The Right Pricing For Your Customers with Marcos Rivera of Pricing/IO

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Welcome to the Tacos and Tech Podcast. I'm your host, Neil Bloom, and I'm thrilled to have you here. On the Tacos and Tech podcast, we interview builders of technologies, of companies, of communities, and we do it weekly, so thanks for tuning in. Every Tuesday, a new interview, and on Fridays, we talk about what's new in the San Diego tech ecosystem from a news perspective. So make sure you join us there as well too. We also have a tech newsletter that comes out every other week@freshbroodtech.com you can subscribe to listen to it without further ado. Enjoy this episode. I'm your host, Neil Bloom. Thrilled to be joined by Marcus Rivera, founder and CEO of Pricing IO. Hey, Marcus, great to have you here.

Great to be here. Thanks for having me.

Absolutely. We got to know each other, man. It's been four or five years now. When you were working on, I think, ProductCamp and with Jessica Sweeney, it may have been even longer than that because obviously Covid's a time warp. But it's good to check back in with you now.

No. Fantastic. It has been a while since we first met and been up to a lot since then. I think I was actually still working at Vista Equity Partners when we first got introduced. But no, super excited to talk to you again. And yeah, lots changed. So happy to dig into it.

Yeah. So give us a quick overview of what pricing IO is. And then also you want to give us a quick little sneak peek on your new book.

Absolutely. So Pricing IO is a boutique consulting firm that we help B2B SaaS companies figure out their pricing. So a lot of companies out there are resorting to guesswork for their prices, their packages. They either copy a competitor or just flat out pull a number out of the air. So we help them in not only helping figure out that new pricing, but the tools to do it next time themselves. So there's a bit of coaching and consulting blended into one and have a lot of fun doing it.

And you have a lot of history doing it too, I know for sure. Working at a number of not just software companies, but then like you mentioned Vista, which has got to be the penultimate for the biggest bucket of software companies as well too, which has built a platform. So I'm really interested to hear kind of the background and how that culminated into this consultancy. But I know. Are you UCSD alum, are you from San Diego or what's kind of your backstory and connection to San Diego from way back?

Yeah, so I moved to San Diego young in my teen and so I'm from New York City, I'm from the Bronx and moved over to a place with better weather and better tacos which we'll get into later. But I think that, you know, the main thing is I have a little bit of that very high motivated moves quickly and also impatient part of me from the east coast and I have my casual sandals, kickback part of me here in the West. So you see a very weird blend that is me in many cases. But. But no, that's, that's how I got out here is just to get, get into a better atmosphere all around the Bronx wasn't all that easy to, to grow up.

I hear you. My family's from the Bronx also, so I understand my mom's family at least. Well, what'd you do after ucc? Did you stay local or did you go off and work elsewhere?

Yeah, so I decided to stay local. I went to UCSD and I'm a double graduate undergrad and I went to the MBA school and everyone talks about the Rady School's inaugural first class of 2006. I was the very little mentioned class of 2007. Right. The second place that no one talks about. So graduated from there with my mba, really great institution. I go back quite a bit. I even help teach a course in pricing with one of the professors as a peasant joy project that we do and just, you know, Love seeing it grow. Feels like there's never ending construction on campus at ucsd. So I expect it to continue to flourish.

Yeah, I seriously, I think all they're doing is building more cranes with the existing cranes. It's awesome. I mean you go back every year and you're like, I don't recognize the place whatsoever.

I, I don't, I'm lost. Every time I go on campus for any event, I'm just lost.

I know. Like that was a parking lot. Okay. Now it's a 30 story building. All right, so how did you find your way to like, did you know you wanted to go into technology or like what was the plan for like your career versus where you ended up?

Yeah, that's a great question. Because it's a dirty little secret about me is that I'm not much of a consultant. I actually started out in software as an operator. Product management was my thing, which is how we met in product camp. The roots of all of my pricing knowledge actually comes from building software value and trying to sell it. Okay. So everything I had to build, I had to put a price on it. Anything I moved from on prem to cloud or to mobile or all these things that kept exploding in my, in my upbringing and tech and pricing, I had to figure out how to put a number on it. And so doing it over and over again, you get really good. I've launched over 40 different products in my career and in doing so you just get a knack for how to distill value down and package it up and price it such that it's easy to sell, easy to buy. So doing that for all those years, I got tapped on my shoulder by Vista Equity Partners mentioned a minute ago they wanted me to come over and run their whole best practice around packaging and pricing. Think about this like for their whole portfolio and you're talking Marketo, Mindbody, Tipco, all these B2B SaaS companies, they had about 60 some odd at the time and I had to do pricing for all.

