Interview with Mark Stiving
8:01PM Jun 14, 2019
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Mike a chrysalis were emerging from the economy of the Industrial Revolution and economy consigned to unlimited by the Earth's physical resources into the economy in mind, in which there are no bounds on human imagination. And the freedom to create is the most precious, natural resource.
Welcome to the soul of enterprise business in the knowledge economy, sponsored by Sage energizing Business Builders around the world to the imagination of our people, the power of technology. I'm Ron Baker, along with my good friend and various agents, attitude colleague and co host Ed kless. And on today's show, folks, we are interview with Chief pricing educator marks diving. How's it going, Ed?
It's going great, Ron, how are you?
I am great. How was your week?
My week was interesting. I was at the AI CPA engage show, as you know.
And you saw Simon Sinek.
I did see Simon Sinek. Well, you know, from from 200 feet across the room. Right? Big thing. But so you'd be very pleased. This was a this is a direct quote, ready. Innovation is not efficient.
The insight of the century?
That's right. So yeah, but let's get let's get some mark. Really, we're looking forward to talk with Mark. We You and I, we I met him just recently. But you go back quite a ways with him. No, yeah, yeah, we
were just trying to figure that out a little before we went on air. I think I met him back in 2009. Or maybe even before that, I don't remember. But Mark Stephens passion is teaching the power of pricing. So that's something we all have in common. evangelizers pricing at major conferences is conducted and has conducted over 400 days of corporate training around the globe. He maintains that net promoter score on those workshops of 81, which is higher than apples, Mark also writes about pricing, his book impact pricing, your blueprint for driving profits is highly readable. I've got a copy sitting here in front of me. So we'll talk a little bit about that. Really excited Mark staving Welcome to the soul of enterprise.
Thanks, Ron and Ed, love being here.
It's great to have you finally, we've been talking about this for a while. And I know you've listened to prior pricing shows we've done and always have comments. And I don't know, maybe even areas where we all disagree. So I'm hoping we can have a robust conversation. But tell us a little bit about yourself, Mark, how'd you how'd you get into the strange pricing game? And what were you doing before then?
It's that we have to go back to when I was a kid. And we'll probably end up talking about price endings at some point in time. But I gotta say that when I was probably 1012 years old, I was at grocery stores, seeing how prices would always end to nine. And I couldn't figure that out. The media companies think we're that stupid that we can't figure out what the price really is. and fast forward a whole bunch of years, I find myself in a doctoral program at UC Berkeley. I'm playing with tuna and yogurt data. And I have a chance to say I wonder if this nine thing really works. And it does. It's amazing.
We can talk about that later. But But I believe a professor dissertation.
I'm Matt right. You're right.
Absolutely did. Yeah. I like to say at one point in time, I was probably the world's expert in price endings.
Wow. That's awesome. No, that's awesome. Good. Well, I've never heard somebody who played price or the age of 10. I mean, I knew I wanted to be a CPA at 15. That was bad enough. But why to go back to 10 years old.
Amazing. I'm not sure I wanted to be a presser. But I was so curious. And, and I think the thing that's so fascinating about pricing to me is it's it's a number, it's mathematical. And yet there's all this psychological stuff going on. It's it's hard to figure it all out. It is,
isn't it? I mean, when I first got into it, I remember because, you know, I've got a traditional economics background. And I thought, well, this is just computational. It's good math. But then you start to get into it. And you realize there's there's this is all psychology.
It absolutely is, especially when you shift to value based pricing and stead of a cost plus pricing. Hmm.
Yep. So in the book impact pricing, which you you I read back in 2011, which I think was the year came out, I think you'd send me a copy of it, when it was published. And one of the things that you write in there, which I really liked, was when you say pricing strategy follows corporate strategy. And I think a lot of people don't understand that, that you have to have a strategy and a purpose and a position first. And then pricing follows all that. How do you find that to be received in the marketplace? When you do your workshops? Is that understood? Or do you have to kind of make that point pretty forcefully?
You know, we teach so much in the workshop, that I make the point and I move on? And I don't I don't get much pushback on it. So everybody's nodding their head. Yeah, I get it. But I think that if I belabor the point longer, I would point out to everybody, they don't get it. And the reason is, you know, I don't want to pick on anybody here. But the reason is, companies just tend not to have strategies. They don't know what problems their product solves. They don't know what market segments they serve, how could they possibly know the value of their products? It's amazes me,
right now, that's a really good point that we've been spending more time on strategy, because it's so important and a precursor to the pricing. You also wrote something and we can talk about the three pricing strategies. I think we did a show and you gave us some feedback on, you know, skin, neutral and penetration. But what about you, you wrote that pricing is not a sustainable competitive advantage? Except if you're a low price leader, such as Walmart. Can you explain that?
Sure. But by the way, you guys are allowed to disagree with me at any point in time, I love having conversations and figuring out what makes sense. But when I pricing is not a sustainable competitive advantage, I'm essentially saying you can't pick a price, and then compete on that price, you have to have something else and the price is there to capture your value. The only time price is driving the strategy is if you're going to say, Look, I'm going to be the low price leader. And the strategy has to be, we're going to drive costs out of the system so that we can maintain that really low price. If you look at Walmart, their entire business, the people who go to work every day, not at the stores, but at headquarters, they're trying to figure out how do we get more cost out of the distribution channel. Because if we don't, someone's going to come along and beat us in price. And then they'll lose their positioning.
