Omer (00:16.000)
Welcome to another episode of the SaaS Podcast.
I'm your host, Omer Khan, and this is the show where I interview proven founders and industry experts who share their stories, strategies and insights to help you build, launch, and grow your SaaS business.
In this episode, I talked to Kyle Poyer, VP of Marketing Strategy at OpenView, which is an expansion stage VC firm that helps build software companies into market leaders.
Your SaaS pricing strategy can make or break your business, but getting your pricing right is really hard and many companies struggle to understand what they're worth to their customers and how to clearly communicate that.
In this episode, we talk about the five common pricing mistakes that SaaS companies make, and we provide some examples and recommendations to help you avoid making the same mistakes.
I hope you enjoy it.
Kyle, welcome to the show.
Kyle Poyar (01:13.620)
Thanks for having me.
Omer (01:15.060)
So, my icebreaker question.
What gets you out of bed every day?
Do you have a favorite quote that maybe you can share with us to, you know, something that inspires or motivates you?
Kyle Poyar (01:24.310)
You know, there's this actually this poem from Walt Whitman, super short.
And he wrote, do I contradict myself?
Very well then I contradict myself.
I am large, I contain multitudes.
And that stuck with me for a while.
I'm someone that always loves to try new things, never satisfied with the status quo.
I'm always looking to improve.
And so I end up contradicting myself quite a bit.
But.
But I embrace that.
Omer (01:49.400)
I love it.
That's pretty profound.
Okay, so tell me a little bit about your role right now at OpenView.
Kyle Poyar (01:58.600)
Definitely.
So OpenView, for those who don't know, is we are an expansion stage software VC.
We've got about 30 active portfolio companies and household brands like Expensify, Calendly, Datadog, and Workfront, our examples.
And I work hand in hand with those portfolio companies to really accelerate their growth.
So whether it's tackling a pricing project, helping them understand what segments of the market they should be targeting, or validating a new product idea, I dig into different projects and get a chance to work across the portfolio.
Omer (02:33.760)
So what type of companies are you guys looking to work with?
Like, what's an ideal company for you?
Kyle Poyar (02:39.610)
An ideal company has found product market fit.
They've reached, you know, some interesting scale of revenue, right?
Probably 1 to 10 million in annual recurring revenue.
And they're just looking to really accelerate their customer acquisition and so go from a couple million in ARR to a hundred million.
And so it's that expansion stage when they're kind of, it's kind of the awkward Teenage years of a business that we get most excited about.
And really if you actually look at all of our portfolio companies across the history of the firm, we've been focused exclusively on that stage and on B2B software really from the beginning.
And so super focused firm.
And just one characteristic in particular that gets us excited is businesses that exemplify product led growth.
So where the product is at the foundation of how they acquire, convert and expand their users.
And like Calendly is a great example of this.
Probably a lot of listeners use Calendly to avoid the back and forth of meeting scheduling.
We have a thesis as a firm that the future of go to market is really going to be product led and users are fed up with having great experiences with the software they use at home and terrible experiences with enterprise software and terrible experiences buying enterprise software.
And so we think that product led companies are really going to become the future.
And if Zoom and Slacks S1 were, you know, any examples, these businesses have amazing economic models when done right.
Omer (04:14.110)
Yeah, yeah.
Cool.
Now you're also a pricing expert and this is one of the main conversation that we're going to have today.
Can you tell us a little bit about like your background and what you've done with pricing?
Kyle Poyar (04:26.690)
So I've been in the pricing space for about a decade now and it's funny, I read a stat recently that the average SaaS company spends about eight hours in their lifetime thinking about pricing.
And I've now spent 10 years which, you know, wow, it's, it's a lot of time on the topic of pricing.
And yeah, when I got started I cut my teeth at Simon Kutcher and Partners.
Simon Kucher is the world's leading pricing strategy consulting firm.
They've got over a thousand employees across, I think it's like 25 or more offices worldwide.
And I was in the tech practice working with both pre IPO and post IPO software companies on better monetizing their products.
And for me I found it was just an incredible way to grow a business.
It's something that most companies haven't thought enough about, haven't put a whole lot of science or process rigor around it like they have for other parts of their business, but can be such a powerful growth lever.
