whodoes the research, who makes the
proposals, who's involved inthe discussion?
And just, just figuring that outwill help you.
Take the next step, whateverthe next step might be.

Om (12:31):
Yeah.
Map out the landscape of whatthis looks like, first of all.
Yeah, I agree.
I think that's a good startingposition for you.
But if you're a product person,you could do worse than just
learn a little bit about thesefinancial ratios
because they willalways help you in the future.

Brian (12:44):
Yeah.
And also if you found thisargument useful or if there's
something that wemissed, we didn't talk about, or
if you've been screaming atyour tv 5.5% of
people that watchthis podcast on YouTube, they
watch it on a tv.
So there potentially arepeople screaming at us on a
TV somewhere.
Okay.
So if you're screaming us onthe tv, I don't know how you're
gonna add commentson the tv, but add some comments

(13:06):
and let us know what, what stuckout to you in this conversation,
because we are done.

Om (13:11):
Yeah.
And, and don't forget like,and subscribe.

Brian (13:13):
Okay.
so for the next category , hey,why don't PMs do pricing?
Because they don'thave the skill.
Like you already started thepodcast saying they don't
have financial literacy.
So if your product managercan't calculate
customer lifetimevalue, maybe they
really shouldn't own pricing.
Like the role requires financialliteracy if they'd never
managed a p and l before, right?
Maybe you don'twant them learning on your dime.

(13:35):
I mean that like, theremight be some legitimacy here.
Product ManagementInstitute survey.
2022. It says 67% of productmanagers report
no formal training in pricingmethodology or financial like
methodologies or fi financialmodeling.
Right,

Om (13:50):
two thirds of all product managers don't have these
essential skills.
I'd say it's a problem.
So I think maybe that's one ofthe reasons why product as a
discipline isn't really gettingas much traction.

Brian (14:03):
Well it's also the PMI that did this study, so I kind
of like a, a product managementinstitute did a
study in 2022 and said everybodythat we surveyed that was all
product managers turned X, Y, z,said that they didn't care
about financials.
Which now that you frame it thatway, like that doesn't strike
me as odd at all.

Om (14:20):
This is surprising 'cause there's so many previously.
Named as project managers arenow product managers, but
project managementteaches you about
project financing.

Brian (14:30):
I understand what you're saying, but also like I,
there's a lot ofproject managers out there that
their only job is to stand overyour shoulder.
Tap in the ruler.

Om (14:39):
When's it done?
That's right.
When's it gonnabe Done's, right?
That's right.
I get that.

Brian (14:41):
All right.
The steel steelman hereis super easy.
Pricing requiresfinancial modeling
and that's beyondthe training of a typical pm.
Like if, if we'resaying that 80% of PMs out there
that's the numberwe just made up, by the way are
backlog admins that, that styleof PM how are we gonna try to
institute this at a large scale?
You even said earlier like,well you gotta talk to sales.

(15:03):
You do.

Om (15:04):
Yeah.
'cause sales presumably has ontheir radar what
other competitors are charging,et cetera.
And you should have some ideawho they are, but you may not be
privy to their financial modelsnecessarily but

Brian (15:16):
sales should be, and not to undercut
myself, what, likefinancial skills.
Like, just like any skill.
Just like hr.
Oh, I gotta learn how to.
I gotta learn how to interviewpeople.
I gotta learn how to have aconversation to make sure people
are, meeting our level, ourexpected level of performance.
Like these things are learnable,they're all learnable.
Financial literacy,learnable however,

(15:37):
I was at a companyone time that was
acquired and afterthe acquisition, they took away
the financial responsibilitiesfrom the managers in the
organization.
Now, I, I was a, I was more aproduct owner in
that organization,which is like some
responsibilities a productmanager were like divorced and
put on managers.
It wasn't exactly the perfectatmosphere for this, , what

(15:57):
is right?
But it's a great example.
When the private equity folkstook over, not only did they not
train, but they made financialsmore obscured because they took
them away from the managers.
Now, whereas before I had fullvisibility, full visibility of
the financials.
So I would say like, companiesare all over the map here.
It's gonna be very difficultto do this.

(16:18):
I understand that's like,that's what we're
lobbying for islike PMs should be
doing the pricing.
It is a product function.
However, it's somessed up in like
what an 80% plus.
It's probably more than thatof companies that
I don't know if we're gonna getback to a place of balance.

Om (16:35):
I, there's hope, right?

Brian (16:36):
Well, we can't end the podcast this early.
That's, no, that's

Om (16:38):
right.
So with companiesthat are acquiring
other companies a acquirers orholding companies,
companies likethat are notorious
for keeping all these financialtype decisions centralized Into
a separate area,typically an area
at the corporate level, an

Brian (16:54):
area with no product managers.

Om (16:55):
Exactly right.
Yes.
Divorced away fromproduct managers sanity, small
companies and sanity and yes, ofcourse most small
companies though,they don't have the hierarchical
burden, right.
So I think in thatenvironment, the product manager
has bit more autonomy mm-hmm.
To work with finance, sales,et cetera.
'cause they're reachable Right.
With the holding companyor anything like that.

(17:17):
Yeah.
Good luck with that.

Brian (17:18):
Okay.
Well, I mean, that's a solidtakeaway here is if your company
is a size where these folks areapproachable, then you're not
beyond saving,

Om (17:26):
you should take the onus right on yourself
to go learn some of this stuffand reach out to your peers,

Brian (17:33):
and, I will tell you personally, this is how
I learned it.
I learned it by reaching out toC-level folks who set the BA
basically at the differentcompanies.
I basically learned it mostlywhen I was on the
point, the periodof my career when
I did contracting productmanagement.
And when I would work with theC-Suite, I would talk pricing
with them.
How did you get to this number?

