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    October 16, 2023

    Profit Streams for Growth Pricing

    Every software company has Profit Streams, whether they know it or not, but many do not know how to maximize their pricing to create the best profit streams. Applied Frameworks is here to help companies create better pricing to maximize Profit. Hear from Luke Hohmann, Applied Frameworks Chief Innovation Officer and co-author of the Amazon bestseller Software Profit Streams, as he speaks to Andrew Phelps, CEO of Incentive Pilot in a discussion of how better pricing helped IncentivePilot become more profitable. Watch this informative discussion! 

    About Andrew Phelps 

    Andrew Phelps is the Co-Founder & CEO of IncentivePilot, a channel marketing gamification and incentives platform responsible for over $500M in sales for enterprise its customers. Previously, he was the Creative Director of User10, a UX studio that designed products and experiences for some of the biggest brands on the planet. He’s passionate about design and making technology work for people.

    About Luke Hohmann

    Luke has been involved with Applied Frameworks since its founding in 2003. He later went on to start Conteneo, a collaboration software company which was acquired by Scaled Agile in 2019. While at Scaled Agile, Luke served as a SAFe® Framework Contributor and Principal Consultant, with significant contributions to the SAFe Agile Product Management (APM) and Lean Portfolio Management (LPM) competencies and the SAFe POPM, APM, and LPM courses. He is the author of four books and is cited as an inventor on more than a dozen patents. His books include Software Profit Streams (co-written with Jason Tanner) (2023), Innovation Games: Creating Breakthrough Products through Collaborative Play (2006), Beyond Software Architecture (2003) and Journey of the Software Professional (1996).


    Luke Hohmann  00:00

    Well hi everyone and for here in America for those of you are coming in from America, Halloween is a pretty big holiday for us. And last yesterday was Halloween, and we had a great time. Andrew went trick or treating. I of course handed out a bunch of candy because my kids are older. But welcome, Andrew. How are you?

    Andrew Phelps  00:22

    I'm good. Thank you. Thanks for having me.

    Luke Hohmann  00:24

    Well, let's get right to it. Tell us a little bit about who you are. And in in true Marvel comic book, superhero style tell us a little bit about the origin story of IncentivePilot?

    Andrew Phelps  00:40

    Sure, absolutely. So we're a SaaS company serving enterprise customers, and we have some powerful gamification marketing tools that incentivize sales activities. We got our start while we're running a UX studio. We were doing UX work for big enterprises, but also startups. And we were hired to create some channel marketing apps for a campaign at an enterprise 100 company. And we got some really amazing results. It was the best campaign they'd ever run. And we kind of got a peek behind the curtain of what it was like to run these programs at scale. It's really hard to organize these programs with 1000s of partners or sellers, to get them to do what you want them to do, deal with all the prize logistics deal with communications and get those results so we knew we could build some tools that would, you know, help streamline the process. Once we kind of nailed down the logistical aspects of it. We thought we could increase engagement. So we started adding some gamification and doing some experiments, and the results were really crazy now. Now we've run campaigns that have generated over half a billion dollars in pipeline and revenue with channel partners and internal sellers. And we've had individual campaigns generate 10s of millions of dollars like $69 million in a single campaign for one of our enterprise customers. So with that level of validation, we decided to shift all of our focus from the UX studio to focusing on the SAS company. And with that level validation, we knew that we'd kind of outgrown our experimental pricing and we needed some help in formalizing things as we as we move further into the market.

    Luke Hohmann  02:26

    Well, I want to pick off a couple of things before we move into the how you got associated with us and how you worked on pricing. One of the things that you talked about, which I think is a really powerful part of your story is that you went from the transition if you're in Silicon Valley, and you have to be a cool kid, you'd say you pivoted but you transition from a services company into a SaaS product company. How was that transition? Was that tough? I mean, you kind of made it sound pretty smooth, but I know that some companies really struggle in that transition. Well, what were how was that transition for you? Was it smoother? Or were there some things that that you had to resolve in that process?