Right. And Mark you This reminds me as you were talking about that, we did an interview with Dr. Jules garden from the UK. And he brought up this massive survey, you're probably familiar with that I forget the name, but it was in H. br, I think it was researchers from Deloitte, they undertook this massive study. And they basically found that there's only room for one or two low price leaders in kind of each sector. And what's been your, what's been your experience with the competitor using prices of competitive advantage, such as Walmart or Southwest Airlines? That's a very, very difficult strategy, isn't it?
It's, it's ridiculously hard. It isn't a fun place to play. And those are not the companies that would hire you or me. Right? Those are the companies that are always focused on operations, how do we keep costs down, and they're going to do a cost plus, maybe they'll modify it a little bit, because they can get more value on some pieces. But to them, it's really driving down costs. So they don't need us to understand value.
Right? Right. And when when you consult with companies, when you look at that scheme, neutral penetration, where do you usually land? Or what do you usually record? Many people? I know, it varies by company and circumstance. But where's the bulk of it usually, and
if I could choose, it would almost always be skimming. Right? Because this is where we're, you know, when I talked to companies, what we're trying to do is figure out how do we create more value in the marketplace, and we create value, we want to capture that value with higher prices, I would always be trying to figure out how do I get to the higher end. Now we can't all be Rolex is or BMW user things. But we can always be at the higher end of our Toyota marketplace. So I think it makes a lot of sense for us to be more on the higher end side. However, I also think that the skin neutral penetration changes dramatically based on where you are in the product life cycle. As a general rule, when a product first comes out, they're probably more on the penetration side. Because we're trying to gain market share early on is a market is maturing. The market share battle is really important. Because once a market matures, it's really hard to move market share. And once you get to that level of maturity, then you should be really thinking about how do I either I'm certainly had a good a new neutral pricing, if not figuring out how to skin the marketplace at that point in time.
Right. You know, one of the things that and I love to talk about is kind of a fool's gold and businesses this just mindless pursuit of market share at almost all costs. Do you find that to be a constant battle with some executives that just think that growth for the sake of growth is the way to go?
I'm lucky that I don't see that. But I think it's because everybody who knows me knows me as pricing. And you don't bring me in to do pricing to get to gain market share. You do me in you bring me into game pricing for margin for profitability.
Right, right. There's that what's that read hold in line I love innovate for growth and price for profit. Yes, yes. Right. Because that's the that, you know, the default, default purpose of marketing is to increase profit not to increase market share, which I don't think is that well understood. Still, to this day, we see so many companies, even smaller businesses pursue market share, and almost all costs.
Well, back in the late 90s, remember, when everybody was going for eyeballs and eyeballs was what was going to drive valuation. And there's still some of that mentality that goes on.
You can kind of even see that with Uber and Lyft. To some extent, I mean, there's piling loss after loss. And because they think there's some winner take all market, but there really isn't in that space. There's no reason that one of those two is going to beat the other, though, they're both going to come out ahead. So why they're not.
What's the word? Not colluding?
Plugging less aggressively.
What's been your experience with helping companies avoid price wars?
That's a really interesting question I don't see price for is that often. So I can't say that I have helped companies avoid them. Might one of my favorite quotes or statistics comes from Simon cooter partners. It was a study they did, I think was in 2012. But it was, I'm just going to make the numbers up, but they're pretty close to accurate, was something like 56% of companies thought they were in a price war. And 88% of those companies said the other guy started it.
Right. It's like every law firm I've ever been in said that all the other lawyers are a pain in the butt. But I've never met the pain in the lawyer.
And so what I usually do when I'm when I'm talking to companies, is I make sure they realize, look, if you see aggressive pricing from your competition, it doesn't mean that they're in a price war with you. It's they're probably doing the exact same thing you're doing. Remember how you gave a big discount? Because you really needed that deal? Will put yourself in your competitors shoes, what did they just see you? Do? They just saw you compete on price? Right. Right. And and just I know, we've only got one minute left, Mark. But just real quick, do you think the reduction in the number of price wars that we do see, is largely the result of pricing being taken more seriously and moved into the C suite of companies? Absolutely. I think that companies are starting to higher pricing people, executives are starting to understand the pricing is such a valuable lever to them. And yet, as you watch these companies, pricing is so hard, because it touches every single departments and a company. everybody cares a lot. And and it's hard to give the control of pricing to one person.
Right? And I'm sure we'll talk more about that. Because I find that whole aspect very interesting. Should pricing be centralized or more decentralized. And I know that's an ongoing debate. And we'll get into that more. But in the meantime, folks, I'd like to remind you if you want to contact Ed or myself, send an email to ask tsp at various age. com. Also check out our show notes at the soul of enterprise. com. And now we want to hear from our sponsors.
All right. Good stuff, Mark.
Good. Good. You are gonna ask me about willing which one because I think that's important. Your audience?