And So I joined OpenView to work with our portfolio companies as an in house consultant where pricing ends up being a big part of my time because you know, we see so much impact from pricing projects.
Omer (05:34.080)
Got it.
Great.
So let's dig into pricing then.
The theme of this conversation is talking about five pricing mistakes that many SaaS companies make.
So before we get into that, let's sort of talk about like, why is pricing important?
Beyond the obvious in terms of, you know, you might start out thinking, great, I need to get the pricing right so I get more people buying my product.
But beyond that, like, why does it matter?
Kyle Poyar (05:58.860)
I think there's two real reasons and it kind of depends on the stage of the company.
The first is that when you're just starting up right, early stages of the business, how you monetize can be critical to whether you build something that you're actually going to be able to succeed and be attractive to raise funding and to, to really build an actual business.
So to me, it's really mission critical at those early stages and then later stages.
It's just one of the most tried and true ways of growing a business.
And it does so in an extremely profitable way that's fast and doesn't require adding a whole bunch of sales and marketing headcount.
So just it's an extremely powerful and efficient growth lever.
But for the first point, I was struck by First Round Capital does an annual survey where they survey different CEOs of technology companies.
And they looked at the founders who struggled to raise capital and they compared them to those who said raising capital was a piece of cake.
Those who struggled were three times more likely to say they monetize late, twice as likely to say they picked the wrong business model, and 40% more likely to say their burn rate was too high or truly goes hand in hand with not finding that model to truly monetize their customers in an effective way.
And so that spoke to me of pricing is critical to get right at the early stages.
People look to businesses that maybe scaled their user count before they monetize.
Like looking at the Facebooks of the world and think the reality is that most technology businesses are in that position to have the luxury of like a Facebook or an Instagram.
But they need to figure out a healthy monetization strategy early on for the company to succeed.
Omer (07:43.170)
Got it.
And then there was a second point as well, I think.
Kyle Poyar (07:46.450)
Yeah.
So on the second point, for more established businesses, we surveyed companies.
We have an annual benchmarking survey of software companies and we asked people about whether they changed prices in the last year and if so, what was the impact.
And for those who changed prices, only 2% said that it actually hurt their revenue growth.
That means for 98% it either didn't hurt or it helped the revenue growth.
In fact, two out of five say that pricing changes alone accounted for 25% or faster growth.
Like, think about that.
How many initiatives do you have at your disposal that could help you grow by 25% or more, and especially things that you can implement relatively quickly and cost effectively.
So to me, pricing just is so impactful, both at the early stages and later stages of a business.
Omer (08:36.130)
I mean, whenever I talk to any founder, it doesn't take long before the topic of pricing comes out.
And so I'm really shocked at that statistic you shared earlier about startups only spending like eight hours thinking about pricing.
And especially when you start to put it into the context of what we're talking about here, why pricing matters.
You know, it kind of makes sense that you should be investing a little bit more time thinking about this.
Kyle Poyar (09:01.530)
Definitely.
And it's so.
And that's a stat from the folks over at ProfitWell who do a lot of research and benchmarking around, around pricing.
And I mean, from my perspective, for many founders, pricing is not something that like, they know a whole lot of the science and like the process of doing pricing.
And so a lot of it is sort of gut feel, putting something out there and then assuming it hasn't really done any harm to the business, they might be reluctant to change it because all of a sudden that is adding more friction potentially in the sales process that's having difficult conversations with their customers.
And so once they find a model that they think is working, a lot of folks are reluctant to change it.
But you find even businesses that are otherwise successful can be even more successful if they look at pricing.
Omer (09:53.050)
Okay, so let's dig into the five pricing mistakes.
So what's the first mistake you see SaaS companies making?
Kyle Poyar (10:01.210)
The first mistake is that most companies are too cheap in the early days.
And I think this is true at just about all of our portfolio companies at least.
And I mean, it's really easy to see why, right?
I mean, if you think about in the early days, most companies don't want any barriers getting in the way of folks adopting their product.
And they also think about their experience as a cash constrained small business, right?
When the reality is most B2B buyers especially are not all that price sensitive.
And price can even be a signal of quality and sort of long term staying power.