Wow.

Well, you had a lot of data at your fingertips or did or were they even collecting data appropriately? Did you have to like dive in and have phone calls with literally every person at every company or what was given to you to start it out?

Yeah, it was a major campaign for us at the firm and it was actually one of the biggest value creation levers when we buy a company. Pricing is one of the early things that we pull and we made sure that we told all our investors that as well. But the idea was stepping through each company that we put them in a different tiering order. So there were companies, let's face it, whose pricing was just way messed up and we had to get in there quick and fix things. There were companies that were doing decent but had some optimization that we can pull and actually make sure that we're actually extracting as much value as possible where it makes sense. And then we had the third tier where they've kind of already done a pricing study. They're kind of doing pretty well, they're pretty on top of it and they just need a couple minor like polishing up and things like that. So we kind of made those different tiers and we dove right in and had a, almost an army of analysts and associates and folks to help me at the firm. It was a major initiative for Robert and we just went through and each and every company collect data and help them with optimizing their price and packaging.

Interesting. Any observation you notice for companies, I don't know, I mean, I'm sure you put that all into the books. You're going to give us some quick nuggets. But like stage of Company, we've got a mixture of startup listeners and big tech listeners. What are anything you've noticed as a trend for pricing specifically based on the stage of company where they're at?

Y' all all patterns all day long. I can give you a couple of quick ones that I picked up over the years that, that I just see play out over and over again. So on the startup side of things, I often find that some of the big pricing opportunities when you're in early stage Company is that oftentimes they'll go way too low on their price point, meaning just to get their foot in the door and they go out with just one thing that they're trying to sell and establish a price on. The truth of the matter is even your customer doesn't know your value at that stage. Right. You're still kind of all learning. So I always like to use a, an anchoring technique when you're starting out and establishing an early price, because not everybody knows like, how do I price this thing? Right. Well, if there's precedents, if there's competitors, if there's an easy way to calculate roi, you have a little better chance. But if you don't, you're still even trying to find your customer. You're oftentimes better with a premium and an entry price and tell them that you're getting the entry price point, but you're getting the premium experience and what you're doing there is you're just giving yourself room to go up, which you inevitably will do as you start to expand. Now if I had to step back and look at big companies, right, these are more established folks. They already have customer base, they already have momentum. What I normally see is the biggest opportunity is actually not the prices, the packaging. And what I mean by that is oftentimes over the years, Neil, they put in like feature after feature. They haven't really thought about where to put them. They just kind of shove them in all these plants and over time the plans become imbalanced with who they're targeting. So they end up getting either too bloated and for some folks, too generous or even not enough for others. And they end up having to resort to things like discounting, undisciplined discounting in order to make us for it. And then so you'll get a lot of really I would say out of whack packaging and pricing with the large entities. You know, some of them haven't changed their pricing in like five, 10 years. Right. So it's just the same since the beginning. So that's my biggest one there is as more of a packaging alignment and in the entry level it's going into low.

Got it. Okay. So when, when did you know you wanted to start a consultancy because you'd work for, you know, Vista is a big company per se, a big fund of companies. Like when did you know it was time to go out on your own?

Yeah, it's, I think no is a strong word. I would say that everyone thought I was crazy to want to leave a high flying firm like that. They were growing, they were buying. It was one of the most prolific investors in tech and a lot of momentum and with my role in helping all these companies increase their value, I even had, you know, great one on one meetings with Robert. I had a lot of, of, of latitude in the firm. It was a lot of fun. So why would I do that? Why would I just step away and leave? Let me add another wrinkle in there. I was about to have my second, my second kid, a baby girl. And so why would you leave a cush job when you're about to have a baby right when things are going well for yourself and now you're going to take this big risk and start on your own. So I did this because the number one thing I wanted was to take back control of my time. So when you're getting a lot of attention from the firm because a lot of the pricing things we were doing, were working. It was, I was in meetings with portfolio companies, I was in meetings with our diligence teams to look and explore our pricing opportunities for potential companies. It was all over the place. My travel, I actually didn't live in San Diego anymore. I was living in Terminal 2 in San Diego. And so at the end of the day, I just wanted to take more control of my time. That's what really what started kind of taking me down this path as I could design it the way I want, I can make the model the way I want, control my time. And frankly, I just felt you don't really need to spend 600k and 6 months to figure out your price. I think there's much leaner, faster ways to do it. And I wanted to go out there and prove that.