Yes. Either Ed will or I will.
Yeah, I'll let you take that. I want to I want to talk price endings. Mark.
How are your math skills? Ed? Pretty good. Okay, good. Do you mind if I do Mind if I test them on the air? Uh,
nope. Got the calculator right here. We're good.
No, no, no, no, no, no.
I know what he's gonna do the Ed.
No, yeah, we could. I'm happy to do that. Um, yeah, because there's a cut. There's a couple things that price endings, couple of questions that price endings leads to that I want to want to get to, as I was, I was preparing for this they came up so I've got a little intro story to price ending similar to yours with its I was much older. I wasn't 10. But it's a similar similar story.
okay, good. Yeah. No, you can you can absolutely test me. That's totally fine. Nice.
Yeah. Wow. 10 years old. That's incredible. Great story. Yeah. Yeah.
And then let's see, we did have one question. And from a listener that came in on our ass tsp hashtag. I'm back. If I run random, get that. I'll get it till the last segment,
Baker and ed class. To find out more about our show, visit us on the web at the soul of enterprise.com. You can also chat with us on Twitter using hashtag ask tsp. Now back to the soul of enterprise.
We're talking today with pricing educator and Mark styling. And we were just one of the things that mark did his dissertation on back in in college I was it was at your with PhD, Mark. It was my PhD. PhD. Okay, awesome. So should we should call you doctor I guess, huh?
It's okay. So
all right. It was price endings. And let me tell a quick story about price endings in the year, it's not as good as your 10 year old story. So I'm not trying to what up you but my wife and I went out to dinner. I don't know, maybe 10 years ago. And this is a after I had met Baker, and you know, was fascinated by this whole pricing thing. And I'm, I'm looking at this menu. And I'm noticing that the appetizers are priced. And they're all like, you know, 95 it's like 995, right? But the entrees are flat price. It's like 30 with a line. Right? And I'm looking at this and I'm studying them at the venue as like, so I turned to my wife and I say I don't get this I don't understand, like what's going on here and she looks at me just Can we just have dinner?
Just eat Is it okay, if
we to ruin a good analytical moments?
So, so as I know, you would probably be as fascinated with that as I am right is like, okay, so I'll commiserate with you. We can do marital therapy together. There we go. what's what's going on with this price? Anything? Because like your 10 year old self, I always thought it was absolute bs still do. So tell. Tell me why I'm wrong.
Okay, well, first off, the research tells us that we're wrong.
But, but but let me start with the basics. And that is that we see nine prices that into nine, as prices that are good deals are on sale. And we actually see prices that ended zero, as prices that are high quality, or let's just say high quality, we'll leave it at that. Now, there's a lot of research that shows that we have this, this thing in our head that says that's the case. Now there's no way we were born with that that's not wired into our brains that had to be learned somehow. The question then becomes, well, how did we learn that? And how did that make sense? But what ended up happening for me was I had access to that does tuna and yogurt and, and was everyone catch up data. And it was pretty awesome. Because I just put, I just put a single variable in that said, Hey, if it ends in nine, we're going to count it as a one. And it turns out this was a significant variable. And and that means that people were using the nine to help them make a decision. But then I went back and I started testing a whole bunch of different models to say, what is really going on in the way people make decisions. And and the reason that this thing works, is we because we are poor some tractors.
Now, I'm gonna ask you, I'm going to test you a little bit Ed on the air. If you don't mind.
I'll give it my best. I'll give it my day.
Let's start with this one. What's 100 minus 99? One? Okay, that was pretty slow. I gotta say, I'm trying
to be thoughtful. You I know you're trying to trip me up here. So
what's, what's 78? Minus 53?
See, this is ok. 78 minus 50? Three 515 23. That's okay. I was 25. But that's okay.
I don't really care that you get the answer. Right. Okay. What's 82? Minus 57?
Oh, God, now I have to carry the one. Okay, stop.
Don't worry about it.
Here's what's going on. Yeah, that's what I'm asking you to compare two products, one of them cost 78 cents, the other ones 53 cents. You're now saying to yourself, well, which 1am? I going to go buy? Oh, I'm not going to do that math. That's ridiculous. Why would I ever do that? That looks like it's about a 20 cent difference. Use the left hand digits, right. And then I gave you 82 and 57. Same thing looks like 30 cent difference. Turns out both were 25 cents. Right? The exact same difference, but one difference looks much bigger than the other difference. We use the left hand digit only when it's different. And when it's the same, we shift over and decide we're going to use the right hand digits. So if you know that everybody's going to ignore your right hand digits, why wouldn't you always make it in mind? Okay.
So that's that's the thought process behind it. But so and this is this is where I was going with this, because I've seen some some recent research that that that is true. This and this is a very big problem in the world today, as we have we hear big numbers coming out of Washington, right, is that people perceive 999 million as more than 1 billion. Right?
Yes, okay. No,
sort of go. I'm going the other way on you now. Right?