So I've spoken to enterprises that say we won't buy an option if we think it's too cheap because we don't trust that that business is going to be around next year.
We don't trust that they're going to be able to invest in their product in the way that we need them to.
And it's just there's so much work that goes into making a process change inside of a large company that they don't really want to go through that effort and spend those resources unless they have full confidence that they've made the right decision.
And so not only are companies less price sensitive than I think most founders realize, but there are real barriers to being too cheap in the market.
And there's a lot of examples of companies that have raised prices over time, too many to name.
But I think one company that I really look at that has communicated publicly their changes and, and I think really advocated for others to think the same way as a company called Status Page.
They are a website for communicating with your users the status of your applications.
And I think when they launched out of Y Combinator, they were on focused free and $49 a month.
And I think they must have realized, or if I were in their shoes, I would have realized you can't build a large and enduring business off of that unless you get hundreds of thousands of paying customers, which probably means millions of free users.
They also probably realized that their product, you know, it sounded kind of tactical.
It provided real value, especially in terms of improving the experience for a company's customers, reducing ticket volume and support requests when incidents did occur, and just actually had a lot of ROI for their customers.
And so seeing that probably gave them the confidence to raise prices.
They raised prices in 2014, they did it again in 2015, they did it again in 2016.
And each time it didn't really have any real impact on their conversion rates or their churn.
It allowed them to grow their ARPU by two and a half times, and they were able to hit two and a half million in arrival really quickly, which led to a successful acquisition by Atlassian.
And so while they have been public about this, there's so many companies that have seen similar results.
Omer (12:46.170)
Yeah, I mean, that's a, that's a good example.
Actually had Scott Klein, one of the founders of Status Page, on the show back.
It was on episode 86.
So if you want to hear their story on where they were before they were acquired by Atlassian, that's a good one to listen to.
So what advice would you be giving to a founder who is kind of maybe in the early stages and deep down is thinking maybe their pricing is a little cheap?
Kyle Poyar (13:13.150)
The first thing is really to test it.
You need to get data on it.
And for some companies that have more of a self service business model or lower prices where customers buy on their own.
I mean, you can pretty easily test right by just rolling out new pricing for new cohorts, seeing what the impact is in terms of conversion rates from free to paid and see what, what happens that way.
And then, you know, worst case scenario, if you know in the first couple of weeks, it has a meaningful impact on conversion, you can always roll it back without a whole lot of risk.
But then for many companies that are in the early stages, you don't really have a whole lot of traffic on the website.
You're not, you don't have a ton of self service purchases and it's more of a negotiated sale where maybe even the founder is talking one on one to the buyers.
And in those cases I think you just have to keep nudging up the price a little bit, maybe increase it by 10 or 20% and observe what the reaction is on deals.
And you can probably keep nudging that up until you start getting the sense and conversations that pricing is really shutting down or really slowing down conversations.
And for most companies that have a process like that, I think they'll realize that they're not priced too high in the market and that there is room to move it up.
Not an unlimited amount, but certainly higher than what they probably started with.
And worst case scenario, if a buyer box at the price, at the price and says it's too high, if that really shuts down a conversation because you're in the early stages, you can roll it back, say we want to enroll you in a beta program, we'd love to get your feedback.
In return we're able to offer you, you know, half off or whatever it is.
I think that early stage companies have the luxury of being able to test these things and then roll them back if it's not as successful.
Omer (15:04.760)
Yeah, that's great advice.
I've been working with a founder recently who was in a situation with pricing where he's in the early stages.
He's going out and talking to customers and having these sales meetings and thought that his price was about right.
But when we talked about it and looked at what the value the product was delivering, it felt like he should at least be charging double what he was.
And he felt a little uncomfortable about that.
But when he went out there and had a conversation with the customer, you know, went through the process and then sort of laid out the price, it was like the customer didn't even blink at it.
It was like, yeah, of course, that's no problem.
And so he came back and it was like, wow.
It's just like I didn't realize that how I was kind of under pricing my product.
But the other lesson from that was, well, probably the next conversation you have, you need to probably push it a little further as well and see what happens there.
Kyle Poyar (15:55.350)
Exactly.
And that's just a muscle that founders need to get comfortable strengthening over time.
