​Pricing is a skill.

It's also a number. A clever model. A structure of the packaging of the product. A contract framework. A SOP for how Sales can discount.

​But all of those things exist in a certain state. They are what they are. Right now. And they create a certain dynamic in how your performs in the market: it determines sales cycles, ACV, churn, expansion - all of it is heavily affected by churn.

​The skill is to use all of those things deliberately to drive a certain outcome.

​Level 1 is to just create one outcome:

• Increase ACV
  = Raise prices or remove cheaper product options.

​Level 2 is to create two closely related outcomes:

• Increase ACV + Keeping conversion rate stable
  = Raise prices... but you probably also need to repackage to position stronger or give more value.
  Or you need to throw in Guarantees or Bonuses in the Sales SOP.

​Level 3 is to create two seemingly unrelated outcomes:

• Increase ACV + Reduce renewal friction
  = You'd need to increase ACV using some of the previous methods, but also need to understand the entire customer journey and the expectations you've given them. You'd probably need to restructure both the contract framework, and maybe also how licensing and discounting works. And then get Sales (and even Marketing) to execute differently upstream... so that downstream 2 years later at renewal you'll see a change.

​The problem with Level 1 is that you get Level 2 problems: ACV goes up, but conversion goes down.

​The problem with Level 2 is that you get Level 3 problems: your solution works locally, but then suddenly something else blows up at the other end of the model.

​The problem with Level 3 is that you can't do it until you have a lot of scars from doing Level 1 and Level 2.

​It's just how pricing works.

​And to be fair: it's how a lot of business works. Solving simple problems (e.g. start selling and get to a few million in revenue) gives us complex problems (recruiting better people).

​The problem with pricing is that it's such a rare skill to practice. You're considered a veteran operator if you've done it 2 times in your career.

​

Here is how you do it:

​Here is the deadpan checklist for best practices to learn pricing:

• Just start.
• Read everything you can.
• Speak to your customers.
• Seek out other people who have done pricing (similar ACV is best).
• Speak to other people in your org - but don't take them too seriously. Break a few eggs.
• To begin: focus on small Lvl 1 wins and do them ultra fast (2 weeks max)
• Observe how Level 2 and 3 problems occur.
• Get bolder. But don't slow down.

​

As promised: a point about pricing every Monday.
​
PS: If you want to learn how we do pricing at WillingnessToPay you can join our 6 week online Master Class Monetization Mastery.

​Spaces are limited and it kicks off Nov 6th.

​If you have questions you can just reply to this email for questions or sign up for the class here.

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