You are. And I and, by the way, I haven't seen the research on this. But I've done a lot of looking into the psychological aspects of pricing. fascinating topic as Yes. Yeah. And, and you know, who does a lot of research on that, by the way, or the restaurant tours? test? Yes, they test price endings and prices all the time to figure out what goes on. And it turns out when you go into a nice restaurant, they'll just write 42. There's no dot 00. It's just 42. And it looks less expensive and 42 dot 00. And they do these tests that if you write a number that has a comma, if I write 1000, with a comma, and without a comma, with a comma looks bigger, by write it with dot 00, it looks bigger, even though it's the exact same number. And and these are all things that are going on inside our brains in a lot of ways. It's similar to the price endings, because you would say price endings is a psychological aspect as well. Hmm.
Yeah. So because one of the things I noticed is I do remember when Apple Watch first came out there was that what was called the Apple Watch edition. Right? And Apple Apple's a great example of why what drove me crazy, because if you're trying to signal quality, you would say that Apple would be the company that would signal quality, yet their their products always ended. 99. Right. At least at you know, hundreds of dollars, I think they actually have $499, even. And I think that's how they do it. So they're not $499 and 99 cents there for 99. Even. But the Apple Watch edition, which is no longer available, by the way I just checked, it is not available, it took it off was $17,000.
Right, that was the right thing to do. Now, mind you all their products should probably be priced.
So let me tell you why 00 works for a second if I may, because this is pretty cool as well. Remember, I was asking to do some traction. And I asked you about 100 minus 99. You got it instantly. Yeah. As quick as you can. 400 minus 299.
Oh, wow. Okay. 101.
Okay, so although that was right, it took a little while. Yeah. What if you just looked at that and said for two, that's about half off? That's a pretty good deal, right? What if that was a $400? original price on sale for 299? I say I were saying wow, look at the size of that deal. way different than 399 on sale for 299. Okay, and, and that's one reason that it makes a lot of sense for us to set our list prices, our original prices at high end prices, because then our just pillows look
like it's a bigger discount. Mm hmm.
Okay, got it. So, so the other one I had for you on this. And I don't know if you notice this run and I did a show, you know, I want to say three months ago is probably six months ago. They're all stuff. We were talking about this they're all starting to run together. I can't remember exactly. But it was on on pricing lessons from Starbucks. It was a it was an article that we had come across. I don't know if you remember this, one of the stories that I told during that show, and I just want to get your impression on because I'd still a mystery is Starbucks has introduced probably now three years ago, four years ago, a new drink called a flat white, which is comes over from Australia. It's actually an originally an Australian concoction. It's probably closest to a cappuccino. Right? But it's called a flat white. What was interesting about this mark is that it it when Starbucks put it on the menu, they only put the price of the tall on the menu and did not have a price for the grand day or the or the venti. Like it was not there. Every other product had those things in there and you could order a Grandee or a venti because I tried it out another I'm standing there at Starbucks go and fascinating. And I, you could order it, and they would make it for you. And they and it was commiserate with whatever the other drinks were right. So it would it would go up in price the same, roughly the same amount, but just is not on the menu. And to this day, it's still not on the menu. So I actually asked the person who is at the Starbucks who contracted her the regional manager, right? Who got back to me in it and asked me this question. I said, Hey, what's going on here? She said, I don't know. Let me check with corporate. Two weeks later, I get a call this you're gonna love this. That's proprietary marketing information.
So what so I know I just explained this to you. Give me your wild guess what do you think might even be going on with this?
Okay, first thing I wanted to say was? I am willing to say I don't know. Is that fair?
Anyway, that's the I'll take a wild guess.
My wild guests would have been actually have a couple. But my first one was maybe they were just test marketing something. And the reason they're test marketing is they probably get better margin on selling the flat. I'm sorry, the the tall than they do on selling the other ones. Now maybe I don't know that. Yeah. And so maybe they're saying I want more people to go towards the the tall. And now that I said that? I don't even like that answer.
So I thought we would have a robust discussion here. I got you disagreeing with yourself already. So yes,
I have no good guesses. What's your good? Yes,
I you know, I have gone through about just about any kind of number of different iterations on it. And they actually they did introduce subsequent in another drink and did the same thing. I forget what it was called. But that one's no longer available. But the flat white still is. My mind, I guess was is that they just they that there was they had something to do with the concoction of the drink. And that it didn't taste quite right, according to their specifications at the Grundy and venti level. Hmm. Right. And that they from a quality standpoint, they wanted to steer people to just the tall because that's where they felt it. It tastes best from a from a recipe standpoint. So that was that was one.
That's a very generous nice guess.
Yeah. Awesome. Nice guest but and then the other. The other one was, I think I thought that they were getting to the point where they might be introducing alcoholic beverages. And I don't know if you've seen this there are now these high end Starbucks things. And I thought it had it might have something to do with that, that that when they began to introduce alcoholic drinks, they didn't think that the tall Conde Vendee was certainly a great strategy.
So we're teaching them.
Yeah, yeah. Yeah. So we're getting it, we're getting him used to it. So that's that that was the thought process. But anyway, last thoughts on that we gotta wrap this segment up. But I thought that was a fascinating thing. And I would figure you would be the guy to have an opinion on that. So
I tell you what, I'm going to think about it during break. And if I come up with a better answer, I'll share it. But I, Boy, that's just that's a tough one.