And really pricing is not something that should be static.
I mean, I think people think there must be some sort of perfect price point out there and if only I figure out what that price point is, everything's going to be great.
The reality is pricing is kind of like product management.
You should be collecting data, learning from your customer interactions and, and constantly improving it over time.
It might mean going after new segments that are willing to pay more and you can design some sort of like new features or new products around going after that higher value use case or you know, maybe you do want to introduce a fighter product, a lower end product or a freemium version to go after another business segment.
There's so many ways that founders can think about pricing also beyond just, you know, increasing the price by a little bit here and there.
You can get strategic with how you think about pricing changes and pricing opportunities.
Omer (16:53.580)
Great, so that's mistake number one.
So let's move on.
So what's the second mistake that you see SaaS companies make with pricing?
Kyle Poyar (17:00.460)
The second mistake is around the value metric.
And folks, many cases picked the wrong metric.
And I think many people kind of instinctively know what a value metric is.
But for those who don't, it's the unit that determines what customers pay or what you charge them.
So think users or think usage or like company size as examples.
And in the early days of SaaS users or seat based pricing was the primary model and that was just because that was the kind of closest analog to on premise products where you installed software on a machine was the seat.
But as we've gotten more sophisticated with we have better billing systems now we're, we track a whole lot better data about product activity.
I think most companies are starting to realize that users aren't the best predictor of value for their products and they can get a lot smarter in how they think about value metrics.
And so like one model that you might think about is a model like Awistia.
So they're a video hosting platform or a, or a HubSpot which is known for their marketing automation.
If you think about how those companies serve their customers, you know, as the customers grow in sophistication or using the products more and more, they might grow a little bit, their teams might increase slightly, but they're probably not going to see tremendous in account growth as their customers are successful.
But rather with like a HubSpot, it's number of contacts that predict success, how many marketing contacts are you generating?
Those become leads that you can market to and sell into.
And so even if you don't have necessarily a whole nother marketing hire, having twice or three times the number of contacts means you can generate a whole lot more revenue.
So that's a better predictor of value than than users.
And with Wistia it would be something more like how many videos do you have or how many views do you have on your videos as opposed to seats.
And when we survey companies, we're seeing that it really matters what kind of application you're selling, you know, what kind of software company are you?
So for horizontal applications like a Slack or a Salesforce, users are still the primary way of charging and you can tend to sell into a whole lot of users within an organization.
But for vertical applications like, you know, a Viva or a Mindbody or an Athena Health or for infrastructure software companies like an AWS or Datadog, users are not the only game in town.
In fact, only about 30% of those companies now charge on a per user basis.
And charging based on usage is much, much more common.
I think in the infrastructure side specifically, once developers started realizing that with AWS they only had to pay for exactly what they used and not a penny more, they wanted to pay for everything else like that.
And so it's more customer friendly.
But I think it's also actually in the interest of a software vendor because having the right metric allows you to differentiate from competitors and scale with the success of your customers.
Omer (20:09.890)
Yeah, I think that's a really good point because when you're in the early stages, it's kind of tempting to just look at what other products or competitors are charging and say, well, that's the industry norm, so let's do something similar.
But if you can pick or identify a better value metric, then not only could it help you generate more revenue, but it helps you, as you said, differentiate yourself.
And maybe it's a better way of demonstrating value to your target market.
Kyle Poyar (20:42.590)
Exactly.
And one example to share from our portfolio is Expensify, which is the mobile app for expense reporting.
And Expensify was competing against kind of the 800 pound gorilla in the space was Concur.
And what people struggled with with Concur is that they had to figure out exactly who was going to be using.
Concur going in.
And it can be difficult.
Right.
Like you don't necessarily know who's going to be a heavy user of expense reporting.
So you'll probably buy some licenses for the sales team.
Yeah.
Give some licenses to the executives, to the services team.
But you might think twice about just the product team needed or are you going to give it to the talent or the HR team?
And it's really difficult to figure out allocating licenses and Expensify.
When they started out, they offered active user pricing.
So that a business could just say everyone has access to Expensify and we're only going to pay for folks that actually have used it and submitted an expense report in a given month.
