Hello. And thank you all for tuning in
to another episode of the professional price.
In society podcast, my name is Terrance and we have a very
special guest with us today. That's going to help me join
into the conversation of raising prices.
Now, before we begin, I'd like to remind all of our listeners
that this upcoming, maybe we'll be in Dallas, Texas.
The 34th annual spring pricing and workshop conference will be
taking place May 2nd through the fifth and we want to encourage
everyone to take the time to learn more about the conference
and register before. The early bird of March 31st by
visiting our website pricing Society.com.
Now, joining with me today, we have marks diving, who is the
chief pricing educator and an amazing company called impact
pricing. Mark has led coach and taught
businesses about value-based pricing for the past 30 years.
He has driven company wide pricing initiatives worth
millions of dollars in incremental profit.
He started and sold three companies which is amazing in
itself. And has written various books on
pricing and value. Mark.
How are you doing today? I'm doing fabulous.
Thanks for having me Terrance. And by the way, I'm going to be
at the conference so other people should come join us.
Yes, Mark has a workshop. He's going to be spearheading at
the conference so all the more reason to come to our
conferences upcoming made to see Mark and his listen to his
expertise. I'm glad you're here with us
today. Aw thanks is going to be fun.
I love talking about pricing good, good, 30 years, I would
imagine you do you should love you have after. 30 years, that's
a truckload of information of knowledge that you have.
Let's go ahead and jump into the conversation and when it comes
to the topic of price increases, okay, all across the board.
What would you typically I guess in this state currently?
What would you recommend across the board regarding price
increases? Yeah, so so first off, I'm going
to say we should not be recommending across-the-board
price increases, okay. So when I talk about raising
prices and I talked about this a lot because right now is it
Perfect time for companies to be thinking hard about raising
prices and the reason it's a perfect time is because we've
got inflation costs are going up.
Your costs are probably going up for your products, whatever it
is that you're selling and your customers know it.
And so it's this great opportunity that says I've got
an excuse to raise prices today. Now when I talk about this, some
people jump to the conclusion, oh, I should raise all my prices
by 10% or 5%, or whatever the number is, and usually See
that's not a brilliant strategy. By you've got some people who
buy from you who are very price sensitive and if you raise
prices, they're probably going to leave you or stop buying from
you. You've got other people or
market segments who are not price sensitive at all.
And there's lots of opportunity for us to to raise prices on
those people using the excuse that our costs have gone up.
So I think that now is an amazing time people should be
raising people should be thinking about raising prices
and Looking at how to do it wisely and carefully.
Mmm, sure, sure. Okay, good.
Now, when you come car across companies as there a difference
between Hardware companies and SAS companies, when considering
price increases, oh my gosh. Yes.
So my second book was titled when keep grow, which is all
about SAS business and and I come from a hardware business
from a hardware Hardware background and what's really
different is in the world of Hardware.
We care about winning new customers, right?
If I'm going to sell cars, I need to sell a new car to
someone that's there once every five years.
And you know, the Loyalty thing isn't that big a deal.
Although they try to pretend that it is, you know, I'm going
to go shop for all different brands when it's time to go buy
a new car, and this is true with the refrigerator.
This is true with a piece of manufacturing equipment, I need
to sell a piece of equipment at a time in the world of sass, it
flips upside down because I need to sell it to you, right?
I need to get you to buy my product.
Yeah, but then I need to keep you buying.
I need to have you pay me month after month after month, for my
subscription? Mmm.
So if we think about raising prices in these two worlds, in
the world of Hardware, if I raise prices on a car, for
instance, most people don't know that I raised the price on the
car. So it's not a big deal.
I still have to be competitive, right?
It's not to be price competitive with the other Alternatives.
I still need to be within their budget.
I mean, it's not this unlimited range that I can raise prices
but nobody knows. I did it.
So I didn't upset anybody. Mmm in the world of subscription
when Netflix raised your price. You're like dang Netflix.
Just raise my price and and what happens in the world of
subscription I love this. I'll assume most of our
listeners. Here, Netflix subscribers.
All right. So what happened.
What happens is we just either write the check every month or
just have it come out of our credit card.
We don't even think about it right?
It's an automatic thing until we get the email that said we're
raising your price by $2. Mmm.