    Andrew Phelps  03:09

    Yeah, I'm not sure anything about running any type of business is smooth. But no, we made it a long way. I mean, I think for my partners and I, we share some of the same core values and one of the core values is to always do right by people, no matter what, you know, if a customer is unhappy, figure out how to make it right at the end of the day. Treat employees and partners and contractors well, and so things change. As you as you shift focus, and one of the biggest challenges is the revenue model itself and services, you're making money as you go. In SAS, you're thinking about the value of the enterprise more than the value of each project. And calculating the value over time is much different than calculating kind of the hourly costs. It is a doing business at a service company. So there's the revenue model switch, and then the roles are very different when you're running an agency. You're using, you know, the employees with tons of creative brainpower, but what comes with that is people who are interested in doing a variety of different projects for a variety of different customers, folks who probably aren't, you know, many of them aren't the same people that you're going to need to run a software company. So transitioning with employees and taking care of them as we did that. That was probably the hardest part because you love working with the people you love working with. But as the nature of the work changes, the roles change and everybody's not always a good fit. So shuffling up, the team is probably the hardest part, but I feel really good about how we did it. And we did it, you know, incrementally we the SAS products started taking a chunk of our our services revenue so we could take on fewer projects, and then we kind of just reduced our project load over time. The whole transition took about a year and a half.

    Luke Hohmann 5:01

     And what was it a hard cut? You did kind of like a change. You didn't cut off your services revenue in one shot, you allowed it to be changed now, I think that had some advantages for you in terms of maybe you've retained more equity ownership. You didn't have to bring in outside investors in or did you bring outside investors in? 

    Andrew Phelps 5:21

    Nope. We're completely bootstrapped. So we did that. We kind of shifted the revenue and then when we reached about 75%, of revenue replacement, we decided to make the shift. So you know, money was tight, and it's, you know, still have to be a carefully balanced budget these days but things are sustainable. And it's really excited because you'll probably hear me talk a lot about experimentation and the process of, of, you know, learning more and more about the product you're building as you go and all of that takes time takes more time than you want it to. And, you know, big we're big believers. In creating something sustainable, that gives you the time and energy you need to try new things and figure stuff out. You know, one of the things that's hard for us as a group to think about taking outside money is you know how much you're kind of creating these and goalposts of what has to be done and in the real world. Just doesn't seem to work that way for us

    Luke Hohmann  06:25

    But it sounds fantastic. I mean, that that's not that is maybe not the path for many SaaS companies.

    But one of the things that you and I share is of course, that's our path. Laura and I were at Conteneo, which we also bootstrapped. We did the similar kind of services to product switch and transition. And when we eventually sold Conteneo, we had a nice outcome, but we didn't have an arbitrarily defined requirement. We we had a way to work that was good for us. I appreciate what you're doing. How did we get involved? And the reason I'm asking that is because I think there's a nice story there that leads us into some of the changes you made about your business model and your revenue model. So let's talk about how you and I got to get together.

    Andrew Phelps  07:10

    Yeah, I discovered you on Greg Heads practical founders podcast, and I, you know, heard your story and, and, you know, kind of clicked the same similarities that you just mentioned. So I think we connected on LinkedIn. And that's when you offered to send over the, you know, one of the final drafts of the Profit Streams Book so I could take a look. And I looked through that. I don't know if I provided any useful feedback for you.

    Luke Hohmann  07:36

    Yeah, you did. And I want to let people know that the book writing was informed not just by the experiences of my co author Jason and myself, but we have by the book, by the time the book was done. We had over 500 reviewers involved and Andrew was one of them. And the way we did it was a rolling review, meaning every month we would find new people but we would also include the prior reviewers. And Andrew did come in when the book was a little bit more complete, and he of course, help. So, Andrew, what was curious to me was that I wrote a book that was with Jason, we try to like as impart as much knowledge as we could. And when you reached out to me and said, Hey, I want to do a growth pricing workshop. I was like, wait a minute, you read the book. Do you Why did you meet this and talk about what was going through your mind that even though you had read the book, and you knew it, you still wanted to go through a gross price growth. What like, how is that