And that just made it so much simpler for them to maybe start with a team like sales and then roll out across the company.
And it works for Expensify too, because their value proposition is that it's software that you actually want to use.
They have expense reports that really don't suck.
It saves a whole lot of time.
And so they're more comfortable kind of putting their money where their mouth is and saying, you know, we're only going to charge you based on users who are active in the product, but we think that people are actually going to want to use the product.
So we think you're going to have a pretty large number of people in your company who end up being active.
Omer (22:20.790)
Great.
So that was the second mistake, picking the wrong value metric.
And we've talked about why finding the right value metric has a number of benefits for your SaaS business.
So let's move on to the third mistake.
What is that?
Kyle Poyar (22:37.430)
The third mistake is that the business doesn't have a seamless way of landing new customers.
And so I think people instinctively know, right.
That faster growing software companies have lower payback of their customer acquisition costs or lower CAC payback.
But part of why that is is because they end up selling to customers the way the customer wants to buy and they don't force them into kind of buying everything at once.
Right.
And so when I think about how to do that, that could be through just the price point that you're offering could be through the packages that you have and having maybe it's a good, better best packaging lineup or just an entry level package for new customers.
And there is a host of ways to do this.
I think one model that I've been a huge fan of in our portfolio is a company called Logical.
And they're a legal tech business in the ediscovery space.
And when they launched, they launched as a kind of annual commitment, paid up front business, kind of typical SaaS model.
Right.
And that worked for them for the first couple of years.
But they started just having a lot of difficult conversations with prospects because prospects didn't know how much they'd need upfront.
Law firms were super hesitant to commit to an annual subscription and pay up front when you know, they don't keep a whole lot of cash on hand and they don't know how much business they're going to sell.
And it created a lot of friction in the buying process.
And so logical said, okay, we're going to introduce a no commitment pay as you go offering.
And you know, this way our customers, it makes it much easier for them to budget for it.
It's easier for them also to bill back to their clients.
They don't need to pre plan everything.
And we think that this is going to be a much better experience for our customers.
And so what's interesting is what, within just a couple of months of fully launching their pay as you go plan, they signed up more customers than they had over the entire like four year history of the business prior to that point.
And it was truly hockey stick growth.
I mean by the end of the year they had a 500% increase in customers on the back of this pay as you go offering.
And so while you know, pay as you go might not be the right strategy for a reap business, I think you should be very mindful of is the offering attractive to customers and conducive to landing.
Effectively landing new customers?
Omer (25:05.100)
Yeah, so again, just kind of give me a little bit more on that.
Like so what's some advice that, you know, some tactical things that people could maybe try to figure this out.
Kyle Poyar (25:13.900)
So there's a number of ways to try to figure it out.
I think one idea that is simple is just looking at how you're communicating pricing.
So, so a lot of companies will publish their pricing on their website, but they end up doing that in a way that is confusing for the customer.
The customer has a hard time figuring out what they want to buy.
There's a lot of drop off on that page.
They don't really know what plan is right for them.
Like there's all of these problems.
There's so many bad pricing pages out there and I think just some simple advice would be like start by clearly stating your value proposition.
So even though it's a pricing page, should never miss out on opportunity.
To tell customers, you know, what you do and, and why and how it helps them.
You can talk about the benefits of the plans and what you get in each plan more in terms of customer language than having a whole set of, like, features that people don't really know what they mean and like, jargon and checkboxes.
And I think that there's just a ton of opportunity just on the kind of the communication side of pricing.
And I've worked on pricing projects with some of our portfolio where we're looking at changing price points to drive conversion.
And then we also look at just changing the pricing page to make it more friendly for buyers.
And, you know, both can actually have about the same impact sometimes.
It's amazing to me, just the communication alone can open up the floodgates of acquisition.
Omer (26:39.780)
So that's good.
So it's not just about what your pricing is or what the value metric is, but are you.
Even if you get those right, are you screwing things up by just having a pricing page which does a really bad job and, you know, potentially confuses people or just makes the buying process harder?
Kyle Poyar (27:00.990)
Exactly.
And that's super easy to test.
I mean, you can do for those who haven't done it before.