All right, so how's you, what was your entrepreneurial first step? How'd you rip the band aid off?

It was a little scary. If I, if I, if I told everyone I was, it may look cool on the surface, but deep down inside I was freaking out. Right. So the first thing you want to do, of course is, is making sure that you're, you're able to have your first couple of, your first wave of wins. This is a, this is the thing that a lot of folks forget. They think, oh, Marco's just, you know, started up and he had all these clients out of the blue. Like, no, I was actually preceding for some time beforehand reaching out to folks and rebuilding those trust connections. What I mean by that is not just a high and a buy, but actually asking someone if they needed help or whether it's a reference, whether it's my opinion on something or anything and actually doing it, expecting and asking nothing in return. Okay. And I did that for a while. I was just doing that to rekindle my relationships. When you're on a plane a lot, you don't get to sit down and meet with a lot of folks. So that was the first stage was hey, get my, get the brain space back. Get my, my, my name and folks heads first. And then what after I did that, that's what started planting my sort of a good fertile ground. Start going in and asking and nigga. And I started with micro engagement. So that's like small two day, three day things that I could just help folks get, get up and running. Not hugely cost prohibitive. You build a little momentum, they start telling other people and that starts getting the referral train going. So I did that for a while in the beginning and then started just Getting bigger and bigger deals. And then from there it was word of mouth started, started growing and that's where a lot of my business comes from.

That's awesome. So whole different thing to know what to write a book. Where was that idea come from and how long did it take?

Yeah, that. You know what, it was interesting because I was. Sometimes I listened to some music when I'm concentrating and either doing a model or something like that. And as a kid I grew up with Snoop Dogg and Dre and Biggie and like the whole hip hop movement that was around that time. And it's just, it's fun music, right? It's just fun. A fun genre that we went through. And I, I started noticing that some of the songs I enjoyed and some of my, my friends frameworks started overlapping. The first one I started thinking about was when I was doing a marketing piece for my 5Q framework, right? Five steps, 5Q. And I said to myself, man, I got five on this because I got five, eight phases. And it reminded me of that song from the Loonies way back when. And I started just piecing together all these lyrics with my framework just naturally. And I all of a sudden started beginning the outlines of the books right then and there.

Oh, that's awesome. I love that. Now the book's out. So now you're riding high. Take us through some, Take us through some of the elements of the book without giving away too much because we want people to read this.

No, Happy to do so, man. So this was a lot of work. And I probably. I'll say this out loud, right? I'll probably take it back, but writing a book was so much harder than I thought. And so writing a second one, I don't know if I have a second one in me, but I will say that it's a. It's designed to really be a playbook or guidebook for, for a lot of SaaS entrepreneurs out there that are really in earnest, trying their best to grow, to capture their value. They just know how to do it. And what I found is that a lot of these guys, they're very smart, accomplished people, but they have really low confidence when it comes to pricing or what the number is. They don't know what the package should be. And again, like I mentioned earlier, they. They resort to guesswork. And so what I want to do is help remove a little bit of that, demystify it, make pricing approachable, make it fun, raise that confidence for a lot of these of SaaS entrepreneurs out there so they can go out there and capture their value the right way and give them better chances of surviving and growing. That was a big impetus of the whole thing. Is like, man, people should read this. And using what I'm saying in the book and I'm, I get very detailed in terms of what you should do to price, more so than any other book. Let's cut the theory, let's get that stuff out of the way. We all get it. And let's get down to some practical things you can do at different stages of your business. And that's. That was the big premise behind it. And you look at my book, you probably wonder like, whoa, Marcos, know you kind of gave away the farm here. You're telling everybody everything. Like, why would you do that as a consultant, Give them all your tricks. I look at it as like Chef Bobby Flay telling you how to cook, right? It's like, listen, I want to make sure that you understand these things and I'm going to build trust if I'm as transparent as possible versus trying to keep a bunch of secrets. So I put it all in there. That's 300 companies, 23 years of experience in this book.

Wow, that's awesome. What are you mentioned? Stages of companies. I don't like to see like stages of capital raised because that, honestly, that doesn't change from one day to another when, if you had 10 million raised or not. What do you look at at stages? Is it multi product line versus single product line or how do you divvy up, like, where companies are from a, from a trajectory standpoint?