    Andrew Phelps  08:44

    I'm a big believer in expertise. You know, I don't write our contracts for the company we don't do taxes. You know, when if something is is complex, I think if you find the right expert to help you it's it's truly invaluable. And I knew that you know, the book is wonderful and it's so full of so many ideas and and a process that's really helpful but you still have a ton of options, right? You have you can value your company and your products in so many different ways. And, you know, I really look at excuse me building a product is as a series of experiments right and, and in the phase of you're building your product and your company, you know, it gets to a point where you have too many experiments kind of the lab is full right you got beakers on top of beakers and, and fluids running everywhere. And it's not really again, not really a sustainable thing. So just like you need that sustainable revenue to keep you going and experimenting. Once things get too chaotic in the lab. It's time to formalize some things, move them to process and make room for those new experiments. And so that's a matter of, you know, focus and energy. And we were doing that with the product. We were doing that with our processes, and I felt like pricing fell into that bucket too, because we've been experimenting with different pricing. We had a variety you know, our product has a variety of different features for a variety of different customers, all in the same world which keeps it you know, a very well positioned product, but there's still just so much so many different things you can do that I knew that outside, at least an outside pair of eyes would be really helpful. And in my experience, always getting help from the expertise and probably the most valuable thing is the peace of mind. You know, we've hired experts in the past to help with business processes to help you know, in the agency days with any court sort of specialized thing, and at the end of the day, even if you don't get anything new out of it, which it was not the case with our relationship but even if you don't get anything new out of your time with the expert, you get the peace of mind that the person who's been there and seen it all is kind of validating your approach. And so I always see tons of value in the expertise and I got a ton from the growth privacy workshops. So that wasn't the case there but those are the things that make me seek out experts because I place a high value on on energy and attention and the more kind of unknown loitering around and in my head and my team's head, the less focused you can be.

    Luke Hohmann  11:11

    Yeah, I want to pull out about three different things that I jotted on my piece of paper one is and this is occurring for me in real time everyone so there's that we have, as you can imagine Andrew and I have a couple of bullet points, but we're letting things flow. And one of the things that just occurred to me is Andrew, I've seen service providers make this transition from a service company to a product company. I've also seen it fail. And I think one of the things I just realized with what you said like you just unlocked something for me is people who were service providers and who were hired for their own expertise as you were when you were running your agency. I find that and I would follow into this camp myself. Is it seems that we are often more comfortable hiring experts to provide services to us. Whereas the entrepreneurial myth often promoted in Silicon Valley is the entrepreneur has to do everything. And those people tend not to hire services because there's this myth or there's this belief like why to do it all and it was really interesting that you talked about a number of people that you hire, to help you out but I've actually seen in Silicon Valley entrepreneurs struggling through you know, I'm going to get my taxes done or I'm going to get my intellectual property filed and then like, why are you doing? So I thought that was really interesting. Do you think that your background of being hired for your expertise makes you more amenable to hiring people for expertise?

    Andrew Phelps  12:51

    I think so. I mean, I think I've met other agency folks that are probably you know, more of the do it myself on mindset. So I'm not sure how much of that influenced it. I mean, I think capital and sustainability comes into it right if your margins are really tight than any expert, hourly rate seems untenable, right? And I gotta figure this out myself kind of thing. So, you know, I think that's probably a big, you know, and one important piece of it is that if you're planning if you have profit that you're reinvesting, in growth, then you have you know, you can see the situation a little bit more clearly and weigh cost benefit of time and money, not just money. So that at least that's a piece of it, but But yeah, maybe it's a maybe I'm trying to avoid being a hypocrite because I, you know, was hired as an expert and, and, and I got to do the same thing, but I also think it's you know, I think it's maybe personal development and learning along the way. I mean, in the early days, certainly tried to do everything ourselves, and money was tighter. You know, I'm thinking about way back in the beginning of the agency when you're just getting started. You know, the projects are small and the margins are not good and there isn't a lot of extra. But maybe there's some personal growth there too, where you learn over time that your time is valuable, but again, your focus is valuable, too, because I think one of the biggest killers is is, you know, feeling unfocused and overwhelmed. And so I placed a high value on being able to purchase time and focus,

    Luke Hohmann  14:28

    right because that by purchasing a certain kind of expertise, you can actually focus on the areas in which you do need to be the expert and you do need to be focusing. Well, let's circle back now to the to the IncentivePilot, the your transition and your awareness that hey, I want to actually go through a growth pricing workshop. One of the things I'd like all of the attendees to know as part of the background is that when we mean b2b, we often don't define the B of the b2b very significantly, meaning sometimes business to business can mean I'm serving retail stores with small amounts of revenue, and I've got a lot of them. But in your world, the b2b is a pretty big B of the companies you're serving. Which tends to lend themselves to more complexity in terms of the relationship, higher overall deal and price points, right. You're not selling apps for four bucks. You're selling multi $100,000 to multimillion dollar deals. So what were some of the things that you were looking for, when you initiated the conversation with me about “hey, I'd like to do a growth pricing workshop”. What were in a sense, what were some of the triggering conditions or some of the problems that you were feeling that you thought maybe going through the growth pricing workshop? would be helpful about