You can install services like hotjar on the pricing page to look at how long people are spending on the page, what they're clicking on, where they spend their time, when they bounce or if they bounce, you know, what was the last thing that they saw.
You can kind of really get into the specifics of their interaction.
And then you can also do usability testing on new pricing pages.
You can share that with people in your target market and see what they would buy when they see it or if they buy anything at all.
And then it's also something that you can do some A B testing on with new designs.
Omer (27:41.620)
Great.
So that is pricing mistake number three.
You can't land new customers.
So let's move on to number four.
What's the fourth mistake you see SaaS companies make with pricing?
Kyle Poyar (27:50.860)
Well, so the flip side of landing is, of course, expanding.
Right.
Every SaaS business wants to both land and then expand.
From the investor perspective, we look at expansion as a critical factor when we're thinking about whether to invest in a company.
And specifically we're looking at net dollar retention.
We want to see signals of net negative churn in a business because that we know that's extremely predictive of growth rates and net negative churn compounds over time.
So you could actually turn off all sales and marketing spend and stop acquiring new customers, but continue to grow as a business if you have net negative churn.
And so to me, there's a lot that can go into getting net negative churn.
Right.
Like customer success can play a role, obviously like your product offering and how much product you can sell into, the customer plays a role.
But what people don't think about is pricing actually has a big role as well.
And the way I think about it is you want to have multiple axes to upsell a customer over time to take their spend from, you know, a low initial price to a much higher price, ideally in the future.
And the most common ways are through having a value metric like usage based pricing where you can expand as your customers are hooked on your product and then also packages.
So having like a good, better, best packaging strategy where you have increasing features and functionality as a customer goes from good to better to best.
I think like Salesforce is a classic example of that.
If you look at the sales, cloud, pricing or really just about any of their products, they naturally build in an upsell path as customers increase in their sophistication.
And they go from having Salesforce be just a system of record where they're updating opportunities to really their key store of information and engagement with prospects and with customers.
So I guess takeaway is make sure to have multiple expansion routes, not just one.
Omer (29:51.360)
Yeah, I mean is there, is there an example that you can kind of share?
Kyle Poyar (29:55.120)
Definitely.
And so I, I have a lot of companies that do a great job.
At this one company in particular where I love their, their usage based model is New Relic.
And so New Relic reports net dollar retention of 123%.
So really best in class net dollar retention and that's powered their growth and they have a usage based model.
And I want you to imagine like what if New Relic, which is monitoring applications, what if they charged based on the user and they sold to Instagram?
Right.
Instagram had about 10 employees when they were valued at a billion dollars.
I mean they were, they did not need to actually have a big team to scale their user count.
But their application was super important as evidenced by the valuation.
And, and so if you can charge based on more the importance of that application, how much traffic is going to it, how big the instance is on aws.
Like if you can correlate the application with the value, that's a much better way of expanding with your customers than just based on users.
And so to me, I think New Relic does a great job of that.
And with usage based pricing, you don't even need the sales team to upsell because it's just that upsell is built in naturally based on the customer's engagement with the product.
Omer (31:12.880)
Yeah, the Instagram example is a really good way of hitting home the point.
Great.
So that is pricing mistake number four.
You can expand existing customers.
And what is the fifth mistake?
Kyle Poyar (31:25.280)
So the last mistake is that your pricing is static, not dynamic.
This goes back to something we talked about earlier where I think some companies are thinking that there's some mythical price point out there and once they figure out that model, that's going to stick with them for years and years.
And the reality is pricing needs to be evolving as the company evolves.
Businesses go from the seed stage where they probably have just one product and it's pretty simple to then expansion stage where they're adding a whole lot of feature enhancements, they have new tiers, they have add ons, and the growth stage where they're attacking more customer segments, have even more products and a much bigger sales team.
So you start seeing a lot more discounting.
And then even later stage businesses that are more international or are starting to see churn from upstarts like there's so many changes that business goes through and pricing needs to evolve as the company evolves.
Omer (32:19.830)
Yeah.
And I think, you know, when I talk to early stage founders or you know, people who are super early stage trying to get to first 10, 20, 30, whatever customers, you know, we often have conversations about, well, I need to get my pricing right, I need to figure what that is.