It's weird, right? Okay. Well, I'm glad I'm glad you and I have this in common that we agree that this is a weird thing. All right. Right now want to remind you can get ahold of Ron or me by sending an email to ask tsp at various age calm, of course, the website with show notes, and previous to upcoming shows, is the soul of enterprise. And please do pay attention to our calendar, which is out there we can see where Ron or myself or both of us together are going to be appearing. But right now a word from our sponsor.
All right. Yeah, so Yeah, I know. It's fascinating, isn't it? Yeah.
Is it more expensive than a latte or something? Nope.
Nope. A price. It's it's it is of the drinks. It is one of the most expensive drinks. But it's not it's not significantly more than any of the others.
And I would say it's more like a latte than a cappuccino.
Yeah. Because I get them all the time when I'm in Australia. And as more of a latte.
It's more of a lot.
Yeah, I tell it somebody Let me taste a cold brew the other day. That was really good. I haven't ordered one but it's it's a nitrogen infused coffee, cold coffee.
Well, that that's because you know that the science behind that is nitrogen makes everything taste better. No, that's that's the that's an absolute fact, I saw when I saw Yeah, I went I saw Alton Brown, live this. And one of the things that he does is he makes this he has this this wheel of fortune type thing, where you spin two different bizarre ingredients. And then he Mozart makes it a multiplication and then infuses it with nitrogen and a cocktail.
You are tuned into the soul of enterprise with Ron Baker and ed class. To find out more about our show, visit us on the web at the soul of enterprise.com. You can also chat with us on Twitter using hashtag ask t. So we know back to the soul of enterprise.
Welcome back, everybody. We're talking with marks diving author of impact pricing. And, Mark, I have a theory about the Starbucks flat white pricing. I think they're just trying to you know what level nine pricing nerds like us geek out, talk about that more. So they get publicity, but because I can't figure it out otherwise. But if you come up with something, let us know that. That's awesome.
In your You talk a lot about I've seen you speak and I knew your book as well. You talk about customers make two buying decisions. Explain that for us.
Oh, so I think this is the single most fundamental concept and pricing. And and most people don't know it. And that is our buyers tend to make two decisions, the first decision they make is will I buy something in the product category. And then after they said yesterday that then they go on to make a which one decision. Now the reason I find this as such a fundamental concept is most pricing people assume our buyers are making it which one decision. But there are a lot of times when people are only making a willing decision. And what's fascinating is the people are much, much less price sensitive, when they're making a will I disagree. There's tons of examples of this, but probably the easiest one is popcorn at the movie theater. Right? You walk into the movie theater and and you look up at the board and say Am I going to take out a mortgage today or not to have popcorn. And, and that's because you don't get to go buy popcorn somewhere else. You can only buy it in the theater once you're there. And so they charge you really high prices for it. We as companies can build products, that that are very unique that people only see our products, I would put the Apple iPhone there. If you've got an Apple iPhone today, you're probably thinking, am I going to upgrade to the new Apple iPhone or not? But you're not thinking, am I going to switch to Android? Now a few people are Don't get me wrong. But most of us we're just going to buy the next Apple one or we'll skip a generation or two. But eventually we're going to go buy another apple. And that means we're just making a will I decision we're choosing a going to buy an Apple product or not. And this is one of the reasons why Apple gets away with charging such high prices. Because we all just decide we're going to buy from them or not buy from them. It's not a choice. And then there are times where we can have situational. Will eyes will I decisions. And think of these as what's gas run and you live in you live in Northern California, Ron, so what is that like? 20 bucks a gallon at this point? Yeah, roughly,
it's getting like four for 20 or something
for 20. So So you go down the street and you see one station for 20. You see another station for $8. There's no chance you're buying gas at the $8 station. But then you start driving north and you've driven a couple hundred miles and you see the sign that says last gas 75 miles, you look down at your tank and it says Oh, it's almost empty. You pull off and gas is selling for eight bucks. You're buying it now. You're making a will I decision not a which one decision? I think we as product people should always understand what's the decision our buyers making?
Right now? That's a great, I love that distinction. And since will i is less price sensitive than Which one? What factors can contribute to to a will I decision? You mentioned the Apple iPhone. It's obviously innovation design brand. What are some of the other things that you can do?
Yeah, if we were going to categorize the will like products for a second, we have things like monopolies. Obviously, you can only buy electricity from the one Electric Company in most places. You've got the radical innovations. So the very first iPod was certainly fit there. If you've got huge differentiation, so people would only look at your product, they're not really comparing you to somebody else. I would think of something like LinkedIn for recruiters there. We talked about high switching costs ready. So I would put the iPhone with the high switching costs, argument. And then and then one that almost every company has the ability to do our options or add ons. Right. So you've hired that general contractor to come work on your kitchen, and he gave you an aggressive quote, and then you decide you wanted a Korean countertop instead of a granite countertop. Guess what? That countertop is really expensive? Because suddenly it's a will I you're not going to go out and rebuild it to multiple different general contractors.
Right. So a change request change orders situation would be more of a will I decision?
Absolutely. Because they're only going to come to you.
