Demystifying Pricing Strategy with Patrick Campbell

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02/01/23 • 52 min

Welcome to another episode of the Product Thinking podcast. This week, host Melissa Perri is joined by Patrick Campbell, CEO of Profitwell. They discuss all things pricing, diving deep into the psychology behind pricing models and how to choose a pricing strategy. Patrick talks about the biggest mistakes businesses make when pricing, when and how often you should be raising your prices, how to align your price changes with your value metrics and communicate those changes to customers, and more.

You’ll hear Melissa and Patrick talk about:

Patrick's team developed a financial analytics product and decided to give it away for free in order to get more data and improve their algorithms. 37,000 companies have used it in the past seven years.
Patrick's company was acquired by Paddle for $200 million in May 2022, with a mission to grow subscription companies automatically.
Pricing is a core competency for a business and should not be treated as a quick task to be done and moved on from. It is the very essence of a business as it represents the value of a product or service and how it is perceived by customers.
Businesses should experiment with monetization once per quarter and raise prices once per year.
Raising prices too often can lead to customer churn. However, this eventually normalizes as ‘fence-sitting’ customers leave.
Make sure your price increase is justified by the value you provide to the customer. Align your pricing with a value metric, such as revenue.
Packaging and pricing go hand in hand and can be thought of in terms of charging different prices for different pieces of value of the product.
Sustaining a social media platform like Twitter is difficult, and it can be hard to monetize.
Adobe's move from selling Photoshop for $1,000 to a subscription model of $32 a month was an "eye-opening" change that allowed for more investment in the product.
It's important to get the finance team aligned with the move to a subscription model, as costs will initially go up and revenue will initially go down.
Pricing is a whole company problem, not just a product problem.

Resources

Patrick Campbell Website | Email | LinkedIn

ProfitWell

You’ll hear Melissa and Patrick talk about:

Patrick's team developed a financial analytics product and decided to give it away for free in order to get more data and improve their algorithms. 37,000 companies have used it in the past seven years.
Patrick's company was acquired by Paddle for $200 million in May 2022, with a mission to grow subscription companies automatically.
Pricing is a core competency for a business and should not be treated as a quick task to be done and moved on from. It is the very essence of a business as it represents the value of a product or service and how it is perceived by customers.
Businesses should experiment with monetization once per quarter and raise prices once per year.
Raising prices too often can lead to customer churn. However, this eventually normalizes as ‘fence-sitting’ customers leave.
Make sure your price increase is justified by the value you provide to the customer. Align your pricing with a value metric, such as revenue.
Packaging and pricing go hand in hand and can be thought of in terms of charging different prices for different pieces of value of the product.
Sustaining a social media platform like Twitter is difficult, and it can be hard to monetize.
Adobe's move from selling Photoshop for $1,000 to a subscription model of $32 a month was an "eye-opening" change that allowed for more investment in the product.
It's important to get the finance team aligned with the move to a subscription model, as costs will initially go up and revenue will initially go down.
Pricing is a whole company problem, not just a product problem.

Resources

Patrick Campbell Website | Email | LinkedIn

ProfitWell

Previous Episode

Answering Questions About Tech Vs Business, Level of Detail for Engineers, and When to Join a Startup

In this Dear Melissa segment, Melissa answers subscribers’ questions about whether or not adding a business owner into a product team is the right call, how much detail product managers should provide to their engineering teams, and if there’s a right time to join a startup as a product manager. Q: I've been asked to include a business owner from outside technology in the teams. I'm worried that this will slow decision making and reduce our time to market. How should I tackle this? A: Unfortunately, this happens a lot, especially in large traditional companies and ones that are going through transformations. They've got this old mentality of the tech team being separate and responsible for infrastructure, and the business side doing the “real work.” Here’s how I would handle this issue. Q: What do you think is a realistic level of detail for a PM to provide their engineering team? A: It’s all about balance. There needs to be a balance between how much information you need and what your cultural capacity is to meet the expectations of the information provided. Listen in to find out how to achieve that balance. Q: Is there a good timing for joining a startup? A: This company clearly didn't know what they wanted out of a head of product. It sounded like they may have wanted a lackey, somebody to do the lower-level stuff. There is a point in a startup where it is too early for a Head of Product. Tune in to learn why. Resources Melissa Perri on LinkedIn | Twitter MelissaPerri.com | CPO Accelerator

Next Episode

Answering Questions About Navigating Your Product Career

In this Dear Melissa segment, Melissa answers subscribers’ questions about how to pivot from product management to a career as an independent product consultant, how to handle coaching roadblocks when working with new product owners, and the ins and outs of book publishing. Q: My question is around how to pivot my career into an independent product manager, for example, a freelancer consultant or coach or a combination of any of those...Since you became an independent product consultant, what would be your guidance based on your experience and considering the current market conditions? A: I didn't set out to be an independent product consultant, it kind of happened, and I just kept going with it. Here’s how I would approach it if that’s the direction you want to pursue, and some questions to ask yourself to set yourself up for success. Q: When coaching product owners, I bring a variety and volume of techniques to add tools to their toolbox for product thinking. How and why do the product owners tend to stick with what they know and not shift towards building new experiences as much as they could or should? A: If you bring [new product owners] a bunch of tools, it might be overwhelming. It's really easy to overwhelm people with a lot of different techniques while they're still trying to figure out what their job is. My first approach is to help them explain what their job is and what the purpose is. Listen in to learn what to do next. Q: I want to write a book. Do I self-publish it, or do I go with a publisher? A: Book writing is incredibly hard, but if you do want to write a book, I encourage you to do it. It was the most rewarding thing I've ever done. Here’s what to know about both publishing options, so you can make the right choice for you. Resources Melissa Perri on LinkedIn | Twitter MelissaPerri.com | CPO Accelerator