    Andrew Phelps  15:54

    I think the complexity of the different pieces of the product is a big one. So you know, we have we run basically marketing campaigns that go to sellers or channel sellers that incentivize them to do stuff. And that stuff can be you know, registering a deal can be doing Power Hour calls with prospects. It can be posting on social media, it can be taking trainings, doing other sales enablement activities. So our app does all of that stuff. And it integrates with other apps as well. The other big piece is that we deal with digital gift cards. And so we have you know, we do 10s of millions of dollars in pass through revenue of gift cards that go to the sellers and for one of our big customers. That is how our deals started. And you know how we got off the ground was taking a percentage of those gift cards as our software service fee. And we didn't want to do that with new customers because the product had changed how people were using the product had changed. You know, a lot of new customers want our gamification they wanted our integrations, they wanted our tools, but they already have their enterprise giftcard people they're not going to switch for us especially not for a product that is you know, very kind of new in the space and and people feel like they're taking a risk on it even though our results are impressive and consistent. It's it's weird, and that's one of the things about the enterprise world is that you know, they're stuck in their ways and the culture of how they've done things is deeply entrenched at all these organizations. And so, you know, kind of one thing we want to do with the pricing and how our deals were formatted is like, okay, the products a little out there. We work really fast, that's a little out there for them. You know, what are the things that we can kind of bring to the table that feel more comfortable and standard for them? And that's something where, you know, we knew the expertise would be valuable because we have the way we were doing it, we were replacing our revenue, but is there a way we can make this even more kind of enterprise friendly? And, you know, we kind of look at it like what are the questions we can get people to stop asking, right that's what the product that's with the, you know, the service anything like if you can have a conversation with the customer, and you're hearing all these questions, because it doesn't make sense to them. It's like what can we change? So that question goes away. And I think those those kinds of factors were the were the ones that that led to, okay, let's take a step back. Can we kind of get all these different pieces working better for us? So it makes more sense to the enterprise customer. So it makes sense for our revenue models. So it makes sense for customers that want gift cards for the don't want gift cards? And, you know, can we hear we've kind of make this make more sense than it does because it's that lab full of experiments at the moment.

    Luke Hohmann  18:50

    So I think that there's a couple of lessons for the for all of us in what you just said. I think one of them is, is there's always, you know, the equivalent in medical terms of patient zero, right, the first patient who gets infected, and of course we call it customer zero and this transition and what you found was that your customer zero was very comfortable with a certain form of a value exchange. They were certain they were they were comfortable with a percentage of the volume of the money that was going through your system. I think the more subtle question and by the way, this could be one of those very, very challenging to answer questions because you may not exactly know, but you you found success in one customer through one mechanism. What was what was it that motivated you to question whether or not that way of doing a value exchange would work for your other customers? Did they flat out say, hey, Andrew, I don't want to pay what percentage of your gift card it was completely obvious, or was it? Hey, Andrew, we really like your model, but we're not so sure about how we're going to work together and it was all this kind of indirect or subtle slowdowns in the sales process because and the reason I'm asking this is because sometimes entrepreneurs or people who are in a larger company and they're trying to grow up, you know, go up, grow up that growth curve, is they start to see the slowdown, and they don't know why the slowdown is occurring and they imagine it's Geoffrey Moore, I gotta cross the chasm or whatever, when in reality, the slowdown is caused because the way they want to get money for their services in aligning to how the customer wants to buy it. And that's what you were saying you were saying, Look, we found that the customers didn't want to buy the way that we were selling and so my question to you is, was it an explicit like, we don't want to pay a percentage of the of the card fees, direct and you get to be like, Oh, okay, well, I'll figure something out. Or was it more subtle? Was it more indirect in that interaction?

    Andrew Phelps  21:08

    A little of both. I mean, yeah, so I mean, so the first and I think a lot of it's the stage right. So our very it was our very first customer that was paying the percentage. And the reason it was the deal was, you know, before we were even accompany, you know, was like, I will build this app for you, but instead of a service, you know, charging you to do it as work for hire through the agency. We're going to charge you to license it and because you don't have very much money to license it, we're gonna take a chunk of the, you know, the 30 

    Luke Hohmann  21:42

    You wanted to get a certain total revenue to cover your costs and you were flexible with that first customer about how they were going to pay you and you had some insight now inside knowledge that they couldn't pay a normal quote unquote, SaaS fee, like they couldn't pay the normal amount that you would expect the SAS fee to be charged.