Right? That's a great point. You know, you mentioned given choices to customers. And I just went through a bidding process to paint my house externally. Just an incredibly laborious process, by the way, but got these bids. And not one of them you guys, not one of them offered options. That was one price taker to leave it. And I couldn't believe it. So what is your view on providing choices Mark? Would you do do three do we use for sometimes
if you ask me, if I'm going to do a bid, I will almost always tell you to go do three bids, almost always. And in the three bids. Let's say that I'm going to bid on an RFP for a second, what I'm typically going to do is I'm going to give you something that's slightly less than what you asked for, but a really aggressive price. And then I'm going to give you pretty much what you asked for maybe slightly more than that, at what I think is probably the best price the price that you're going to pay me. And then I'm going to offer you an offer that's got amazing stuff in it at a ridiculously high price. And and that last bit does something wonderful for us. It shows our client, we have all this capability. You could grow up to this if you wanted to someday. And you could trust us because we actually know what we're doing. The low end product says if you're going to buy just on price, we're going to win.
Right? Right. Yeah, no, I'm just I'm flummoxed by these four painting companies that only gave me one price, take it or leave it. I think that's a serious, such a serious mistake. Because it just makes it a binary decision for each one. And just it's not good pricing at all.
Yeah, I don't know about you, but I'm not sure it's a take it or leave that price. But I don't I'm not comfortable negotiating with people that are doing work for me. Not that I'm afraid to negotiate. I want them to do good work for me.
Yeah, for sure. Yeah. Especially when they're going to be hanging out in your house for you know, a couple weeks or whatever. It's, you know, you're going to get it really you're going to have a relationship with these people. Yeah, that's great. I really liked that. Which one and? Well, I really cool distinction.
Can I tie it back to who I think is mostly your audience? let's just let's just say it's accountant groups are professionals. Okay. I often hear you guys talk about, hey, we're going to go we're going to go quoted deal. We're going to quote based on value. And I think in your mind, and correct me if I'm wrong. But I think in your mind, you're always assuming it's a will I decision, huh? Yes. So you're trying to say yeah, we're the only ones out there. And this is how much value we're going to deliver you. But in truth if you're going to sell bookkeeping services, and and you want to you can say look, the bookkeeping, bookkeeping services keeps you out of jail. This is going to save you a million dollars, you should pay us a million dollars, they should pay us 100,000 for not a 4 million we're okay. And they say I get that. But you know, I can hire a bookkeeper down the street for 5000 bucks. It isn't really just the will I value? We to understand the decisions our buyers are making?
Sure, sure. No, no doubt about it. But just like Apple uses branding and design and innovation. We kind of preach to the professionals to use Good, good value conversation skills, asking more beautiful questions. offering value guarantees unlimited access. So there's more to it. It's building that competitive advantage, those competitive advantages into the price. But yeah, I but I see what you're saying. Yes, we do. We always want them to take competition into account. But one of the things we preach is how do we differentiate ourselves from the competition?
Yeah, absolutely. And and when worth, if there is no competition, then people are using what will call value in us? How much inherent value? Do I get out of using this product? And think about air for a second? How much value do you get out of breathing air? Pretty much infinite, right? It's everything I got. And then there's value in choice, if I have a competitor, how much value on offering relative to my competition. And if we go back to air for a second, if I want, if I captured some air here and I wanted to sell it to you, you don't want to buy it. Because you have free air. So air is either worth everything or nothing depending on if we're talking about value in use, or value in choice.
Yeah, I mean, I get that distinction. But I don't think it's right. I think the Austrians proved with the subjective theory of value that values holistic and cannot be divisible. I mean, water cells have an incredible premium price. We all need it to live and I can get it for free at an airport. But I go into a store and pay for it.
Yeah, what do you think that is?
of drinking fountain isn't convenient.
I think a bottle water is more convenient. I can take it onto the plane, I can leave with it. I can drink it on my bike and on a walk my dog whatever.
Okay, I think I buy bottles of water because I trust the quality more. I'm probably wrong. But I trust the quality more in a bottle than I do.
Well, it's funny, if you if you check out Penn and Teller show on this. They did a whole show where they traced the source of most of this bottled water. It's tap water. It's municipal tap water, we pay a fortune for clean tap water. It's you know, it's probably better than bottled water the end of the day. But But look, that's a separate issue. Maybe we'll have you back on we can talk more. But I wanted to get your take mark. As you know, Ed and I have been talking a lot about the subscription business model. I know you've been doing a lot of work in it. You've even worked with somebody said from Oracle. What do you see out there with the subscription model?
What I find fascinating I had a I had a company who's very successful in subscription, call the other day and say, Hey, could you teach me how to do pricing metrics. Now this is basic in subscription pricing. And what I find fascinating is that a lot of people are doing this, but very few people actually understand the subscription model, the subscription pricing that goes along with it. And and it's just it's, it's fascinating to me that it's so misunderstood, although it shouldn't be because I stand up and teach rooms about value and value based pricing. And most people don't know that either. So why I think they would understand subscription pricing, I'm not sure. I think the keys to subscription pricing is step one, understand there's three revenue buckets, you're now managing, where before it was always I need to go win new customers. Now we've got three, I got to go win new customers, I have to keep my customers, and then I have to grow my customers. And so in typically those are called acquisition, retention, and expansion. And most of the companies who are really successful in subscriptions today, you have to start out in acquisition, you have no choice. But as you start to ramp the company, the companies that are really successful focus on that expansion piece really, really well. And then once it was up front, well, amazon prime is raising prices, that's one of four ways you have to to grow your revenue from your current customers. The other ways you can if you've, if you've chosen the right pricing metric, then as somebody uses more, they're going to pay us more.