(17:53):
What is the lifetime value?
How did you calculate it?
And I basically inserted myselfinto the middle of pricing
discussions and that's howit happened.
But I did that because it wassmall companies and at small
companies usually people arejust happy that anyone's even
interested in these things thatthey're doing in addition to
their normal jobresponsibilities.
And they're just happy totalk about them.

(18:13):
Even if they're not just happyto talk about them because
they're happy that other peopleare interested in
these things thatthey've just been
kind of silently, quietly doingwhen nobody is looking to get a
second opinion.

Om (18:25):
Validation.
Yeah, exactly.

Brian (18:26):
The best people that I work with, they
invite this kindascrutiny 'cause they're looking
to learn to be like, oh, Ididn't consider that, or maybe
you see something I didn't see,it's, well you're

Om (18:37):
saying talks directly to the culture of the
company regardlessof size 'cause some small
size companies also don't workthis way it depends on the
corporate culture.
Yeah.
But yes, I agree.
I think if you area C-level person
who is basically coming up withthese things, it behooves
you to get some validationat least.
Yeah.

Brian (18:54):
So take a step back home.
It's story time.
So I worked at a place one timewhere a small company, very
tiny little, smallcompany, usually the founders
will set the pricing right?
Like nobody else is.
Nobody else is like, they don'tknow enough.
Usually the founder is thesubject matter expert, right?
They set the pricing.
And over time as customers grow,as you deviate a little bit from

(19:16):
your ICP and you go to a broaderaudience, your offering goes
out to people who aren'texactly in your ideal customer
profile or idealcustomer persona.
And then your pricingmight change.
So you say, well,I want to go over
here and sell the big enterpriseclients, or I wanna go over
here and sell B2C.
Another place I was at, we.
Entered the, we were B2Bsoftware, but it

(19:38):
was really B twoB2C software, like
the purchasers and the customerswere not the same.
Right.
And then we got into the B2Cmarket where we sold mobile
applications directly toconsumers.
And then there was a pricingconversation there to be like,
well, do we do a subscription?
Do we do a one-time feein the store?
'cause some appsyou buy you just one-time fee.
It's a good amount of money.

(19:58):
And then whatever other apps youhave by service.
But then the conversion ratefor service versus the people
actually willingto just buy an app
is like very low.
Some apps in theapps store, they,
you, you buy them and then theyhave a cycle, like
they're only up there for like18 months, two years, and then
they go away andthey come out with
their new version.
You have to rebuythe new version which really
like, causes some friction.

(20:19):
And almost every time I've gonethrough this it's
usually the person that set theinitial pricing.
They're the one that everyonein the company looks to, right?
To go back and dothe pricing again.
And because the founder of thecompany set the pricing when the
company was like eight people orwhatever, and now
the company's 500people like that person who's,
and then, that founder who'sstill with the

(20:39):
company magically,somehow everyone's
looking to themto set the pricing and they're
doing a bunch of other stuff.
They're running the wholebusiness.
They have hundreds of employees.
They're doing hiring, they'redoing firing, they're doing
budgeting.
They probably answer to somefinancial person
somewhere else ifyou, if there's PE involved or
whatever, and theyshould not be the
person, the singlepoint of failure here doing the

(21:01):
pricing anymore.
'cause they can't dedicatethe research time anymore.
Basically.
They're doing too much, iswhat I'm saying.
They're doing too much.
They need to delegate that,that pricing research
conversation.
I'm not saying the person thatdoes that stuff shouldn't answer
to this person and tick all theboxes, answer all the questions.
Right.
And not be informed.
That's not what I'm saying.
They should do that.

(21:22):
And if they can't figure it out,then you should get a panel of
people or the right person, ormaybe the person you got in the
job is not the right person.
But I'm not like going backand having that original founder
who now is like super strappeddown with other activities.
'cause the business has grown.
That's not theright thing to do.

Om (21:37):
Absolutely.
So that founder,like in addition to doing a
thousand otherthings now because they're now
growing right.
They're not doing what they needto do, which is
that research thatcan inform the
pricing decisions.
They're not doing that.
Right.
So they're basically going ongut feel yesterday
year stuff that they say, oh,this is how we used to price it.
We should probably just do that.

(21:58):
Yeah.
Just adding the cost toinflation that's not always the
best way to go.
Yeah.
You need.
Extra pair of eyes to look atthis stuff, and
those other peoplewith those extra
pairs of eyes cando the research.
You don't have to be theone doing it.
So it's twofold, right?
If you're a product person inan organization
like that, expectthis to happen, first of all.
And when it happens, be thefirst one to put your hand up,

(22:19):
go learn those financial thingsthat you don't know about, and
then try and askfor the owner to let go of some
of those things.
To entrust you ifyou are the one of
those owner typepeople, let go at
some point, right?
I mean, you can'tdo it all forever.

Brian (22:35):
I just, I think you just hit
a whole different podcast rightthere that we, you
gotta talk about.
Yeah, that's a good one.
Yeah.
The, the, the growing abusiness, like when to let go,
that kinda stuff.
If your productmanagers can't do
pricing because ofdifferent reasons, no, no time.
Someone won't let go.
They lack skill or whatever.
It may or may not be your hiringbar that you're
like, oh, we gottaraise the bar, or
whatever it may not be just thatalone, right.

(22:56):
It may be a bunchof other factors.
So again, that flow, the earlierin the podcast where we talked
about that flow diagram of likewho does what by when you know
who discusses it, who makes thefinal decision?
You gotta have all that writtendown somewhere.
You gotta have these processeswritten, these processes.
Processes written downsome, it doesn't

Om (23:12):
have to be like very elaborate.
No.
You could do just like what Icall force field diagram just,
just write down who does what.
Put people's names in littlebubbles and just put arrows and
say, this person does this, thisperson, I mean, believe me, that
one picture.
Worth its weight in gold.