    Andrew Phelps  22:02

    Exactly. So I mean, and that's kind of like that's how the experiment started. And then it grew and grew and grew at that organization. And you know, procure, working with procurement has been a challenge. But, you know, at the end of the day, there's just things you can't change. And so that's one that hasn't changed. And then rather than someone saying, you know, hey, we don't want to be charged that way. It's like, our next big opportunity was, hey, I really want to use your tools, but we already have our gift cards covered. So that's like, okay, you know, there wasn't even an opportunity to charge that way. And then, you know, the other interesting thing is that once we develop the gamified engagement tools, your need for gift cards or other, you know, monetary or physical prize incentives drop drops drastically. So there's this kind of contrast between, you know, you use our gamified campaigns and you don't have to spend $50,000 on gift cards. This campaign, you can spend five and get the better results because you're using the game of five campaign. 

    Luke Hohmann  23:10

    You want to charge that way because you were actually you would have been lowering your revenue because you're cutting out costs for your customer. You want to find a way to say hey, look, I'm cutting out those costs and taking you from 50k to 5k. And of course, had you been tying your revenue to that you'd be lowering your revenue and so this requires some modeling. So modeling can be scary for people. Some people love it. Some people find it scary. What was your relationship in this process to building out spreadsheets or financial models that would help you reason about some of these choices? When did that kind of kick in and how did that process work?

    Andrew Phelps  23:55

    Well, my business partner Brad Wires the financial guy, he's he's the whip your Speedsheet

    Luke Hohmann  24:01

    I love it.

    Andrew Phelps  24:02

    Yeah. I mean, he can whip up a spreadsheet to do anything in about a half an hour, which is a wonderful thing. So I'm not really an expert to talk about with it. I mean, I think in the modeling, we certainly do that. Did that and continue to do that. You know, the one thing about taking a small percentage of giftcard revenue is that it's not very much money. So there's not a ton of modeling to do to make up for that revenue. Right? It's just like, Oh, if we can, you know, get it in this ballpark, then this is we're going to work great for new customers. And as you mentioned, prices for the enterprise are high. The challenge is, you know, getting them to take that first step and run the pilot program where things start going well, and then the conversations about you know, going into so when we're looking at the pricing we you know, we there's the models for Okay, once we get someone as like a subscription customer, what does it need to look like? But also what is the pilot program? Like what kind of is this to, you know, help people make? Make an easy decision to to try us out because that's, as soon as they kind of see it in action. It's very sticky. But again, it's very foreign. And, and it's it's hard to hard to get the ball rolling with with any big organization. It just takes, you know, time to build relationships and earn trust.

    Luke Hohmann  25:31

    So let's let's, let's pull up a couple of things. And there's a there's like just a statement I want to make for all the listeners to really cement something. It is important that there is a member of the team who can build spreadsheets and models and help do financial analysis and financial forecasting, even if it's even if you have that skill. It's good to have someone who can collaborate with you. I think one of the other things I want to pull on a little bit, Andrew is that you and I actually use spreadsheets to but we did in packaging. To start to design packaging. And the packaging had a clear goal, which was this notion of how do we help people get started but then how do we create value for IncentivePilot if that first trial that first pilot is successful with organization? What were some of the insights that you acquired or learned in that process and how did they match? Once you put those insights in place? How are things going? So there's like a two step question here. One is this notion of the goal of making it easy to try out because you knew you are sticky, but also being fair that once you got going you were able to recoup the value, how did the model help balance or how did this choices that we ended up making? How did that how are those balanced?