And I guarantee you every single one of you said, am I watching
Netflix enough to justify this price or not?
And so the price increase caused all of our subscribers.
To rethink their decision. Now, many of them would rethink
and say, yep, that's worth it. I'm still going to pay the two
bucks, but some of them said, no, and they actually had quite
a few people churn out after this last price increase.
Well, yeah, when it comes through subscription-based, I
mean, it looking at my own life, you know, I noticed very quickly
when a company raises, their prices.
Now, I'm considering price increases for different
companies in your opinion who has done price increases poorly
in comparison to done them wealth.
Well, since I brought up Netflix, let's talk about that
flicks. Okay, you may recall in 2011
Netflix did a huge price increase, I mean they raise
their prices, probably 80% on all their subscribers and it
wasn't that their subscribers didn't value.
It is that they did it so poorly they just said hey we're going
to raise your prices, pay us more money and there wasn't good
communication. There wasn't a good strategy and
it turns out that in 2011, they lost 800,000 subscribers.
Wow, and their stock price went down 75% because of the huge
amount of churn in that one price increase.
Now, I was one of those people that I turned out.
Now, I'm back. Of course, write most of us who
turned out a, probably back to Netflix at this point in time,
but but it caused a huge Ripple in their business because they
did it so poorly. Mmm.
So who did it? Well, let's talk about Netflix.
X. Okay, so so they waited two
years before they did this again.
Write this like, ouch, that hurt.
Let's not hurt ourselves. And this time they did it so
much better. What they did was they raise
prices? I think it was a dollar may have
been too but let's call it a dollar, okay?
So they raise prices by a dollar on everybody.
And, and what they did was, since you're a subscriber, they
would send you this. Notice, it says, hey, we're
raising prices, but because you are a loyal subscriber.
We We're going to hold your price steady for six months.
Mmm. And and we raise prices today.
And so then six months later you get the notice it says hey
remember six months ago we raise prices.
So now it's time and that made people feel better.
So the price increase wasn't ridiculously high, the
communication about the price increase was really much much
better done and they announced that they were going to do
something nice for their subscribers.
So that one went over exceptionally.
Well, which is why I think they do.
Do a price increase, probably, every year now that makes sense
and that does help a lot. I can imagine that there are
some platforms. I'm subscribed to in which I was
going to cancel my subscription. They actually lowered the price
for the next three months. You know.
And that lured me in to stay with them for an additional
three months for a cheaper price?
Is that after you told them, you were going to cancel.
Is that? That's after I told him, I was
going. Yeah, so there's this big
cancellation strategy, that companies use and and You'll
find, by the way, I hate this. As a, as a consumer, I think
this is ridiculous and I try to punish these companies but what
they'll often do is they make it really easy to subscribe, mmm.
But when it's time to cancel, you have to call them.
Oh yeah. And so when you when you call
them, that gives them the opportunity to offer you a lower
price and say would you stay for this price instead of that?
And and so I was just in the process of trying to cancel
Sirius XM. And they caused me to do that.
Yeah, I'm going to share a story with you just real quickly.
Sure. I hated that so much that I
didn't call them and I canceled the credit card.
No. So that means that they're going
to try to hit my credit card again.
And it, they're just going to spend a ton of time and effort
and energy getting me to pay and it's like, no, you guys didn't
make it easy to cancel. So go expend your resources in a
way you didn't want to. Hmm?
Well, hey that's that's another way of of canceling, a
subscription Now there's a, there's a term called
competitive analysis and means you study your competition.
So how should we think about competition?
When we Implement price increases, this is a really
tricky one. So let me start with price
decreases. If I could your rights it since
nobody's thinking about this right now, although I did just
get a notice that someone decrease prices Paramount plus
just decrease their prices which I found fascinating.
But in most cases I strongly recommend that a company never
lead a price decrease. Okay, right so in other words,
put it in your head that says look I'm just I'm not going to
lower my prices. If you lower your prices odds
are good, you probably are lowering prices because you want
to capture more share, you want to win more business.
And if you lower your prices, your competitors going to say
ouch that hurts, hmm. I better lower my price to and
all we did was hurt industry profits.
Didn't change anybody share. And so, I would never ever lead
a price decrease on a price increase.