Brian (23:26):
Although I could totally pin
somebody down in this discussionand demand No, no.
I want to know whoin your business
if I was running the business.
Yeah.
And I would say, look, I'mlike Brian and Om software
development company.
We started a Brian as Brianand om software development
company.
Om just screamed at me, keeplike, develop more, develop
more faster.
But in German, I don't knowwhy he was speaking German.

(23:47):
'cause he lives in Berlin land.
That's why.
Yeah.
Well, was that Spanish?
I, that's a callback toepisode one right there.
That's Oh, you guys, you guys,

Om (23:57):
That was a long time ago.

Brian (23:58):
That's a lot of salt in that dump truck.
That's a salt mine over here.
Every business process is likethat though.
Mm-hmm.
Is like who does what?
You know, by, by when?
Like that, that old, that oldkind of thing is
like, who, who isresponsible for what decision?
Who's responsiblefor carrying out what business
process?
Like if you're not writing thisstuff down, where does it live?

(24:19):
I mean, it lives all in yourfounder's head.
Okay.
Well, how does it live in yourfounder's head when there's 500
people in the organization?
A thousand people?
We kind of alreadysegued into the takeaway, you
already have yourmap of who does what, deciding
for your pricing and whatnot.
So maybe you can add to that ontop of this well, what research
have they done?
Like, do they understand thevalue based versus competitive

(24:40):
versus cost based?
can they explain the differencebetween cost plus value based,
competitive pricing, alldifferent types of pricing?
Yep and then, and then let'swrite down the
research that theydid for pricing.
You know, and showus that, bring that research
back to the group.
I'm hoping one person is notjust deciding on pricing in the
dark by themselves

Om (25:00):
listen, it doesn't sound silly to me because in
practice that's how it happens.
That's how it happens.
Yes.
and the flip side of that, mostpeople just simply
take that well, so and so saidthat must be true.
feel free to challenge thesepricing decisions and start with
the basics, right?
What you're not doinghere is simply knocking down
somebody else.
What you're doing is trying toget validation on what's
happening here,

Brian (25:21):
right?
I don't know if wecame away in this
category clean, soI like what I got.
No, you probably didn't.
What I got in this categorywas like skills are 50% of it.
Like you, you need the skillsto do it.
If you're a pm you don't havethe skills, you can't do it
but also your organizationaldesign matters.
Yes.
So if the PMs are not everinvited into the room where it
happens, that's, again, it'sfor you Lauren.
It's two podcasts.
I did that for you, Lauren.

(25:41):
Then you're never gonna get theresults you're looking for.
So like, I don'tfeel like we made
it like we had, wehad our steelman,
we had our points.
We still didn't get a goodtakeaway out of this one.
I'm gonna throw it over tothe audience.
Do you have good experience withthis one or are
you like me where you're like,Hmm, most people are just kinda
like pricing.
Oh, the adults will takethat one.
Brian, get on outta here.

Om (26:01):
That's somebody else's decision.

Brian (26:03):
Well do

Om (26:03):
let us know in the comments down below.

Brian (26:05):
Alright, the next section Oh, I know what I want.
Talk about om.
When executivesrefuse to delegate
pricing authority,when that, when that founder
who was with thecompany when they
were tiny, small.
When they weretiny and small and
is still with thecompany and they
set the originalpricing and they
refused to give uppricing authority.
Authority Throw Cartman back upon the screen.

(26:25):
Author.
To the product managersbecause this new
fandangled productmanagement, like
it's, this trend'sgonna blow over.
Yeah.
Gary from sales is what we'retalking about now.
They're like, that's a signalthat you either, either you've
hired incompetentproduct managers like that,
that's definitely one signal.
Sure.
Maybe or you've got people thatcan't relinquish control.
I mean, that's the other sideof it, right?

(26:47):
Like if, if we're goingfor extremes, if we're, if
we're only showing barbellgraphs right now

Om (26:51):
Indeed.
I think you can attribute thisto both sides.
I mean, sure.
If you've made badhiring decisions.
Then it kind of feeds into thelack of trust because people
can't do the job.
But you hired them.
Well, you're not gonna entrustthem with pricing
decisions so wheredoes this go in
the long picture?

Brian (27:06):
I'll tell you where it goes.
It goes to Marty Cagan's.
Empowered.
That's right.
And Marty Kagan'sEmpowered 2020.
I think he wroteEmpowered in 2020.
I'm not quite sure.
Off the check thatreference when the
podcast is over.
I won't, let's be honest.
He says, organizationsthat centralize
pricing decisionsin executive or
finance functionstypically operate as feature
factories.

(27:27):
That's what he says in his book.
I didn't make that up.
I could completely make up MartyKagan quotes, actually, that,
that should be apoll podcast we do
is made up Marty Cagan quotes.

Om (27:35):
That's not like a fun one.

Brian (27:36):
Sounds like a fun one.
Yeah.
Oh my goodness.
But I don't think this is fake.

Om (27:39):
Yeah.
You know, the people that.
Closest to those decisions andare refusing to let go they're
going to propagatethis environment.

Brian (27:48):
Well, I'm gonna start right away with the steelman.
Oh yeah.
Let's go get mymusic steel, man.
That's right.
Listen, pricing affects companyvaluation and investor
relations, likecompany pricing is
too critical of abusiness function
to be delegated to anyone.
Product manager.
Sorry.
You saw, you looked at me andyou knew, in my

(28:09):
brain, I was like,I knew exactly where you were
going with that.
But also like that ruinousempathy right here that's right.
I'm, I'm lifting that term fromthe last podcast.
Like that is whatthe executives are
thinking is like,who's this guy I'm
not giving him?
That like lack of empathyright there.
That, that I saw in your eye.
I saw a flash in your eyesright there.
He was right there.
I'm telling you that's,that's what the executives
are thinking.
They're like, who is this kid?