But I think the reality is, is when you're going after the first 10, 50 customers, it doesn't really matter what your price is.
Right.
I mean at that stage it's just about having, as you said, you know, there needs to be some simple pricing.
You're not getting in the way of your customers.
As long as people are paying you something, you're kind of getting to that first stage and then beyond that as you grow and move closer towards expansion stage, then you're going to start to think more and more about how do I optimize and how do I think about value metrics.
And again, it's just a never ending process.
So I think a big takeaway for me has always been, is like don't get so hung up about finding the right pricing because you're always going to be doing that or looking for that.
Kyle Poyar (33:23.670)
Exactly.
To me it's more important to set up a process where you're able to get real feedback from your customers and you're using your customer interactions to make better decisions.
And it's just something that you're kind of proactively thinking about and monitoring over time.
Like, that's more important than coming up with a model at a whiteboard that you think is going to be perfect.
Omer (33:48.350)
So what should people be thinking about?
Like, what are some things that they should be doing on a regular basis to make sure that their pricing isn't static?
Kyle Poyar (34:00.030)
So in general, they need to be doing more pricing research and price testing.
And so pricing research is a great tactic that most companies I talk to haven't done true pricing research.
And you can actually ask questions to folks in your target market, either existing customers or just buyers in the space.
You can ask them questions around the value that they see in the product, your competitive differentiation from other products out there, the ROI they see from products like yours, or if they're not customers, or like, what's the sort of size of the problem as it faces today that you can hopefully fix for them?
And then what are their price expectations?
So what do they think is a fair price?
How much budget do they have?
You can be asking a lot of those kinds of questions in a research setting without actually needing to change pricing with a customer.
And you can get really insightful feedback that can lead to different, just very different courses of action that you take when it comes to pricing.
I remember I interviewed one customer of a portfolio company of ours that said the price is so cheap that they were concerned that the business, you know, would actually be able to stay alive for the next year.
And they were proactively asking to pay more to fund the business because they found the products so important to their workflow.
And I've seen just so many nuggets of wisdom from these interviews and pricing surveys that you just don't get unless you are talking to your customers.
Omer (35:40.000)
So regularly doing pricing research and then regularly testing the pricing as well.
How often should people test the pricing?
Kyle Poyar (35:50.160)
It depends a lot on the maturity of the business.
Right.
So in the early stages where you have maybe 10, 20 customers, you should be thinking about just about every interaction with a customer as a way to get feedback.
And even though you know you have some sort of pricing that you're working off of, you should be experimenting regularly to make sure that that's right, because it's a lot easier to test and experiment in the early stages compared to once the business is maybe 10 times the size and you have customers that have rooted expectations or the market has rooted expectations.
So early stages, you should be doing it regularly, I would say for expansion stage or later stage businesses, you definitely have an opportunity to do testing with new products, but otherwise with existing products, I'd probably do a couple of price tests per year, so maybe one every six months.
You don't want to make it disruptive for your sales team or your customers.
But there's so many aspects when you look at like packages, value metrics, the price points themselves, what to do with new features, how to price for different market segments or different geographies.
Like, there's a lot of different variables in the mix that you can be testing.
Omer (37:04.340)
Yeah, I think it's funny, I can't remember the company and probably should mention it anyway, but maybe sometimes if you're doing like tests too often and kind of running these split tests, I kind of went through this funny situation where somebody on a Facebook group was talking about a product and saying, yeah, you should get this.
It's like, you know, you can get started for this much.
And somebody was saying, well, wait a minute, I'm seeing this price when I go there.
And obviously that's, you know, inevitable, but it's going to happen from time to time.
But I thought it was just like funny how sometimes how people learn about pricing is not necessarily by going to the pricing page.
Kyle Poyar (37:41.360)
It's true.
Although it's.
I find it always interesting that people don't really talk about a business's pricing as much as I'd expect.
I know some companies like ahead of a user conference.
One of their concerns is are people going to start telling everyone else about what they're paying and are they going to find out I offered customer A a bigger discount than customer B and is that going to come back to bite me?
In most, the vast majority of cases, I actually should say they don't get into it.
Right.
They know that their scenario is not apples to apples what the other company's scenario is.
So I think for most companies there's.
