Value-Based Pricing in the Subscription Economy: Why It’s Hard to Perfectly Align Value, Usage, and Pricing with Ed Arnold

Ed Arnold works as an Advisor at Ibbaka, a software provider for high growth companies that helps optimize planning and execution of key growth initiatives while improving company performance. He was the VP of Products at LeveragePoint for 10 years, and was able to work with the pricing legend, Tom Nagle.

In this episode, Ed talks about the future of value-based pricing in the subscription economy as he discusses how product-led growth companies achieve their initial growth which later on leads to big wins.

Why you have to check out today’s podcast:

• Understand why pricing in value is the key in very clever segmentation in terms of creating user profiles in the market;
• Find out how product-led growth companies grow from being a small enterprise to being loved by a bigger market
• Discover companies that are product-led growth businesses and realize how much they’ve grown since day one

“Understand how your customer gets value from using your product, not from buying it; not in terms of what the product offering is in terms of features, but how they actually use it.” 

– Ed Arnold

Topics Covered:

01:03 – Who is Tom Nagle?

01:41 – How Ed got into pricing + creating a tool and working with Tom Nagle

03:07 – Explaining what LeveragePoint is

03:50 – Future of value-based pricing in subscription: Value as a differentiator in the market

07:11 – Buying vs. negotiating a price: Knowing what you’re after

11:43 – Product-led growth practice as a brilliant strategy for business

13:55 – What Ed and everybody else likes about PLG – instant gratification

17:43 – Life-changing benefits of Slack

19:15 – Aligning pricing metrics

21:34 – Why usage-based pricing frustrates Mark

23:41 – Changing and having more than one pricing metric

27:13 – Ed’s piece of pricing advice for the listeners

28:06 – What Ed thinks about behavioral economics

Key Takeaways:

“If you're thinking about what sort of animal you're hunting in the enterprise game, those are the whales. I think value is the only way you can differentiate yourself in the enterprise market.” – Ed Arnold

“No corporate buyer ever heard of Slack until thousands of people in their company were already using it. So, in a sense, the business employee is a consumer, and that's how product-led growth companies are getting that initial growth. They're making it so ridiculously easy for people to start using it before the corporate procurement folks or even IT departments have any idea that they're using it. That's what makes that model so, so attractive for investors.” – Ed Arnold

“We like to talk about three types of metrics. And you got to link those three together. Ideally, if you can link those three together, you're in Nirvana, because your price is aligned with value and it's aligned with usage and everything is great.” – Ed Arnold

“When it's the right thing to do, and it makes sense, it does pay dividends. But it's tough. And I think it's really a leap of faith and doing it.” – Ed Arnold

People / Resources Mentioned:

• Ibbaka: https://www.ibbaka.com/
• The Strategy and Tactics of Pricing by Tom Nagle: https://www.amazon.com/gp/product/1138737518/ref=dbs_a_def_rwt_hsch_vapi_tpbk_p1_i0
• Monitor: https://www2.deloitte.com/global/
• LeveragePoint: https://www.leveragepoint.com/
• Salesforce: https://www.salesforce.com/
• Slack: https://www.slack.com/
• Calendly: https://calendly.com/
• Zoom: https://www.zoom.us/

Connect with Ed Arnold:

• Email: [email protected]
• LinkedIn: https://www.linkedin.com/in/edarnold1/

Connect with Mark Stiving:

• LinkedIn: https://www.linkedin.com/in/stiving/
• Email: [email protected]