(28:31):
This product management kid?
Yeah.
With 20 years of softwareexperience like,
I went to Harvard!How dare he!!! That's what
they're thinking is, it's tooimportant of a
business function.
I should do it because I'm bigand important.
You know that, that's whatthey're thinking.
if I'm not gonna be a jerk.
For once.
The other side ofthis is executive experience
provides market perspective thatthe PMs lack.

(28:53):
They haven't been in my marketlong enough maybe I'm a sales
executive, right?
Yeah.
Maybe I'm a 20 years salesexecutive, and this PM came from
like logistics or whatever.
And we work in healthcare,healthcare tech or whatever.
you don't know anything about Iknow about pricing
in health tech.
you're not qualified that,that would be the trade off here

Om (29:09):
understand that.
I think that has somelegitimacy, right?
Because people that you justhired from the
domain that you'vehad a long stay experience in.
But that's fine.
That does not mean it needsto be binary though still.
I would still maintain Allthat's saying is by all means go
in, but invite.
Invite someone else to examinewhat your basis is, right?

(29:31):
Your assumptionsand say, this is
how I'm arriving at this pricingconclusion.
What do you think?

Brian (29:38):
we talked about the steel man of like, well,
the executives, like they havethe experience in the product.
Managers don't,and you know, they
think that it's super important'cause it affects,
it affects likecompany valuation and product
managers don't sitat that level, and
that's where their bonuses, likethe executives and like VPs
and stuff, that's wheretheir bonuses and stuff are.
So it's like, it'stoo important to
them personally.
And boy, they won't delegatethat stuff.

(29:59):
That's the slippery slope.
That's like the gently rollingIrish countryside
of moss covered stones thatare always wet'cause it's
always raining or misty outwhere they won't delegate that
stuff and then they just slip.
Into like, well now we won'tdelegate all this other stuff
as well, which includes productstrategy and what
features you build next, and allkinds of stuff that has to do

(30:20):
with basically you're not evendoing product management at

Om (30:23):
now you put your product management into in a sack, tie
their hands behind their back.
Yes, I can chuck them into theAtlantic or Pacific, whatever.

Brian (30:29):
Well, it's, I mean, you just
built the weaponand you can, now you're using it
for everything we can't let theproduct managers
be involved with prioritizationof what features to build or, or
if you're doing like OKRs, whatproblems to solve and what,
or like Right.
The more of thisthat we're talking
about, the more it's pushinginto a feature factory of this
overly burdensome executive thatbelieves they know

(30:51):
better than peopledoing research.
People doing like the trial anderror of figuring out business,
you know?

Om (30:59):
Yeah.
I think the takeaway wouldprobably twofold.
If you're an executive likethis, sooner or
later you're gonnafind out sooner or later, right?
If you've been in the gamelong enough, you probably did
that and bounced somewhere else.

Brian (31:11):
Do you have a story of a overly burdensome executive
that ended up being wrong?
Sorry, I have one.
I certainly have one.
Well, let's start,

Om (31:19):
lead, lead off with yours.

Brian (31:20):
When I was in logistics what the company would do is the
company would hirethese trucking executives in
these nebulous positions oflike, you know VP of strategic
initiatives, right?
And the strategic initiativebasically was we
want to sell oursoftware to your former company

(31:40):
that used to be ahot shot director
or whatever at,so they would hire
them in I mean, government doesthe same thing.
No, it's a real thing.
I know.
Yeah.
Government does the same thing.
Mean there's plenty ofindustries do the same thing.
And they would do that and theseexecutives would
come on and they would basicallylike with no, no
broader context, just their,just their.
Anecdotal evidencefrom the company that the one
single company they workedat previously would say, oh,

(32:03):
everybody wants X, Y, Z feature.
Everyone wants feature X orfeature, let's go build it Now
feature Z, we'veabsolutely gotta build features
Z. And because they're a highlevel executive, the more they
push, the more youknow, the director
of development or whoever whopeople that are looking for.
Promotions themselves Hmm,we just, let's just make this
person happy.
Let's just, you know?
Yeah, I know.

(32:24):
There's not bringing evidence.
They don't really know howto do research.
Let's just makethis person happy.
They would get these people andthey would last maybe somewhere
between 12 and 20 monthsand really not contribute much.
Take a lot of the developmentseems time, and then eventually
wash out becausethey couldn't sell
their company.
They couldn't come 'em out withany meaningful features

(32:45):
because again, I understandwhat the company was doing.
they basically were hiringlike they should
have just called this person theVP of business development.
'cause that's what they weretrying to do.
They're trying to expand ourbusiness into this
particular firm.
They couldn't break through.
But they should have never giventhat person authority to
like green light featuresand all that kind of stuff.
That stuff should have beengated off to a product manager,
To say, Hey, whatkind of bets do

(33:05):
you want to, yeah.
Do, do you want to try to puton the table Mr.
And Mrs. VP of Strategic specialGrand Pooba initiatives or
whatever you arebecause, because the product
manager would come back and whenthey get grilled.
They can say, I took this betbecause your new strategic
VP assured me that X, Y, Z wasdefinitely used by the company.

(33:29):
The early prototypes of thepeople or whatever
that they referredme to, said they
were gonna use it.
And then it never panned out.
Sitting in front of all theexecutives and department heads
they're gonna ask, how come itdidn't pan out?
And then there will come a pointwhere you have to
decide if you're gonna tell thetruth or if you're
gonna try to justquietly swallow it and move on,

Om (33:50):
move on, keep updating that resume.

Brian (33:51):
I'm gonna give them the facts and the evidence and just
lay it out and be like this.
They need to hear it.
Yes.
So I agree with that.
And, and the, and I bringthat story up.
This is my real story aboutpricing and about pricing and
about greenlining features andwhich is sort of like parallel
to pricing.
To tell you thatthese folks were
a diamond dozen inthat co I stayed in that company
for over a decadeand these folks came and went

(34:14):
like clockwork.

