How Much?

This week no mention of AI, just the importance of good old fashioned pricing.

In addition to my day job of hawking quality marketing advice to tech companies, I’ve been doing some 1:1 mentoring/coaching for folks who are either starting their journey as freelance consultants/fractionals or early-stage founders.

As I've mentioned before in this blog/newsletter - When you hang up your own shingle, you are now a B2B product, so whoever I talk to, whether it’s a company leader or a sole operator, the fundamentals are important - identifying your ICP, your buyer, and, of course, defining your product and being disciplined in all of this when the temptation drags you to say yes to all the wrong things.

But there is a critical question that does not always get the attention it deserves when defining this foundational strategy, whether it’s a 1-person freelancer, a startup or an established firm, and it is a hard one:

How much does it cost?

Or more specifically - how much should it cost?

Or really - how much does it need to cost?

I’d love to avoid the topic of filthy lucre; I am not keen on pricing my own work.

But love it or loathe it, it’s something to be faced early, as it is connected with all the foundational work you do, how you execute your plan, architect your product (regardless of whether your product is software or services), and what your sales and marketing motion needs to look like.

I talked to two early-stage tech companies this week, both discussing different challenges in sales and marketing execution that appear to point to ICP and buyer, but really the critical business decision for them is price.

One was pondering that, however successful their baby was, would it deliver the revenue they needed personally, or were they better off pursuing more lucrative options elsewhere and stepping away from the sunk cost of the time bringing this thing to market over the last year.

This was framed as a sales and marketing challenge, but without knowing the market size and, most importantly, the price the market would be prepared to pay, it’s not a question you can answer with just more sales and marketing.

The other had decided early that their product was something the user could put on their credit card, rather than pursuing corporate sales to a more senior buyer persona.

A decision like that, to be $99/month, changes not just the sales and marketing motion to be PLG (product-led growth), which requires scale in both marketing and sales execution, but you also need to really understand if the category size, the addressable market within that category, and the slice of that you can reach and convert, is sufficient to reach your goals.

Plus, early on you need to make decisions about how the product is provisioned, onboarded, and adopted with an incredibly low human touch and how much friction there is in all of this, for you and the user. The moment that a user asks a support question, you could be losing money.

So maybe $99 is the right price, reflects the value or what your buyer will be prepared to pay, but how many people do you need to pay that and how do you reach them?

Similarly, I was chatting with a small IT services company that shared with me that they were 100% utilized and working weekends, so there is clearly demand for their product (their services) but the numbers did not add up; they were not getting the revenue they needed to sustain the business.

So, we quickly diagnosed that this was not a sales and marketing problem but a pricing and account management issue. They were not charging enough.

Another wrinkle on this topic is the comment I also heard in two of these conversations this week: “we’ve never had any pushback on price”.

This typically signals the price is too low; they’ve pressed the sales easy button rather than the challenging business of actually selling on value; it’s positioned as easy and cheap.

And this isn’t about inexperienced entrepreneurs and freelancers forced to become sellers. All the best sellers I’ve worked with would love for the friction of price to disappear; they want to discount, get numbers on the board, and get traction in the account.

And this can be a great strategy when done purposefully, but it could also mean you should be cautious about the pricing advice you might get from sales; you need to do a bit of market research and analysis of the deals you’ve won or lost, and speak to those prospects.

And, a final twist on this price thing: perception.

Another small services company I was talking to, which has all the credibility, a slick corporate website, and a leader who writes books and is a keynote speaker, was wondering whether their professional presentation actually turned buyers off, as they look expensive.

Perceived price is important, now that B2B buyers are all doing market research themselves before they identify themselves to you or raise their hands.

It’s something that needs to be addressed in your brand messaging - and this isn’t simply about putting pricing on your website, although that would obviously help, but rather whether you look like Louis Vuitton or Walmart.

In B2C consumer products, price is a critical decision in product development and marketing, and in B2B we need to recognize that this question is a driver of much of what we do:

How much?