    Andrew Phelps  26:58

    Yes, I think there are a couple really valuable things that helped in the packaging. The first was, again, a large number of small features that are hard to wrap your head around with. You're the one who's designed and built them with your team. It's hard to wrap your head around how outsiders see it, and you don't always get you know that direct feedback from customers and prospects. So the outside perspective of Luke's questions of what the hell is this and why is it like that? You know, he's much more kind than that. I'm joking. But you know, you get in the questions, the direct questions and the conversation you start to understand how it makes sense to people on the outside because they don't know how the product works. They just know how the products how it seems the product works. So that was very valuable in understanding Okay, these features need to be separated out as add ons and these can be included here. The other big thing that you know, I got in our process of packaging into our three basic packages with understanding how the value and the pricing of each tiers are related. Right. You know, I think in our first pass, we kind of got the features separated out into add ons and things were feeling pretty comfortable and then we were assigning prices to each package. But then that's when the expertise I think really kicked in and you were able to help us, you know, understand how you more than double the value of the next package by the features that are included. But also increase the price so the price of each package roughly doubles, but the value that you get for each increase is way more than double. And kind of, you know, it felt really good when we were done with with the pricing exercise and then just a couple of weeks later, you know I was able to use the pricing on a call with a new enterprise customer and and it was so much fun to watch the pricing in action because we were talking about their entry level package for the pilot program. And then effortlessly, you know, they started talking about well this is as well this is what we're gonna need for next year. And I looked at our pricing sheet and it was just the next the next package up and the cool thing was, you know, they're running a pilot campaign with some add ons now it's going awesome two weeks in we have 6x their engagement of the first six months of this year so the results are through the moon. I'm hoping we'll continue to work with them next year. But the cool thing is, is that you know, they want to do additional campaigns each quarter next year. If they stay in the package they're in, they're going to be paying more than if they move up to the next year. Because they get some of that residual value included in the next package. So you know, they're moving up in our pricing structure, which is a larger, you know, a larger annual fee, but because of their add ons, you know, they're actually saving money so I just really love how the different tiers interact in that way. So yes, they go up in in monetary value, but what you get for your money is actually better for the customer.

    Luke Hohmann  30:07

    Yeah, so there's a couple of really important things there. One is the value curve that we designed together is super linear. And the cost curve is linear. However, there's for everyone listening, there's downside protection built in. Meaning if the customer at the current tier doesn't upgrade to the next tier, but they do consume more of the service or they do consume more add ons. There's still additional fees. So there's there's an upside incentive for them to move to the next tear which creates more consistent revenue for IncentivePilot. But if for whatever reason the customer doesn't make that tear job, but they still want more of the service, that incentive pilot can sell more ala carte offerings, these add ons and are protected against people just saying hey, give me more well, okay giving you more it's going to cost more. One of the things that you mentioned it kind of in passing, but I think it's really instructive is that you've always had in this process, your customers performance is the leading in your conversations with me. You've always talked about how do you help your customers and you just said it again. You know, we created a 6x improvement. In terms of our model, we think of that as the customer ROI, how do we show our customer that we're delivering them value? Where are you in terms of your need, or you're building out of either tools or, or sales enablement for yourself and your other salespeople about how you're showing customer ROI. How are you how are you communicating the value now that we've gone through this and you've got a better handle on the value you're creating?

    Andrew Phelps  32:03

    Yes, that's a great question and I think one of the interesting things that we found is that I guess an assumption I had a few years ago when we started working with these folks was that they were going to be the ones who were incredibly business minded and scientific minded and we're going to have tough KPIs for us to hit. And I learned really quickly that that wasn't the case where you know, we're usually the ones creating the KPIs or setting the goals for our customers. And so, I think step one for us was understanding, you know, where our customers are, and educating them on. You know, I mean, for many customers and many prospects will ask, Well, how did you know how are things going this year? How many partners in this initiative, how many partners have you engaged? What have they done? A lot of times they can't answer that Question. They don't even have the basic metrics, you know, and so, educating on hey, let's take a look and collect this stuff so we can understand what improvement looks like and what how much the improvement will be. That's a big piece of it. You know, we've had campaigns run where the results are just unbelievable. And we get on the call and talk with them. And it takes the conversation for it to sink in with our customer like, oh, yeah, this is 10,20,100 times better than the last thing I did. Right. I think a piece of it is the scale of enterprise you know, you run a campaign and you make $50 million is great. If you run a campaign and you make 150 That's great. It doesn't necessarily click that you just, you know, did three times the revenue, that might be a piece of it, some of it's a mystery, but that conversation and you know, part of that was wanting to serve the customers part of us was want us wanting to learn more about what's actually happening, right. We wanted to know how our products were performing. We wanted to know, you know, how we could make things better. And so I think I think those those realizations and conversations arose out of our interest in building our own product and learning from our customers. So that's a big piece of it. One of the challenges we have with our results is that they're unbelievable, they're unbelievably good. And so that's a that's a kind of a funny little problem we have is even being taken seriously in in in initial conversations