Om (34:15):
I think that's not just limited
to that industry either, right?
Oh, no, you've seen that.
I've seen that inbespoke software for vertical
industries, and it's, I've seenit there too.

Brian (34:24):
It's, and it's definitely the way things happen in
government, sadly.
So organizations that won't letproduct managers set prices have
already decided product managersdon't do product management.
That's basically what we'resaying on this podcast right.
Scary hard to hear for a lot ofpeople, but that
it is what it is.
So, diagnose your organization'spricing authority structure,
which we already outlined earlyon the podcast.

(34:45):
Who has final approval?
Who is involvedin the discussion?
And also funny thing arguingAgile 2 0 1.
It could be helpful in thispodcast because the people that
have say in, inthe pricing, even
from the outside, you could bemapping that that
stakeholder quad.
The two by two.
Low interest, no, sorry,high interest.

(35:07):
High, high interest.
Low low power, power.
Yep.

Om (35:09):
You are a stakeholder at that point, right?
Yeah.
in that quadrant.
Yeah.
absolutely.

Brian (35:13):
And then, and then, does that structure, whatever that
structure is that you mapout, does that map your feature
prioritization?
Because if it doesn't, you'vegotta, you've got
some, you got a huge disconnect.
You've got some disconnectthat you need to deal with.
Yeah, absolutely.
But if you found this usefulgive us a like subscribe on
the podcast.
Let us know thatthis was useful.
the next logical step that we'regonna jump to is a debate on

(35:34):
how to structurepricing, assuming that you want
PM zone pricing,which we do, how
do you structurethat discussion?
How do you structure thatcollaboration between sales,
finance, your executive,all that kind of stuff?
How do you actually do it?
We're gonna talkabout a we pricing collaboration
model.
That, that may work.
I'm not gonna say it actually.
100% works.
No.
May work.

Om (35:54):
Let's get to it.

Brian (35:54):
We're gonna start by reiterating.
Product managementshould own the pricing strategy
and the researchfor that pricing strategy.
Okay.
Sales owns negotiationwithin defined boundaries.
Finance owns marginrequirements, revenue
forecasting, things like that.
Right.
And then all these boundaries,if they're not clearly defined,

(36:15):
which most companies, they'renot at all we like, which we
touched early in the podcast.
Now you have chaos.
Oh goodness.

Om (36:21):
Yeah.
Well, I mean if none of them aredefined, you are
in the jungle now.

Brian (36:25):
If you have clear pricing, authority,
boundaries, those categoriesI just pointed out, you will
deliver faster time to market.
Your pricing changes will beable to respond more quickly.
And because of that like you'llmake more money.

Om (36:40):
Yeah.
So the boundaries,I just wanna be clear about the
message here.
We're saying that the boundariesshould be clearly defined, but
that doesn't mean that theyshould be rigid.
You need to be able to reachacross the boundary and
speak to the other person ina collaborative manner.
For example, finance could layout the guidance for margin it's

(37:00):
usually a range.
Sales would havethe authority to swing somewhere
in there.
But potentially they could sella system at cost.
If it's the, likethe big customer, this is your
entry product withthat customer, et cetera.
'cause there's a big upsideto it right.
There are many, many reasons whysales would change
the actual price that is chargedto the customer.
But it's an informed decision.

(37:22):
It isn't just simply.
You know, a randomkind of decision that sales made
by themselves orfinance dictated onto sales or
anything like thatcollaboratively, they arrive at
a range that would be pitched,but the actual pitch, the actual
number would vary based on whatsales decides.
So you could lose somemoney upfront.
Maybe I've seen that happen.

(37:43):
In software sales, and thenthe money's made up afterwards.
Or you make verylittle margin on
the price of thesoftware but you make margin on
recurring revenue,on, on support well, you're,

Brian (37:55):
So you're already in the steelman side of the discussion
here, which is pricing requirescross-functional consensus.
Okay.
The period, a hundredpercent period, right, requires
cross-functional, and I'm notdebating any, first of all,
this is the beststeelman section that we've ever
done on these two podcasts foryou, steel Man.
Because Steelman, because I'mnot debating either of these.

(38:17):
Pricing requirescross-functional consensus,
number one.
Number two, salesneeds flexibility
to close deals.
Okay?
Look, steel man, steal away.
Your steel man is stolen.
He's stolen.
I put him in mypocket and I agree
with all of that.
However, if you're gonna sayconsensus models,
create paralysis,and you're gonna say like, well,

(38:37):
if it's everyone'sresponsibility, it's nobody's.
If that's what you're gonnasay, then I have a big problem
with like that.
You're not steel manningat that point.
Now you're introducing abunch of stuff that doesn't need
to be introduced into this.
You wanna set anew pricing model,
you wanna change the price, youget all the folks
in the room thatare contributing to this sales
and pricing discussion, andwe discuss it and
we move forward.

(38:58):
That doesn't need to be 47people okay.
That, that, that, that thepricing requires
cross-functional consensus.
It could be thesales person, the
chief executive, and the productmanager could be
the holy Trinity.
But I can pull those threepeople together instantly,
basically.
So if you're saying like, oh,well that's gonna
create analysis paralysis,and this is a diffusion of

(39:21):
accountability, I'll saycompletely untrue.
Yeah.
Once you make that coalition,that coalition understands
that pricing andpricing structure is a super
important thing.
Just as importantas anything else.
And we will pull it together andself-organize.
To get it done.
The other one issales flexibility
needs to be withinthe pm defined guardrails.

(39:42):
So I, as a product manager,like if you're saying, well,
this customer won't buy unlessI build these five features and
then give 'em a discount by 95%and do whatever.
I was like, thatsounds like that
is, doesn't fall into our idealcustomer profile and hard pass.
Okay.