Think of using AWS think of
LinkedIn in males, how many emails you're going to send. Right, right. These are these types of pricing metrics.
Right? I was just thinking that in the Amazon Prime buyer, what is it spends, like seven times more than the non prime buyer or something like that? Oh, just amazing. Yes. How much more? Look, I know, it's probably got some more questions on that. Unfortunately, I'm out of time. But Mark, thank you so much, since Ed's going to take us out. I just wanted to say thank you so much for coming on. It's been really fun. And we got to have you back, maybe unpack some of that odd number pricing even more, because I'm fascinated with old restaurant menu thing. But folks, if you'd like to send Ed or me an email you can do so it asked to so we had Vera Sage calm. And you can also check us out on the Patreon site. Ask or what is it Ed Patreon slash tsp? Yes. And now we want to hear from our sponsor, sage.
You're clear about that day and I ran into your time.
Oh, no worries. No worries.
I'm glad you guys are watching the time.
Yeah, it just flies in the fastest hour of our lives when we do that. But Thanks, Mark. That was great.
Oh, nope. No worries. I I love talking about this stuff.
Yeah. I saw that when we come back. I'm going to go to our listener question.
Mark. Who's the listener? Do I Do I know the name?
No, I don't think I know. Is that
that's our friend from Russia, ed.
Yep. Yeah. So all the way from Russia.
Nice. He's listening live from Russia. Wow. Yes.
Not Listen, this question came in through about three hours ago. So
Yeah, but now he might be listening live that? I don't know.
Okay. And then I got a couple of standard questions that I asked every price or who comes on? So go get your thoughts on that. Yeah.
Okay, I just found this question. All right, we're coming back.
You are tuned into the soul of enterprise with Ron Baker and Ed kless. To find out more about our show, visit us on the web at the soul of enterprise.com. You can also chat with us on Twitter using hashtag ask tsp. Now back to the soul of enterprise.
And we're talking pricing with Mark styling today on the soul of enterprise. And Mark, when a few few minutes that we have left, I want to ask you a couple different things. But first one I want to talk about was a listener question. And Dimitri for who's coming to us all the way from Russia. So you the soul of enterprise truly has worldwide appeal. And he's asked us he says, Why does Mike styling have only one price for his workshop published on his site? That's been options.
Good one, Dimitri. Good one.
Eat your own dog food.
I was an instructor for pragmatic marketing for six years, and I was also their internal pricing coach. And for six years, I tried to figure out how to do good, better best pricing with our programs. I just couldn't figure it out, make the systems work and everything like that. I just launched the new company in January. And please believe me, Dimitri, this will get to where there are multiple options for the for the products. Today, there's only one My apologies.
Well, we could we could workshop it right here, Mark, if you like. You could offer up because that Ron and I talked about all the all the time, you could offer a certain amount of follow up after each one, do you get three months or six months? Or a year's worth of follow up based on that, right? It's just an access level agreement after but so so let me let me let me ask this. And this is, what is your thoughts on creating a subscribe subscription agreement for impact pricing, right? Just we want would there might be people who want to subscribe to your company, they want to subscribe to you.
I've been I've been studying this and thinking about it a lot. And this is a really hard issue. Here's what happens is, I think what I offer to the world is content. Right? I offer the knowledge and the ability to do certain things. And if I were to put video classes up and make them available via subscription, you can subscribe per month, watch them all. Okay, I'm done, I'm off. Now, the other thing that you would get if we had a subscription type program is you know, there would probably be weekly mentoring calls, but not one on one but group calls and, and things like that's what may be worthwhile to have a subscription to, to a pricing organization like this. I haven't put it all together in my mind. But trust me, I am absolutely thinking about it. I'm going to figure out how to pull this off.
And if I can make a suggestion and also talk about Ron and I have launched our Patreon site, and that is if you have not seen that technology, which is specifically for content creators, and allowing different levels of access to the content, as you put it up there, it's they've done a fantastic job with that with, we're just dabbling in it just as a sample but take a look at that. And go ahead. And do you ever actions that or
No, I was just going to say that. I've heard you guys talk about it quite a bit. And I've not been there yet. So okay, I'll go check it out.
Yeah, yeah, no, it's pretty good. So I did want to ask you this, though. You talking about you know, the apple, what do you think of the the ability to now and they don't call it this, but it pretty much is the ability to subscribe to an iPhone. I've done it the last three iterations, which is, you know, every year, I just get the upgrade the phone upgrade whenever it comes out. And now it's billed as a lease. But the reality is the way they rolled in in Apple care to it, it's a subscription.