    Luke Hohmann  34:32

    is interesting. There's a there's a famous book for consultants by a guy named Jerry Weinberg the secrets of consulting and in early in the book, he said, You know, sometimes you'll find an organization that you can help and you will create these quite large ROIs. But you don't claim it because you might even inadvertently, be unbelievable, meaning it's better to claim 10% than 1,000% Right? Getting 1,000% improvement is not quote unquote believable, but it may be true and so I appreciate what you're saying there. Let's let's circle back to the process. In the book, we talked about a certain process of going through the changing pricing and changing packaging. We talked about understanding what's motivating you which we call triggers. We talked about creating a snapshot of what you have, then we flooring, various changes, potentially settling on changes and then implementing those changes changing the websites changing collateral. Changing marketing materials, and sometimes even communicating changes to customers if you have a lot of inflight customers. A question I have for you is, was the process that we followed or outlined in the book and then tried to follow is that a helpful process or do you think we varied a lot and we had to vary a lot to to kind of meet the needs that you have?

    Andrew Phelps  36:05

    I think the process was certainly there. I think you know the what kind of caused me to reach out for help was I know we could get to the end goal faster We had some important conversations coming up. And again, that peace of mind, right? There's enough there are enough unknowns and are we doing this right floating around in my head and the more you can get out of your head the better and so you know, I wanted to bring in an expert and and and yeah, get that peace of mind that hey, this is a this is a good shot at this and I don't have to think about it. It can you know, I can move that piece of my brain to thinking about something else.

    Luke Hohmann  36:52

    That's funny. I have a similar attendance statement that I use. I like to tell people look I'm I'm I think I'm smart enough that if I wanted to sell my own home, I could probably go get some kit and sell it. But it's a big transaction and I don't do it very frequently. I've been in the same house now for 25 years. And so that peace of mind is really important. For large, infrequent transact. We don't change our prices. We don't change our packaging. So that notion of a large infrequent transaction in getting some peace of mind, I think that's it's not just in our business lives. It's in our personal lives too. Let's let's bring this home and then give a little bit of time if the attendees heads up attendees. If you have questions, now's the time to go ahead and put them into the chat. Or put them into the q&a. But the results so far seem to be promising. What would you say would be some of the lessons learned or the kind of the key takeaways and then I have one additional question which would be when do you think you're going to be revisiting your packaging and pricing? I know it's new and it's settled. But we also know that things evolved. So what were some of the lessons learned or takeaways and then when do you think you would be doing this again?

    Andrew Phelps  38:18

    Yeah, lessons learned, I think that invaluable outside perspective of what makes sense on paper, like how things are not how things are laid out. So kind of getting, you know, your prospects and customers are, are obviously places you can get feedback on how things are packaged, but also our customers are extremely busy, you know, hardworking people that you just can't always get the feedback you want or need from them. So to get an outside perspective, or from someone who had kind of shares that foreign relationship with what you're offering, you know, you get to see how other people see your product right because when you've built the product, you know how things are connected on the back end, you know, which which features are duct taped together for that which project and, you know, it doesn't all make sense in your head. And how it makes sense from a user experience perspective is not always how it makes sense from a pricing perspective or a buying perspective. So really sorting out, you know, the three different views of our product, how it works from a technical perspective outwards from the user perspective, and how it works from a buying perspective. You know, to have those things settled, or were settled enough. Obviously, nothing's ever settled. You know, to understand more about how those systems work and interact is really invaluable. And I think it's, it's, you know, has gotten us to the next stage of maturity in the business and the offering, again, to kind of remove some experiments from the lab. And in terms of reevaluating, I don't know how soon we'll be evaluating any of the packages. I do like how the system and the framework works. We're always adding new stuff so they'll be new add ons to get into the pricing and additions. 

    Luke Hohmann  40:09

    So, when you add new stuff, your current sort of meta structure of the packages seems to be holding and we don't want to change those too frequently. And I agree with that. By the way, I, I think one of the one of the changes one of the mistakes that that b2b people make is they'll say, Well, I'm experimenting with my pricing. And they just keep experimenting and experimenting. Like you said, the lab has too many experiments. And sometimes you kind of gotta let it stick in the b2b world for a little bit. But once you've got this structure, what is to replay what you said in my own language, if it's okay to do that, I've got this job. I've got a dev team that solving problems and bringing things in and so as I bring new things in, I'm gonna fit it into this structure. And you feel that that structure allows you to do that and you really you don't foresee any like, major hiccups with what's on your roadmap. Or when you're the packages for buying.