Om (39:57):
Yes.
I agree with you that it's, it'sreally not gonna.
It's not a viable approach.
Let's say that however, thereare cases, you could say there
are edge cases, but there arecases where sales
will undercut whatthe price should be going into a
customer, right?
Sure.
For a myriad of other reasons.
Maybe this is thefirst of several
products that the customer wouldbuy from you.

Brian (40:17):
Yes.
I'm gonna say yesand yes, and I'm gonna say yes.
And in first time today I'mgonna say yes and the first
time today, but I like yes,and, but my, and really is.
However, I can'thave rogue sales folks like the
sale, assuming that we've doneour legwork.
Pricing is an execution ofour product strategy, so

(40:38):
I'm only willing to flex so far.
If you're saying,well, Brian, I'll
just, I'll givehim this for free and then we'll
get in the door and then we'lldo whatever.
That's what all those truckingpeople that I was talking
about before, that's whatthey were doing.
Oh, we'll just Brian, we'lljust give 'em everything for
50% discount for two years andeventually they'll
be, they'll love our stuff somuch or whatever.
That's what all these executiveswould do.

(40:59):
So, and then we give it to themfor reduced costs.
They'd ask for abunch of features.
We spend months with ourdevelopment team working on to
punch out the features and thennobody would use the software.
And then after one year theydon't renew.
So now that executive hasbeen here for about 20 months,
20 ish months.

(41:19):
About 20 months in, theydon't renew.
And the CEO just comes to thisVP of special projects or
whatever, and says like, look,we did a bunch of work for you.
You spent this much indevelopment budget
and your guys, they never useda product in the 12 months they
were using it.
You got no adoption.
they obviouslybought it with the

(41:39):
minimum bare bonesof what they could
buy to be nice orwhatever, and then
didn't use it,showed no interest
and then skipped.
So like why, why like thosenine months of development
time, six months, three months?
It's huge opportunity.
Why do in the time it took usto work on those things and sell
this customer, yeah, we got alittle revenue,
but we could haveworked on these other things.

(42:00):
That benefited all of ourother customers and then.
What comes is a very quietdismissal of that individual
of the mutual partying of ways.
I wish I could tell you howmany times I have
seen that exact thing go down.
It goes down behindclosed doors.

Om (42:16):
It does, it does.
I agree with what you say.
It happens a lot.
I do think that there are cases,not many, but there are cases
where sales can sometimesradically undercut the price.
Sure again, forreasons that need
to be solid, thatneed to be shared
with the product people as well.
Because , pricingis just one factor

(42:39):
in the product.
It's not the only factor anexample of this.
So you have a brand new productthat you're building from
the ground up.
Nothing like thatexists anywhere.
Now you have.
A product that you would liketo put into a customer's hands
so that you can sell more of it?
'cause no, it's not there.
It's not out there at all.
Yeah.
And a salesperson could say,well, you're our first customer.

(43:00):
We're gonna get you on, we'lltreat you with white gloves.
And the, the cost of entryfor you is X and
the next customer will pay two xor three x is that legitimate?
I think it is because it'sreally a barrier to entry that
they're trying to overcomethere's limits though, right?
They give away the farm and it'skind of like the case you just
described wherethey don't renew.

(43:21):
Well, somewhere in there, thereneeds to be a proper calibration
of what they're doing so thisis not on the product manager.
This is on or in productmanagement.
This is directly in sales.
Mm-hmm.
Between sales and finance.
We did this, but what happened?
So the gamble thatthey're making there, right.
They need to be very carefulwith that gamble.

Brian (43:39):
I understand you.
I understand the pictureyou're painting.
I would say that I don't agree.
I think product managementshould be in the middle of
this discussion.
Here's the way I thinkabout finance.
Like they're experts.
I think they just set the, , inthe driver's test, they set
the cones up.
The fact that business comesin and knocks down certain
cones, whatever,like we're gonna
drive over thesecones to parallel
park or a three way, you knowwhat I mean?

(44:00):
Yeah.
Three point turn or whateverwe're gonna drive over these and
there's nothing you can do, likeyou can judge us, but there's
nothing you can do, it, look,I've, again, this
is the same as a CEO or like theprivate equity firm that comes
in and takes out a big loan.
Like we're, this is our loan nowwe're gonna pay it all back.
And the finance people are like,oh, how are we gonna do this?
Their job is this the Instapotstory there?

(44:20):
it's basically the, it'sbasically there were financial
people at Instapot that probablyrecommended we
probably shouldn't do a specialdividend Yeah.
Of all of our cash and thenevery penny and then take out a
loan for double,triple, whatever it was yeah.
We probably shouldn't do that.
And they're like,cool story kid.
And you know whatwe're doing double because you.

(44:40):
Because I wanna get paid.
That's like, put that cashin my hand.
Again, like this is the way thatI look at the finance folks.
Like they're, a risk indicator.
Okay.
Yeah.
But they're notthe ones that are
telling you like,oh no, you can't
spend this cash.
You can't do this, that's theproduct manager.
Because are theya product manager
or are they the backlog admin,because again,

(45:03):
we're back at thismain point, right?
Yeah.
Are they the ceo of the product?
I'm gonna beat that dead horse.
I'm gonna bring it up everytime I can.
or do they justmanage the backlog
on when we need to have adultconversations?

Om (45:14):
They leave.

Brian (45:15):
Yeah.
Get out,

Om (45:15):
yeah.
I mean, on the whole,yes, I agree.
But I do think that there arecases where companies will
undercut pricing to get into amarket or get into a customer
just on the promise of futurerevenue stream.

Brian (45:29):
listen, I'm a hundred percent down.

Om (45:30):
Don't pan out

Brian (45:31):
again, you convene that pricing group.

