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Dor Sasson on SaaS pricing & packaging loops, the insight behind Stigg, and going from PM to CEO
Product State Q&A
EC: How should product orgs handle pricing and packaging at different stages?
DS: While funding rounds may correlate with pricing and packaging iterations, they are not necessarily related in a cause and effect manner.
In SaaS, the key motivation and trigger behind pricing and packaging optimization lies in the business goals, which should be seen in the lenses of customer acquisition, retention and expansion. Along the life-time of every SaaS company, the pendulum swings, and the company weighs its focus on each growth strategy.
As a former product person myself, I’m also personally a big fan of approaching PnP as a loop of 4 steps — Where the level of investment and detail in each step vary between the different cycles along company life-time.
1) Motivation/Trigger: Motivation includes all the different signals and reasons to initiate a pricing project.
2) Research: Research includes all the quantitative and qualitative work devoted to nail the pricing change.
3) Implementation: Implementation is where theory work ends and there’s a switching of gears from spreadsheets and decks… to code, tools, workflows, policies.
4) Roll-out: Lastly, roll-out is where the change meets the market, the customers — it involves all the comms and external facing materials to make sure the change is introduced smoothly to the street.
Why is it a loop you ask?
Because iteration is never done. Optimizing to value-based pricing is an always iterative process. Once the change has been launched and rolled-out, now it’s time to collect new signals and feedback which will trigger the next wheel.
Let’s now dive deep into different stages of a SaaS company.
Early Stages (Seed, Series A)
In early stage ventures (e.g founders/CEO of seed/Series A, the focus tends to be on customer acquisition. New logos, adoption and engagement are of high importance. The pricing strategy tends to be handled by the CEO / founders together with the board and company advisors.
Engineering + Product + Design (EPD) orgs — for that matter — are opinionated stakeholders who can help nurture an intelligent conversation with product usage data / patterns, market and competitive analysis, and customer discovery (calls, surveys).
Once willingness to pay is understood and there’s a minimum viable pricing strategy to be tested and rolled out, EPD orgs should help on the best way to implement and rollout (as any other feature on the product roadmap).
Growth Stages (Series B, C)
Growth stage ventures (Series B/C) tend to have a more balanced focus between new customer acquisition and retaining existing customers, as well as expanding their existing contracts. This would typically mean that EPD teams may be tasked to find new ways to streamline deal flow, allow easy expansion and upgrade flows, and figure out additional ways to buy more.
In product-led organizations, there would typically already be a growth group in-place that is always looking to find ways to improve conversions from free to paid, and experiment on different growth flywheels. While most associate growth with product experimentation, onboarding and smooth time-to-value — an intrinsic piece of growth operations is actually monetization. EPD teams should be able to help the company grow by optimizing and iterating on customer journey flows (trials, freemium, reverse-trials, quota-based trials), introduce better self-service buying experiences and monetization aware in-product UX which helps drive overall better NDR.
In sales-led organizations, most of the pricing strategy tends to be led by the CRO / Sales executive team, as pricing is the instrument that helps sales grow the business and close deals, as well as helps CS org expand existing contracts with appealing offerings. With these organizations, EPD teams tend to partner with Sales / BizOps to help streamline the provisioning experience (from opp-won in the CRM to account provisioned). The key focus should be helping make pricing and packaging clear to the customers, to sales reps, CSMs, and providing the right instruments to allow both customers as well as internal teams an easy way to understand and control their plans, while unlocking new ways for the business to monetize different elements of the offering as production innovation continues.
Scaling Up (Pre, Post IPO)
When scaling up (Pre → Post IPO), the chief focus is expansion. Expanding to new markets, to new segments (going up or down market, depending on where you started), localizing currency and prices to optimize profitability - on that stage, every dollar counts.
Figuring out new ways to package offerings (multi-products, usage concepts, add-ons, a-la-carte, bundles, geo-fenced offerings) is now table stakes. Companies at this stage who don’t use PnP as a lever for growth, will die.
Typically, at this point there would be cross-functional team working on PnP (EPD, Pricing exec, Finance, Data teams), and EPD main role is to enable more and create the right infrastructure to allow the entire organization to be nimble about the way it goes to market and iterates on its offerings.
EC: What was the insight that sparked Stigg and what was the journey to get to where you are today?
DS: Anton Zagrebelny, our Co-founder & CTO, and I became obsessed about SaaS PnP infrastructure during our shared time at New Relic. It was when the company underwent a massive pricing overhaul — which led us to believe there should be an off-the-shelf infra to help EPD teams turn pricing changes to a growth lever, not a setback.
While the first spark of Stigg began with New Relic, most of how we think of Stigg today is actually attributed to hundreds and hundreds of hours spent together with EPD teams, growth leaders, and industry pricing experts doing Discovery calls.