There's less transparency in the market than you think, but you certainly need to be mindful of it and you don't want to create a bad customer bad prospect experience because of your pricing.
Omer (38:34.120)
Yeah, good point.
Okay, great.
So those were the five mistakes that we talked about today.
So number one was that you're too cheap.
Number two is that you've picked the wrong value metric.
Number three, you can't land new customers.
The fourth mistake was you can't expand existing customers.
And number five was your pricing is static.
Great, that's really been helpful.
Thank you, Kyle.
Kyle Poyar (39:05.400)
Definitely.
My goal is hopefully to, by taking some of these mistakes and talking about them.
We can help some of the early stage founders just better understand their business and ask the right questions around their practices.
And I'm sure many folks have experienced these and corrected these mistakes, but hopefully it gave some advice or some tests to try for those who haven't thought about it.
Omer (39:29.560)
Yeah, no, I think it's definitely really great information there.
All right, so we're going to jump into the lightning round.
I'm going to ask you seven questions.
Just try to answer them as quickly as you can.
Ready?
Kyle Poyar (39:37.550)
Sounds great.
Omer (39:38.190)
Okay.
What's the best piece of business advice you've ever received?
Kyle Poyar (39:41.870)
If you're in a meeting, you need to contribute, you're in that meeting for a reason.
Don't be silent.
Omer (39:48.190)
What book would you recommend to our audience and why?
Kyle Poyar (39:50.670)
Thinking Fast and Slow.
It's about behavioral economics.
I found it just super fascinating to think about how people make decisions, which applies even in business contexts.
Omer (40:01.160)
What's one attribute or characteristic in your mind of a successful entrepreneur?
Kyle Poyar (40:05.720)
Openness to feedback and to new ideas.
I mean, you want to be passionate about and have a ton of conviction for what you're building but can't be stuck in the mud.
Always have to be sort of ready to learn from peers and really seek out the advice, ideally of others.
And you can accelerate growth growth by bringing in new ideas faster.
Omer (40:26.920)
What's your favorite personal productivity tool or habit?
Kyle Poyar (40:30.760)
Personally, I am very into Trello.
I use it to manage my all of my tasks for the upcoming week.
I find it invaluable, although I haven't paid yet, so they have some pricing opportunities there and a second one just to give a quick plug is Calendly.
I use that for meeting scheduling and it saves me so much back and forth in emails.
Omer (40:53.520)
Yeah, we mentioned we were talking earlier.
I'm going to be interviewing Tope soon, so thanks for making the introduction there.
I'm looking forward to talking to him about Calendly.
All right, so what's a new or crazy business idea you'd love to pursue if you had the time?
Kyle Poyar (41:05.760)
You know, I haven't given too much thought to this, but I've always been of a belief that there must be a way to productize something around pricing and turn it into software.
So I don't have an immediate business idea, but I just think there's so much opportunity there.
Omer (41:23.300)
What's an interesting or fun fact about you that most people don't know so
Kyle Poyar (41:27.340)
people might not realize?
I started out in environmental studies actually, and I even wrote a journal article about urban climate change adaptation, so I've definitely come a long way from that in my career.
Omer (41:44.900)
Wow.
And finally, what is one of your most important passions outside of your work?
Kyle Poyar (41:50.280)
Cooking.
Anything Mediterranean.
I love, love, love, love Mediterranean and Middle Eastern cooking.
And once I read the cookbook Jerusalem, I got hooked.
Omer (42:01.320)
Nice.
Cool.
Carl, thank you for joining me today.
Thanks for sharing your many years of experience around pricing and all the work that you've been doing with your portfolio of companies.
Now if people want to get more information about OpenView, they can go to Open View partners.com and if people want to get in touch with you, what's the best way for them to do that?
Kyle Poyar (42:25.590)
So you can definitely follow me on Twitter.
I'm just oyerc so P O Y a R K or reach out on LinkedIn.
Omer (42:34.270)
Great.
And I will include links to those in the show notes.
Great.
Thank you for joining me, Carl.
It's been a pleasure and I wish you all the best.
Kyle Poyar (42:42.270)
Great.
Thanks for having me.
Omer (42:43.470)
Cheers.