This is a very different story right now.
Imagine you're a competitor, just raise their prices and you
have a choice. You can either raise your price
to match or, you know, copy their price increase or you
could say, I'm going to hold my price still constant so that I'm
going to gain more business. I'm going to gain more share
because my competitors raise their price.
Now, my advice would be raise your price, but here's what
potentially could happen if you hold your price constant and you
don't raise your price and you start taking business from your
competitor, your competitors going to say.
Oops, I didn't mean that and bring their price back down.
And so, we ended up not getting share and we ended up not
gaining more profit. If we have a competitor who's
leading a price increase Bala, Low odds are really good.
They'll keep the price increase, everybody makes more money.
So the question you have to ask yourself is are you in business
to win market share, or to make money?
Mmm, because those are two very different things.
Now, let's say that you're a competitor hasn't raised their
prices, and their prices are constant.
What should you be thinking? If you have any influence at all
in the industry, I would try leading a price increase.
Right. I would explain it, I would
announce it in the trade press. I want everybody to know, I'm
raising my prices because I want all my competitors to see.
I just raise my prices in the hopes that they follow and if
they follow, I smile and everybody makes more money.
If they don't follow, I always have the option of saying.
Oops, I didn't mean that and bring my prices back down.
Mmm, so it's really a test, the market thing and we're watching
to see what our competition does.
Relative to our pricing. Now this only really matters if
you're in a business where people are constantly choosing
between your product and a competitor's product, right?
And prices are really important, part of that, decision product
being, for example, Netflix and Paramount plus exactly.
And I gotta say I'm not sure why Paramount plus Lord their price.
We're going to see what happens to that with the with all the
marketplace because of that sir, sure, absolutely.
Next coming months now you explained, you know, So, the
benefits of raising your prices and remaining the same and not
raising your prices. Let me ask you this, who should
not be increasing their prices right now.
So, we started this whole conversation out with with me
saying, I think everybody should be thinking about how to raise
prices, how to do it intelligently and I still stand
by that, right. Everybody needs to be thinking
about it, but there are companies or products where you
want to try. Really, really hard not to raise
prices, and so, if you are selling products to let's call
them, the, the not, well off people, right?
People who are struggling, To make budget what happens is
they're getting hit with inflation, all around them.
Their budget is getting squeezed no matter what.
So it is possible or likely that you're going to sell less units
to them. Anyway, but if you raise prices,
then you're squeezing their budgets, even more, and you're
likely going to sell even less to them.
And so, if your main market for whatever the product is, that
you're selling happens to be the people who are struggling.
And by the way, in, B to C, you can think People who are
struggling in B2B, you could think of it as companies, who
aren't yet profitable, they're trying to grow.
They're not, you know, overly well-funded bootstrap companies.
Sure, your companies are going to be struggling with budgets
and they have to make trade-offs because inflation is forcing
them. To make new trade offs.
They didn't have to make before now Mark, like, as you said
before, you will be at the conference.
Is there anything in particular? You're really excited about
discussing regarding this upcoming conference, in your
particular session? Well, it turns out the session
I'm going to do is called how to fearlessly raise prices now.
Yeah, so we're through some of these Concepts will have some
graphics and visual so that people can see the concepts
better than what. I can just describe them odd
audibly. So, and and we'll have a chance
for people to ask me questions about all of this and by the way
they can ask about anything in pricing.
A I love talking about pricing. Good, good, awesome.
Now, this was a nice quick brief discussion but very insightful.
Very informative. Do you have any resources?
Is available for our listeners to maybe learn more about you
and your material things or than of that nature.
Yes, if you go to my website impact pricing.com, the home
page is just filled with my free content.
So we put out a we put out three podcast every week we put out a
Blog every week. There's so much free content
there that that you'll get inundated with too much.
If you if you want to communicate with me it's easiest
to do it on LinkedIn. So Actively live on LinkedIn.
So I have great conversations there.
So, feel free to send me messages or comment on posts and
we post every day every day. Something on LinkedIn.
Okay, good, good, that's awesome.
Once again, ladies and gentlemen.
Mark stive, you know what? Thank you so much for your time
here. Good sir.
But we'll be seeing you. This upcoming May in the
meantime you all have a great rest of your day and we will
tune in next time.