Episode 86: Pricing and Subscriptions with Marcos Rivera, Founder & CEO at Pricing I/O
On the latest episode of Subscriptions Scaled, we speak with Marcos Rivera, founder and CEO at Pricing I/O, about everything related to subscriptions and pricing.
Pricing I/O is a training and coaching boutique helping high-growth B2B SaaS companies improve ARR growth and market share.
In the episode, we discuss various topics, including Marcos’s personal and career background, like how he got into subscriptions and pricing and the methodology Marcos uses to develop pricing.
Keep reading to learn more about the episode.
Marcos’s personal and career background
Marcos didn’t start his career in pricing. He began in product development and building subscription software. From there, Marcos learned about understanding value, what it means to break it up into pieces, and how to ensure you’re pricing an experience.
He started creating software and integrations between financial institutions, and that’s where he first started getting into pricing. Then he began building technological workflows, automation and APIs.
Marcos realized people were willing to pay a good price for a good experience. He learned how to create value and get people to invest in it.
Essentially, Marcos is from the Bronx, went to college, went through business school, learned a ton about technology and how companies work and how they buy. Marcos used his learnings to break into an area where he could help many companies grow, which is what he loves doing the most.
The methodology Marcos uses to develop pricing
The skill set of developing pricing has been developing for over 20 years. When Marcos worked at Vista Consulting Group as their head of pricing, he realized there was a faster, leaner way of working.
Marcos started asking, how do I help companies with pricing at scale? How do I help brands that don’t have a lot of runway and budget create an excellent structure to help them evolve?
Businesses don’t stay still and are constantly evolving. As such, pricing never remains still either.
Marcos started brainstorming on how to help businesses in this way. He took his skills and created a few models. And that’s where he began to develop a model to teach companies how to work with their pricing. Then the concept evolved from there.
Quantifying how much value customers receive from products
One way Marcos quantifies how much value customers receive from products is by calculating the return on investment (ROI).
Businesses need to consider questions like:
What’s the hourly rate for somebody who does a task without the software?
What’s the value of a new customer?
How much are staff paid?
What are the main reasons a product exists in the first place? Is it to reduce time or increase input, for example?
Companies need to run through a few scenarios to understand how their product adds the value it’s supposed to. It’s a bit of a benchmarking scenario-based exercise to understand the different value points with a bit of math comparing how much a business pays their staff and what customers pay them.
From there, you start getting to some basic numbers or values. The key here is to look at a price point or derive a price point that customers can get, say around ten times the value.
However, if a business has a lot of competition, ten times probably isn’t enough. They’d probably want to go 15 or even 20 times the value in these cases.
If the company doesn’t have much competition, it can go as low as seven or five times the value. This is an excellent starting point to determine what you can charge.
The Pricing I/O process
The first thing the team at Pricing I/O does when a customer reaches out to them is beginning to get an understanding of the business. For example, is it selling deals worth 1k or 100k?
Is the business in a rapidly evolving state? Is it mature? Has it found a good product-market fit? Does it know its customers and who it wants to sell to?
What’s the plan for bigger growth? Is this company expanding to other markets? Is it trying to get bigger deals? Or is it trying to go down a level and look for smaller deals?
Understanding where the business is and where they’re trying to go is key. From there, the team at Pricing I/O should get some more information on the pricing architecture and decisions. Are there ten customers or 10,000 customers, for example?
Many companies have a poor collection of data with lots of gaps and holes. The data may be spread across different systems, for example. In these cases, it’s tough for companies to see what’s happening from a performance perspective. Pricing I/O is used to this, though.
Pricing I/O will also try to find out about a company’s competitors. If a company says there are no competitors, Pricing I/O will dig deeper because there are usually some alternatives.
Once through all that, Pricing I/O moves into the next phase, which is around coaching. This is where Pricing I/O helps companies connect the dots with their pricing and products.
Other topics of discussion
In the episode, we also learn Marcos’s thoughts on various types of pricing models, including usage-based pricing, performance-based pricing, subscription-based models, and hybrids.
As well as this, we dive into where many SaaS businesses go wrong with enterprise pricing and discuss Marcos’s book ‘Street Pricing: A Pricing Playlist for Hip Leaders in B2B SaaS’ and what it covers in relation to the episode.
Ready to hear the episode for yourself? Then feel free to click on the episode to tune in.
Or, to reach out to Marcos, head to the Pricing I/O website where you can also check out his book and the company’s services, and how they help other businesses. There’s also a blog full of tips and content on some topics discussed in the episode.
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