    Andrew Phelps  41:09

    We could go I would have said no, but you know, we got some new ideas from customers. No, I'm joking. I think for the for the most part. Yes. There's always going to be things that don't fit and that's why it's mostly a joke. I do think that they will fit in it's just, you know, as much as you want to systematize things there's always new opportunities and things to think about. So, I think for the most part, we can add, you know, small features into our add on selection or just throw them into the packages if we need to.

    Luke Hohmann  41:38

    So I would make something into a package as opposed to creating a new add on, is it just because you want to provide more value? Is it because you want to retain customers? What are some of those motivations like I've got this new feature, and it's a fundamental choices of leadership team. Do I charge for it as an add on or a module or do I integrate it into an existing package? What would what might motivate you to choose one over the other?

    Andrew Phelps  42:09

    I guess, customer expectation, right? That's right. potations are are probably the biggest driving factor of of anything right? And so if they would expect it to be included and not an add on, that's why it would go in there. And then I guess the other case would be you know, something that's technical debt. That shouldn't be a feature then right now, it's it's not right. So those would be the two cases I think mostly, you know, majority of the time it would be an add on.

    Luke Hohmann  42:38

    Okay, great. Yeah. And I think that that's something that all of us as business leaders, all product managers, we we have to make those choices. And there's no uniform answer. There's this idea of like, okay, I got this thing. Now. And we recommend trying to figure out is the thing that you're adding, primarily designed to acquire attract new customers, or is it primarily designed to retain existing customers? And I think it's in the attainment of existing customers. That you tend to lean towards including it in a package and just saying, hey, it's a new and improved version of IncentivePilot, as opposed to things that can attract new customers in which it would be like hey, there's a module there's a configuration and we can meet your needs. But those conversations are occurring. Play consistently. And I really did like the triad that you introduced, I wrote it, I wrote it down, like, how does it work from the user perspective? How does it work from a technical perspective? And how do I buy it? How does it work from the buying and pricing perspective? I like I like the way those three perspectives work together. Let's see if there's any from the attendees. I don't know if we have any q&a, any questions. But are there so I don't see any but Laura, if there's any that that you seen in your world? Let us know. And of course participants feel free to send them. I'm going to turn this over to you, Andrew. What what other final words of wisdom might you want to close with in this process?

    Andrew Phelps  44:23

    I don't know. I don't know if I have any words of wisdom. I think to go back to your last question. We're revisiting pricing. I don't think we'll be revisiting the packages. I do think there'll be some experimentation with price increases next week or next year, just depending on the demand of our conversations, because we haven't gotten any pushback on the new pricing.

    Luke Hohmann  44:41

    Yeah, no prospects suggested it might be too low.

    Andrew Phelps  44:45

    It's new, you know, it's still new and the sample size is small, but probably opportunity to increase this next year.

    Luke Hohmann  44:56

    Brilliant. Okay, Andrew, thank you. So much for participating in this sharing some of your experiences sharing some of your wisdom. I really love this idea of how you've made the transition from a services agency based organization into a a product led organization. I also like you listen to Greg Heads. So this is a shout out to Greg Head and the practical founders podcast. We have to get you on Great show because I think Greg and his audience would love listening to your transition, because it's such a powerful transition. What you've done is to do, he's smiling. It there's sleepless nights behind the smile at Sure. But I love what you were what you were sharing today. So thank you so much.

    Andrew Phelps  45:49

    Oh, thanks for having me. And thank you for all your help. I mean it was wonderful working together.

    Luke Hohmann  45:54

    Okay, bye, everyone. Stay tuned for another episode of our webinar series because then come on back. See ya.

    Tag(s): Profit , Webinars

    Luke Hohmann

    Luke has been involved with Applied Frameworks since its founding in 2003. He later went on to start Conteneo, a collaboration software company which was acquired by Scaled Agile in 2019. While at Scaled Agile, Luke served as a SAFe® Framework Contributor and Principal Consultant, with significant contributions to the SAFe Agile Product Delivery (APD) and Lean Portfolio Management (LPM) competencies and the SAFe POPM, APM, and LPM courses. He is an author and cited as an inventor on more than a dozen patents. His books include Innovation Games: Creating Breakthrough Products through Collaborative Play (2006), Beyond Software Architecture (2003), Journey of the Software Professional (1996), and the upcoming Software Profit StreamsTM (2023) co-written with Applied Frameworks CEO Jason Tanner.