That's a super good question. And now you, like you. I don't really tie it to fundraising as much. I've seen some startups out there for 15 years. I've seen some companies that two years have completely. They look different than they did two years ago. So the way I correlate it is sort of the sort of traction and momentum that you're getting in terms of your revenue growth and where your economics start to meaningfully change, right? And so in the very early stages, you're kind of taking what you can get, right? You got hit here, hit there. Your, your ICP isn't quite fully defined yet. Your ideal profile, you're still kind of figuring things out. Your product may not even be fully complete yet. And so the money tends to be more episodic, more opportunistic, coming in the door. Your team's really small, everybody's wearing a bunch of hats. Then when you move to that next stage of growth, where I Look at it as you're growing now you're beginning to prep for scale. You're not at scale yet, but you're prepping for that now. You got more people kind of staying in their lane. Your product is a bit more mature, you kind of better definition of who you're after. The product itself can stand on its own two feet. You can even tear it up a little bit. And now the revenue is coming in, the economics are starting to level up pretty nicely. Then you get into starting to scale and move up fast. Now you're putting more fuel in and you're pumping up your ability to sell. You're expanding your channel reach your inbound, outbound channels. You're getting more sophisticated. You're watching the data closer and you're starting to get more precise on what you're doing because you're doing it faster at scale. Then you got the big mature guys. Now you got instead of one person in their lane, you might have multiple people in the lane, multiple products. You're now going more for a portfolio play in some cases very large quantities of data coming in with your customers. Your sales cycles might get a little bit more complex. And overall the way you look at your economics is now different. You're thinking five, 10 years down and you're also with your cash reserves can do different things. But that's how I look at it.

Got it. Okay, so take us through what's happening right now because we're in an interesting economy cycle in 2022 now than we.

Were a year ago.

There's recessions on the horizon, maybe there's the volatility in the stock market, like what are you telling people to do to their companies right now, pricing wise, when you're seeing stuff on the horizon around that.

I, I get this a lot right now. I get as a lot. I advise a lot of private equity firms around pricing strategy and portfolio and they all come to me and say, hey Marcos, we're thinking of raising prices, what do you think? Or hating this climate. Should we be raising prices? What should we be doing? And I'll give you the quick it's, you know, I try to tailor my response to the type of firm, the type of companies they invest in and so on and their investment horizons. Right. But the general sense is right now we're getting a lot of mixed signals in the marketplace which in itself drives a lot of uncertainty and sort of has a little bit of that self fulfilling prophecy that we all know about when it comes to these downturns. So when it comes to downturns, I always talk about a couple of things. One is making sure that you have in your customer base a good incentive to have a annual or longer term agreements with you. And in that sense, there's a lot of companies out there that enjoy going month to month or keeping it very lightweight in that, in that respect. But when it comes to downturns and customers are holding on to cash and things like that, then the shift moves a little bit from the acquisition spree and more on the retention and then as I was about to say, expansion piece. So holding on and then expanding them within are the two key things I look for in the downturn. You still, of course, want to make sure you have the sales engine moving along. That's great, but you have to keep that in mind. It's a much more efficient revenue coming from those channels, expansion versus acquisition. And you want to make sure that as they think about where to cut money and where to cut and save, they're not going to cut you. Right. And that's where the effort comes in. So that's number one is shifting the energy to more customer success driven initiatives and sales driven initiatives. Secondly, in your agreement, a lot of companies, especially mid and Enterprise, have this, this clause to raise prices either on inflation, inflationary bounds or other things like that. And some of them don't even exercise like ever. And so what they'll do is I'll say, hey, hey Marcos, place up, time to exercise that clause. I'm like, hey, you got to be super careful. Number one, the fact that you haven't exercised that up until now can create a little bit of a shock and you don't want to already add an incentive for them to start looking elsewhere or to go with an inferior solution that is a lot cheaper than yours, which can get very scary. So my take is if you're going to go down the inflationary route, which the ground is fertile for that, I mean, you're looking at 9% or you're very high inflationary, unprecedented. But you have still, still couch it with value. Meaning how many things have we released in the last couple years? What are we going to use this money for over the next year or so to be that longer term partner for you and keep on investing in that messaging. Because if you just come out and say, hey, costs are up, I'm going to jack up your price in this environment, you're not going to get the reaction you think. People are going to say, you're a software company, they have pretty high standards, you should be looking for efficient ways not to raise prices on me. Right. So I'd say it's you can do it but you have to still capture with a value story. You can't just do it by itself.

Great points. Especially the communication part. I think the way that you do it and how early, maybe in advance you say hey this is how far out six months from now we're going to let you know we're starting to raise. I'm realizing just a small business owner right now. QuickBooks and Slack have recently sent out notice that they're raising price. QuickBooks was by email. Slack has this little bar full time on the bottom of each of my Slack groups saying just letting you know we're gonna raise prices, lock in an annual rate soon so that you can keep the lower rate. I'm noticing the communication style right now of how they do it too. Anything to speak to around that as well.