Speaker 4 (45:34):
Yeah.

Brian (45:35):
And you talk about, yeah, we're gonna
break our policy because of.
X, Y, Z and thenwe talk about the
risks, and thenwe make a decision
and then we do it.
No, that's absolutely not.
But there room is your point.
And, and I agreewith that, right?
Yes

Om (45:46):
Sales can't just go out there and deal with
customers or prospects turn himinto, customers
come back and say,we've made a sale.
By the way, we'renot making money
on this one, but,

Speaker 4 (45:55):
correct.

Om (45:55):
Like they can't do that by themselves, but that's
how it happens quite often.
Right.
It should be a collaboration,is what we're saying and I
agree with that ahundred percent.

Brian (46:04):
Oh boy.
All right, well let's pivot tothe next category.
But before we pivot, I wannasay launching your
product without doing pricingresearch is product management
maelpractice.
So get your lawyers lawyerup is what I'm saying.
It's product management,maelpractice disguised as speed.
Speed to markets.
Oh, speed to market.

(46:25):
Move fast and break the law.
That's what I'm saying.

Om (46:28):
You're gonna be taken to the cleaners.
So lawyer up and lather up.

Brian (46:31):
Yikes.
Oh, lather up.
I like it.
It's a little saucy, butyou know.
Hey, I'm for it.
Research providesdata, but product managers must
also know when to change pricespost-launch.
So when to change price.
What signals do you needto monitor?
That's, that's interestingbecause I don't, of all
the podcasts and everythingI listen to, I don't ever hear
anyone talking about this.

Om (46:52):
This is why.

Brian (46:53):
No, you guys are here.
You know, one, one person.
I would say Daria tech.
Tech, but make itreal that channel on YouTube.
Yeah she talks about this.
and a little bit of ElenaVerna, she talks about a little
bit pricing.
But pricing is aproduct feature.
And it requires iteration justlike any other product feature
and product.
And if you set pricing onceand set it and forget it then

(47:15):
well, basically you're doing theequivalent of ignoring feedback.
That's what I'msaying right now.
So what you should be lookingat is the value delivered in
your products.
If you are measuring yourvalue delivery every year, then
you have some kind of percentagefigure year over year, right?
If you're working for thoseexecutives that I
was talking about,special projects or whatever,

(47:36):
where you add this feature,'cause this one
customer asks forit and then nobody
cares about it.
Nobody uses that feature, right?
If you're not measuring yourfeature adoption, also, you're
gonna have a hardtime doing this.
But if you're measuring yourfeature adoption
and you see that your featuresare getting used and you're
adding value your outcomesright through your software,
then you have a leg to stand on.

(47:56):
When it comes to price increasesyou over year.
And if you're not.
Growing your revenue and youhave like static
pricing, I feel asa product manager,
there's gonna besome uncomfortable conversations
with your executives behind

Om (48:10):
closed doors.
Yeah.
I agree with this.
So he, here's the thingthough, right?
How do you know what value yourproducts are delivering?
We talk about that briefly.
So you have features thatare, that are in your product.
Yes.
And they're out in, that's awhole different podcast, right?
I, yeah.
we are not gonnadeep dive too much
here, but you do need to figureout how much value
you're delivering per featureover unit time.

(48:31):
Whether it's annually orquarterly, whatever it is.
It's, it's contextual.
But if you're not sure aboutmeasuring those, you're, you're
probably not gonna changeyour pricing.
'cause nothing's informing thatprice change.

Brian (48:42):
Well here so or maybe inflation on, on the I
would say pro, probably a lotof companies do.
They say if inflation is acertain percent, then we raise a
certain percent.
Yeah.
And that's probably theonly way they're adding more,
or, or they justsay, we're gonna
sprinkle AI in andpixy dust yeah.
And then pixy dustinflation into it.
Anyway, like a Daria has a greatchannel, like technical make
reels a great channel becauseshe talks about the typical SaaS

(49:04):
businesses versus AI businessesbecause the AI businesses with
tokens it's not a predictableamount of revenue you're gonna
bring in because your customerscould blow you up with tokens.
Sure.
But the, the steelman inthis category, I'll, I'm gonna
try to make a quick, thesteelman in this category is a
frequent priceincreases, like it
confus customers.
It confuses sales teams.
it bothers customers,especially with AI products it

(49:26):
bothers customers.
And then stabilityin your prices.
It builds predictability andtrust over time.
People know whatthey're gonna get.
They know what your costs you'reall reliable.
Which I feel likethat that's a kind
of a number onepoint is frequent price changes.
And also I would,I would sprinkle in a system
doing Salt Bae.
So I would also like sprinklein that.

(49:48):
complex AI related creditrelated stuff.
Yeah.
That changes all the time.
Like the cursesof the world, like
the AI vendors that have beenchanging their models left and
right, you knowthat's an example that enrages,
it enrages

Om (50:01):
enrages people.
It's, an example of what themarket will bear.
They're figuring it out andthey, oh, we can make more money
here, right?
So let's just change up,the package size and the
variations, right?

Brian (50:11):
Yeah, and that, that versus
price stability.
I mean, that's really the,the steel man.
I mean, that's really thetwo things in this category
that we're talking about.
I will start immediately bysaying like the
market conditions move fasterthan your annual revenue cycles.
So you're not like year to yearrepricing not good

(50:32):
enough anymore.
Like you, like 90 day window.
I would want to be, if I hada pricing team that I could
convene right.
Myself, CEO CFO maybe somebodyelse in the business, I don't
know, marketing, CMOI don't knowwho it would be.
Yeah.
You know, four people talkabout pricing.
I would meet every, I wouldput a 90, every
90 days, I'd justdrop a meeting on

(50:52):
the calendar if, if they didn'tdo it, which they won't, they
probably, they prob no, actuallythe CMO probably
would before that.

