Pricing is like the mythical creature of strategy. From seed startups to seasoned enterprise behemoths, there's an alarming level of pricing the world is merely guessing on - and ProfitWell has the data to prove it. Join Co-Founder and CEO, Patrick Campbell, in a monetization deep dive to unpack what they've extracted from over fourteen thousand companies on value based pricing strategy, and why getting it wrong is not an option. You'll uncover the top pitfalls, strategic insights on industry trends, and tactical tools to increase revenue and customer satisfaction.
Key Takeaways
Data proving the power of pricing compared to other levers of growth
The pricing pitfalls we hate to see
Tools to understanding value metrics and price optimization
Actionable insights to maximize revenue and customer satisfaction
Patrick Campbell:
Hey product people, Patrick Campbell here, CEO and Founder of ProfitWell. It's actually the third time I'm recording this because the audio hasn't been working and so, hopefully, the third time's the charm. But, today we are going to be going deep on pricing. We're not going to be able to talk about everything having to do with pricing because we only have 30 minutes. But, we're going to give you a really good framework, and a couple of different things to look at in order to understand where you should probably start, with making sure that pricing is a huge product like growth, growth lever. So with that, let's jump in, and let's get down and dirty here with pricing. The one thing that I will say is that because we're not going to be able to go through everything today, I'm encouraging you to email me at patrick@profitwell.com. We're going to basically reference a couple of resources, including the book that we wrote on pricing that will be super, super useful for everything that you're trying to do. And also a bunch of different resources around the data that we're about to show here.
Patrick Campbell:
So, don't be afraid to email patrick@profitwell.com, because we've probably seen every question that you're about to ask. And that's good, we've probably written something on every question you're about to ask, and we obviously want to be helpful. So with that, let's jump in here. Now the big thing to keep in mind with pricing, as we give you this framework here, is that pricing is more than just the number on the page it has to do with your monetization overall. Which involves everything from packaging and your positioning, all the way to your value metric, price, localization, internationalization, and everything in between. And before we get into why this is so important, what we're talking about with monetization, just want to give you a little bit of background on myself as well as the company.
Patrick Campbell:
So, my personal background is in econometrics and math. Started my career working in U.S. Intelligence, and then went and worked at Google, basically, doing different value modeling for different outcomes. And then started ProfitWell about seven years ago. And at ProfitWell, we basically focus on helping with the hard parts of subscription growth. And what I mean by that is we first have this core product called ProfitWell Metrics, which essentially gives you free access to all of your subscription financial metrics. You plug it into your billing system, set up takes less than five minutes, sincerely less than five minutes, which is awesome. And then, basically, you get access to accurate input of all of your MRR, your churn, your cohorts, everything like that when it comes to your financial metrics and now also your engagement metrics. And the way that we make money is we basically show you opportunities and then problems within your business based on your data.
Patrick Campbell:
And then we have a couple of different products to help with some of those opportunities or those problems. We've got a product called Retain that reduces your churn, a product called Price Intelligently that helps algorithmically understand willingness to pay and then basically give you data-driven pricing, and a number of other products. So, I'm not trying to sell you here, I'm not trying to give you a pitch. But, the reason I'm bringing this up is, we actually have about 20% of the entire subscription economy using one or more of our products. So, we're sitting on a lot of data and a lot of insight as to what's working and what's not. And that's got the context of where some of this data, that we're going to talk about, comes from as well as why we're going so hard on some of these particular pieces here.
Patrick Campbell:
But, before we get into those pieces, let's set the stage here. So, I alluded to this before in the intro, but what are you trying to actually do with monetization? Well, it doesn't matter what your business is, retail business, non-profit, enterprise B2B, SAS, doesn't matter what you're doing. What's interesting about your business is that you're creating some sort of value. And then what you're saying is, because we don't trade goats and barley or whatever we trade in a barter system anymore. You're basically saying, "That value is worth this much." And in that manner, your price is the exchange rate on the value that you're essentially creating and you're providing. And what that means is that your pricing inside your business has a lot more to do than just that number. Everything in your business is being used to either drive someone to a point of conversion, or to justify the product, or the price for that particular product.
Patrick Campbell:
And so there's a lot of different things that influence that point of conversion, that purchasing decision. There's the customer that you're going after. This is why a lot of companies go up market or go down market. It's why a lot of companies go after a different vertical, or a different champion, or a different actual buyer. Because what you're offering is the product or you're positioning. One feature or one piece of functionality can change the market you're in, can boost your willingness to pay. The positioning of your value propositions in your case studies, we're about to see in a bit, that actually influences things a lot as well. And then finally, the actual price point obviously has a lot to do with how well your monetization is doing. But, it's one of those things that it's not only an anchoring impact based on, are you a premium product versus a cheap product, but actually aligning that willingness to pay to your customers is something that's so, so crucial.
Patrick Campbell:
Now, what's fascinating about this, is that why is this so important right now? Nothing I said has really changed or been different from the past thousands of years that we've been selling things. But, why is it so important right now? Well, we're basically in a world where things have changed pretty dramatically, especially for technology business its very product-led businesses. And what I mean by that is, 20 years ago product was so focused just on technology. Because you had these giant costs, these giant barriers to entry, all you were trying to do is just get things up and running and try to get those to be efficiently running. And this is why so much of product was focused on speed. How do we ship more in a much quicker manner? How do we get better dev productivity? But now, because of the birth of Cloud, the birth of DevOps tools, all of these different things, we're now living in a world where basically getting started and building the actual mechanics of the product, it's not necessarily easy, but it's much easier than it once was.