Yeah, I am. You know I'm a big fan of early transparent communication around your pricing. So believe it or not I do get the question hey Marcos, should we just like not talk about the price raise or not talk about pricing until the very last minute so they won't have a chance to shop us around or go to RSP and it I always say do not do that. That is the fastest way to erode trust with a lot of your clients. It's actually one of my chapters in the book here about how to raise price and how to talk about it. And one of the key things is if you if you're upfront about it and you couch it with a really nice value story of the value they've gotten and the value they will get continuously with you then you're much better chance and that found companies over again. Say Marcos, you were right. It was much better. It was scary to kind of tell them in months, a few months in advance we're about to raise prices but it actually worked out far better.

Super interesting. Well we it sounds like with with your guidance regardless of the economic scenario we're in there is there's lots of tips that entrepreneurs can be following. So where can people find the book?

Well the book can be bought anywhere books are sold. Amazon is a very common Amazon Books I love it. Barnes and Nobles other great places you get from my website. It's three common places to to grab it there. But one of the key things is that we're making sure that for folks that do pick it up, please like share review, tell us what you think. Let us know because that's always helpful for folks like me who are indie or independent authors. I decided to take it on my own and not go down the publisher route. It was a big risk, but I really wanted to control the messaging, the way it was distributed and everything around it so that way I don't lose the sole purpose of it. And so, so yeah, any reviews would be fantastic. And sharing, of course, everything is word of mouth for me. So talking about it and telling your friends, big, big help for sure.

Yeah, we'll make sure we link to it in the show. Notes is there. Have you done the audio recording yet? Just sit down and record your voice reading the whole book.

You know, that was a really big topic with my team on should I do the audio recording myself or should I get some professional book audio smooth, suave voice to do it? It turns out I'm going to do it myself. Not because I have a suave voice or anything like that, but because there's so many personal elements in the book. I even talk about how I grew up and learned about pricing Skinny Kid from the Bronx and how did I, how did I get pricing knowledge and things like that. So we ended up with me doing the audio. I am about a third of the way through it.

Oh, I love it. That's how I consume most of my books. And I'm listening to another skinny kid from Brooklyn, Mel Brooks. I'm reading his autobiography and just certain things like when you say stories like that, it's hard to hear someone else tell it. So looking forward to hearing your stories from the Bronx and I'm looking forward to it. Well, thanks for that. You've lived in San Diego multiple times. You've moved back to San Diego to make it now permanent home. You obviously have a lot of stories about your favorite taco spots. Do you have a favorite or multiple?

Man, I love tacos. Like I'll tell you right now, if you say, Marcos, let's go out for taco, I will drop what I'm doing in golf for tacos. The, the one area that I would say I keep going back to over and over again, just in terms of consistency, flavor, like it's, it's less of that down home authentic taco spot. And it's just a bit of elevated tacos. And that's going to be puesta. Right? That's good. I like their carne asada one. I also like, believe it or not, their mushroom one is really, really good. And I'm a meat eater. I love meat. But there's so much flavor in that taco there. So the steak one in the mushroom one veggie one, meat for those that are either side of that fence. But Questo for me hits it, hits it home every time.

Questo is a great one and has been mentioned before. But you know, you're right, they have the wide variety. So let's do it. I'm down. I know you didn't formally ask, so I'm just gonna ask you. Let's go get tacos at Puesta soon.

I am down. Anytime you let me know man, I will be there.

Love it. Well, I'll bring my book to get a signed copy from the author and we'll do some tacos. But Marcos, thank you, thank you for being on the podcast, but thank you for bringing your brain to the masses to help so many companies on pricing because like you said, a lot of people are self conscious about it and don't lead with the most confident foot. So let's help our companies, especially here in San Diego, but anywhere as well go maximize the potential of their product, which is exactly what you're helping them do with the book. So thanks so much.

Oh my pleasure. I love helping and I love being here. This was a lot of fun. Thanks for having me.

Awesome. Thanks again, Marcus.

Awesome.

Thanks for tuning in to the Tacos and Tech podcast. You can find all of our episodes on freshbroodtech.com as well as on Twitter at Tacos and Tech Pod. Also follow Fresh Breedtech on all of our social platforms and make sure to share and give a review on Apple Podcasts, Spotify or Google Play. Thanks again.

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