Om (51:00):
CMO, if they're looking to squeeze more
of their problem, they will.

Brian (51:02):
I would.
Exactly.
I would expect that they would,if they're marketing
initiatives are not squeezingringing us.
You know, more, more, morebringing the sponge dry.
That's right.
Get more, get more.

Om (51:13):
The dry sponge

Brian (51:13):
liquid outta that lime.
That's what I'msaying right now.
Yeah.
I would expect this.
So I would expect people aregonna ask me, so I'm just gonna
proactively justput a 90 d Well,

Om (51:20):
product person is the right person to initiate
this, I think.
Yes.
Because when you're in thismeeting, you have
to bring in otherfactors like who
are still active players in themarket for your product who are
the competitors?
Did we lose one or two of them?
Did we gain new competitors?

Brian (51:37):
What you just said is let's, every 90 days, let's
reevaluate the customer's valueperception of our brand versus
other brands.
To see if other brands havematured more in that period.
Or maybe there's new competitorsthat emerged on the market
in that period.
And we just, weare unaware 'cause
we are all superbusy and important

(51:58):
and we have yachts to attend to.
I don't know

Om (52:00):
Right.
Golf games to play.

Brian (52:02):
Do we have yachts?

Om (52:03):
We sold ours.

. Brian (52:04):
Why?
Why would we do such a thing?
my kind of takeaway in thiscategory is that static pricing
in a dynamic market or anemerging market, right, that,
well, that's, that's justlike a decision to leave money
on the table.

Om (52:16):
Yeah, I agree.
Absolutely.

Brian (52:17):
So if there's a takeaway in this category, which again,
this was a very quick category.
The steelman in this categoryis pretty good.
But if you're going to youneed some kind of
signal monitoring.
Apparatus.
That's why I saidlike 90 days, it
could be differentfor your company.
I don't know what market segmentyou're in, , I would think like
your wins and losses by pricepoint by customer.

(52:38):
If all your customers arethe same price point, maybe it
doesn't matter.
You need, your 90day review needs
some metrics to goalong with this,
you know discount frequency.
If your sales team can givediscounts, well, sales kind of
needs the ability to flexibilityhow often are they
leveraging that?
And then what's, the trade off?
What is the steep discount?
There's the upside on allof those things.

(52:58):
Feature adoption rates.
If you've got that sales guy,strategic vp what
are the adoption rates of thatthing that they're
saying oh, the customers lovethis one trick.
Like, okay, butI'm gonna measure you on this.
And then fire you on thisor whatever.
Every 20 months, in myexperience like a reassessment
every 90 days sitting down withyour executive or with your

(53:20):
pricing panel, whoever thatpanel is, right?
Again, I had a bunch of CClevel executives.
Maybe it's not that for you.
Maybe your is really, reallybig and it's like
one director and then the otherthing we didn't
talk about is if aparticular metric
moves, you mightwanna reevaluate
pricing, whateverthat metric is.
Maybe that metric is a certainnumber of customer
growth above a certain number.

(53:41):
Although if you have a servicescomponent to your products,
your products and services ifa certain number of hours or
customers onboard or whatever,basically what I'm saying is if
you're taxing yourservices component
of your businessa lot, you might wanna raise
your prices like significantly,to be like, Hey, because
I'm providing myservices and I'm super stretched

(54:02):
thin, I want less customers.
So you need to make itmore expensive on purpose.

Om (54:07):
Yeah.
You talked about if the, if thecustomer base grows, it, it
also applies theother way, right?
You have attrition and you mightwanna reconsider,
maybe your price is too highor you could just do trials,
promotions, whatever else.
The point I wannamake here is the apparatus that
you mentioned thatmonitors all of these different
factors, the radar or radars themonitoring happens all the time.

(54:28):
That's not a three monthly thingwhere you get together and say,
what, what's, whathappened in the
last three months?
The marketing happens all thetime, but the price adjustments
don't happen all the time.
Sure So maybe quarterly,whatever cadence
is right for youhave the meeting
there, but you'rebringing in all
of that knowledgeof what's changed
into that meeting.

Brian (54:46):
So we covered the case.
For the pmd ownpricing strategy, execution
collaboration with the otherdepartments and whatnot.
Yeah.
We gave you a system fortracking these kinds of things.
And let us know what you thinkabout the system
or with all thisin place if you,
if it still is notenough to convince executives

(55:07):
and whatnot to involve you.
The main crux of this podcast,we talked about that pricing is
product strategy.
And yeah, there might bea skill gap.
There may, maybe that's ahiring problem.
Maybe that's a learning problem.
Maybe that's a organizationalproblem.

Om (55:22):
These can be overcome.

Brian (55:23):
Yes.
I feel all of themcan be overcome.
All these kind of boundaries.
You can knock 'emall down, and then
once you knock them all down.
You need continuous monitoringand continuous kind of working
together to reassess and keepyourself updated and on the edge
of the market.
This is an interesting onefor me because I know a lot of
product managers out there arenot dealing with pricing, right?

(55:44):
You should be dealingwith pricing.
I think that was my takeaway outof this podcast.
And maybe we've given you sometactics to kind of get your foot
in the door.
'cause once your foot, onceyour foot is in the door, much
like that, VP of strategicOperations and special kids'
birthday partiesor whatever I was talking about,
you stay there awhile stretch out,
lay on the couch,put your feet up.

Om (56:04):
That's right.
And despite all of thosethings, if you still don't get
any traction orheadway, keep that
resume updated.

Brian (56:10):
Oh, I thought you were gonna say like, subscribe
the podcast.

Om (56:12):
And then

Brian (56:12):
update your resume.
You definitely should do bothof those things.
Yes.
In whatever order you want.

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AA236 - Why Product Managers Should Own Pricing (Not Sales or Execs)

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