By engaging relentlessly and coming in with an open heart and curious mind to learn from the unique POV of teams and individuals who experienced this pain, we were able to hone and scrutinize our vision and get to where it is today. This is why part of our culture will always be about staying curious and never stop asking the hardest questions.
It is only by combining our own personal connection and obsession with this particular problem space, together with the authentic belief in power of community wisdom, which we strategically decided to seize, that we were able to get as far.
Our most recent announcement involves our new and advanced metering pipeline. With that capability, Stigg is now the only platform with both an Entitlements and Metering API. These two engineering concepts are essential in-order to model hybrid pricing.
Why does it matter?
Our vision was never about one pricing model or the other. Unlike other tools out there, Stigg insisted from day 0 that it wants to solve SaaS pricing - any pricing model for any company at any stage. This core principle is our north star. Speed of product innovation makes it critical for SaaS companies to be able to launch new ways for their customers to buy their software. Consumers want more options, and vendors need that level of nimbleness and elasticity in the way they go-to-market. It doesn’t matter if it’s flat-fee, subscription, seat-based, usage-based, pay-as-you-go or any other model. Our infrastructure should never limit our business model options.
Usage-based pricing has been on the rise for being attributed to superior CAC payback and net dollar retention rates. Yet uncommitted revenue bears a high risk, especially in downturn markets. In 2023, a rising number of businesses are adopting more complex, hybrid models that balance between usage and subscription pricing methods. Building or adapting any pricing model in-house requires already scarce engineering resources and lengthy development cycles. As a result, businesses that don’t leverage external SaaS pricing capabilities end up with outdated pricing models that block growth.
Stigg’s API and SDKs ensure companies never need to deal with pricing in their codebase again. The product’s integration provides the infrastructure to safely launch any pricing model and easily roll out pricing changes end-to-end, without additional developer resources. Users can add new plans, introduce full trial flows, create everything self-service buying has to offer, and build any type of pricing model, from usage-based, to flat fee, or hybrid models.
EC: What lessons did you learn as a PM that have helped you as a CEO?
DS: I’m not a big fan of trying to reverse engineer lessons in hindsight; we are far too vulnerable to survivorship bias. It is also hard to tell if the lessons I learned are unique to my journey as a former PM or not.
Instead, I will name a couple important personality traits and state of minds which I was fortunate to pick up along the years that I find helpful in my current adventure:
Fear of failure: When failure is not an option, antifragility and resiliency become intuitive - they are hard-coded to you every day. My short life journey led me to fear experiencing failure. This fear was also very present in my PM career. As anything else in life, this trait has downsides, but the upside of it is that it is an unprecedented driving force towards exceptionalism in every single thing you do. When you are young, you can easily get confused, and focus too much of your energy on perfectionism, which leads to ego-first decision making, procrastination and ultimately anxiety. As you get older, you switch perfectionism with exceptionalism, allowing yourself to become a lot more pragmatic, which results in better decision-making.
Having all the right
answers questions: We underestimate the craft of asking questions. It is still a very common misconception that having all the answers or even having the right answers most of the time makes you a big-shot or a great leader. In my early days as a PM I thought that my job was to have all the right answers. I was full of ego and pride and I thought that if I knew everything, that would make me special, appreciated by my team members and superiors, and help me progress up the career ladder (and maybe protect me from failure?).
Needless to say how wrong I was. Along my career, I learned that wisdom is not in providing answers, but in your devotion to finding them. It sets your team as the powerful members with the responsibility to find answers; it positions you as someone they can proactively approach to critically think about their whereabouts. Socratic dialogue with my team is one of my favorite activities.
But don’t be confused - asking questions is not as straightforward as it may sound. It’s just not about raining question marks in every other discussion.
The craft of asking questions has 3 different muscles to it:
1) The art of Questioning, i.e having enough critical thinking and subject expertise to be able to know what questions to ask
2) Direction, i.e knowing who you should ask any given question - it is never about titles or superficials - knowing very well each and every individual on your team, their personality traits, strength and weaknesses unlocks this skill of knowing who you should ask what questions
3) Timing, i.e when you should be asking a given question. ‘When’ is not just a pure matter of metadata / medium (chat, meeting, call, day, hour), but also a matter of substance (timing in the context of a project, roadmap, quarter) — as well as the mental state of the team member you’re addressing (are they feeling successful? Are they having a bad day? Are they busy with other priorities? etc.).
Making it a life-long mission to master this skill sets both yourself, and your team towards success.
“In SaaS, the key motivation and trigger behind pricing and packaging optimization lies in the business goals, which should be seen in the lenses of customer acquisition, retention and expansion.”
- Dor Sasson, CEO at Stigg
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