Yeah, I think that makes all the sense in the world, because they've just got you wrapped in and are you paying it monthly? Or are you paying it once a year? Yeah, monthly? Yeah, I think that's absolutely brilliant. The thing is, you just know, hey, I'm paying for my phone. And whether you're paying for the last one to the next one, it's totally irrelevant to you. I think it makes all the sense in the world. They've got you locked in, and that subscription, you're not locked in. But you kind of are. And their retention is probably really, really high. They're going to have the ability to sell you more over time. And they'll get their expansion up.
Yeah, the brilliance was is bundling an apple care and my opinion, that's what really made the difference because it's basically the same quote, price for the phone with Apple care bundled in. So you don't have access to the technical support. Not by the way, that in the I think two and a half years that I've been on it. I've used it once haven't.
I had it for a long time. And I never used it. So I stopped buying it.
Right. But to me, it's it's it's a security thing. It's a it's a I want access to it, because I know if it's going to be a problem, they'll take care of it. So interesting stuff. I always ask this to prices Mark when that when I have him on the show. And I in fact, when I originally formulated the question it came out this way is Do you believe that pricing is an art or a science? Well, everyone says both. So I've changed the question to is if you had to put a percentage on on this as to whether pricing as art or pricing is science, where would you put those percentages? Where would you say it's, you know, 90%, or 10%? And why did you give that answer?
I would say I would give it much higher art than I would science. And that's because I could teach you a process. But you still have to go through the work to figure out the value statements. I've recently been teaching something I'll call a value table. And if you take any given product feature, doesn't matter what it is, you put that feature into your product because it solves a problem. Can you articulate the problem from your customers point of view? And, and you have no idea how hard it is for people to do this? And then you say, Okay, now what's the result of that? And by the way, here's something else I borrowed from you guys, the value conversation, oh my gosh, that was so valuable that I learned from you. I modified that put it into the product world. And I teach people how to have value conversation. So I could figure out the value of a feature in the b2b world. And and once you can teach those pieces says, Then someone can actually get to how much value is my clients going to get? The process is pretty straightforward. doing the work is really hard. I think it's way more art than it is science.
Cool. Yeah. So and and I was going to come back to that we've only got about two minutes left. But you know, you're saying that that in listening to the show, you felt that we were more about a will I decision? I have to tell you that my background is to is selling accounting systems accounting implementations to people and it actually was not so my background is far more which one were they were they were making a comparison between Should we buy a sage product or we should we buy Microsoft or SAP? So it was a combination now they were also buying services or access to knowledge really, in that was involved in that but it was definitely a which one component. And I found the stuff that we talked about on the value conversation, especially those things that I mentioned with Mohan Khalsa. Right? The the notion of those five golden questions could be the differentiator in and of itself. The very fact that we were asking those questions is what differentiated us from everybody else?
It shows that you cared about the client, you cared about their value and what they were going to get from the product? Absolutely. Yeah. I think the value conversation was is got to be the single best episode of yours. I heard it was. It was truly transformational.
No, cool. Well, thanks. So well, we'll we'll put a link into that in the show notes. But unfortunately, Mike, we are all out of time here on the soul of enterprise. But on behalf of Ron and myself want to thank you so much for appearing today. This was a hopefully this will be like your favorite episode number two now. Your mom's your mom's favorite episode.
Well, Ron, what do we got coming up next week. Next week, we're going to do memorable mentors. I'm going to dive into some of the Tom Peters work, ed.
Oh, great. Alright, can't wait to do that. So you in 167 hours.
This has been the soul of enterprise business in the knowledge economy sponsored by Sage energizing Business Builders around the world to the imagination of our people. The power of technology is next week, folks, Friday at 1pm Pacific will be talking about Tom Peters work. And Meantime, check us out at the soul of enterprise. com. And if you want to get a hold of Ed or myself, you can do so ask tsp at various age.com Thanks for listening, folks. Thank you, Mark, and have a great weekend.
All right, gentlemen, you're clear. All right. Thanks so much, Josh.
You guys. Have a wonderful weekend. We'll talk to you next week. Okay. Thanks, Josh. Thanks, Mark. Hey, add my painter just showed up. Speaking of the devil, I gotta go pick a color. So I could do the bonus episode later. But I know you probably got baseball.
We do not have baseball today and season ended. So we're good to go. So yeah, just just shoot me a text in a little bit.
Okay. Okay. All right. Thanks. Bye. Bye. All right.
All right. Sorry. Thanks again. Ed. Thanks. It was fun. I had a great time.
Oh, good. Good. And we find out anything about that Starbucks thing you let me know.
I will tell you what I'm I'm going to find the answer.
So it wasn't Oh, I had you on my podcast for the other company in 2017. If you would like to come on the new one. You're welcome to.
I would love to I'm sure. Sure. I'd love to
any topic in particular you want to talk about?
net? We talk subscription we can talk. I mean, I'd happy to talk value conversation with you.
That's what we did last time. I love that concept. That's okay. That was two years ago and in a different podcast.
Okay. Yeah. So I love repurposing material.
Yeah, exactly. Okay. I'll send you an invitation.
Alright, sounds good. Thanks. Bye.