Patrick Campbell:
And the implication of that is we're now living in a world where there's so much competition. We found that the number of competitors that you would have today is actually five to six X. The number of competitors that you would have if you were starting your business five to six years ago. And so it's one of those things where it's really fascinating, and it also gives us the most overused slide in every single marketing presentation, there're just so many different companies that are out there now. This is the MarTech landscape, that's the 5,000 companies that are basically focused on helping you grow in terms of marketing. But what's fascinating about it is, the one that was four years ago, the landscape was four years ago, only had about 400 companies on it.
Patrick Campbell:
And so we're living in this market where there's so much competition, and the result of that is that we've lost a lot of our power. Because there not only wasn't as much competition, but we had these brand new marketing channels opening up every single quarter, if not every single year. We were living in a world where essentially we could get Google AdWords for a penny a click, we could have 90% email open rates. But now because of this density and the lack of new marketing channels, we're living in this market where CAC, customer acquisition cost, is steadily increasing. Customer in both B2B and B2C that might've cost you $100 five years ago is now actually costing you about $160. We're also seeing that the relative value of products, or features are declining as well. Because you used to be able to slap a login screen on a database, and you were a God because it was so amazing and made people so efficient.
Patrick Campbell:
But now if it doesn't have a fancy design, doesn't have a good user experience, maybe, you won't even make a cut in the consideration of the actual purchase for that product. And to give you some data behind this, just under a million data points that we collected on willingness to pay over the time. We actually found that features and functionalities, and actually a lot of aspects of products that you would use as add-ons like single sign-on or analytics, that value has actually dropped about 70% as well in the last five, six years. And to get the final kicker here, what we found is that basically, everything's amazing. I don't think anyone's going to stand up and say that products are worse today than there were five, 10 years ago. But, our customers are actually pretty unhappy or not unhappy. I should say they just, they've lost the luster or the magic appeal of a lot of products.
Patrick Campbell:
And we're seeing this in NPS scores. So, about 1800 companies here, the average NPS score about five, six years ago, was about 34. Average NPS score about a year ago, we're sitting around 10. And again, no one's going to stand up and say that products were worst five years ago than they were today, even though customer satisfaction on average has actually gone down. And what's funny about this, is that it's all market data, right. It's really, really hard to control the market. But, we can absolutely control our reactions to the market, and we haven't really changed that much when it comes to those reactions. And the first step is we are still so focused on acquisition. We did a study in about a thousand companies, and what we found is the median amount of spend on the overall budget of the company that was going to acquisition-based activities, was about 60%.
Patrick Campbell:
So, 60% of every dollar, every expense in businesses, at least on a median basis is basically going to acquiring customers in some way. The problem is that the acquisition is now table stakes. We did a study where we isolated the three main growth levers in a business, acquisition, monetization, and retention. And what we found is that if you increase those by the same relative amount, meaning you improve each of those by 1%, you have very different outcomes when it comes to revenue. So, a 1% improvement in acquisition essentially attributes to a two to 3% boost in your actual revenue. So, improving your acquisition might be your net new leads, your conversion volume. A 1% improvement in your monetization, your retention, your ARPU for monetization, or your churn for retention, that's actually going to have about four to eight X the impact of that 1% improvement in acquisition.
Patrick Campbell:
And it's not to say that you're going to take that 60% of your budget and basically push it all into monetization retention. But, it is to say that, if you really think about how much time you're spending on monetization retention, there's probably some gains to be made by putting some more resources on those problems. Mainly because those 1% gains for monetization retention are actually much harder than those 1% gains and acquisition, and so they need a little bit more resources. The other thing that we found here is, because the market's moving so quickly our product focus is actually more important than ever. But, unfortunately, a lot of us aren't really focusing on our customers, or where value perception actually exists or putting together our product roadmaps. And this isn't to say that we need to find out exactly what customers are saying and agree with them and only build what they want.
Patrick Campbell:
That's not what we're trying to do at all. What we're trying to do there is, we need to better understand where value is, where that job to be done is in order to build the right thing or the right functionality. We measured this in a little bit of a different data set. And I need to introduce the model to you before I reveal the data that supports that claim. And it's a nice little classic two by two, that is going to be something that's super useful as a framework for you to think about monetization and value in your business as well. Because it doesn't matter what your product is, could be a cup of coffee, a piece of enterprise software, doesn't matter really what you're looking at.
Patrick Campbell:
There're two axes of value for that product. The first axis of value is the actual features or functionality of that product. So, for a cup of coffee, it's the tastes, the country of origin, these types of things. And the second axis of value is the actual willingness to pay. And what we can do is, we can go out into a market and get a sample of a user base, a prospect base, basically whoever you're targeting. And we can find out that for a cup of coffee, basically, the most important feature relative to the other features is taste. It doesn't mean that that's the only feature that matters, doesn't mean that no other features matter, but it just means that's the most important one relative to the other features. We might find out that people are pretty indifferent about temperature. And then the least important feature, not that it doesn't matter at all, but the least important feature relative to the other features is country of origin. And then I can cross-reference willingness to pay data on that.
Patrick Campbell:
Using some methodologies that we're not going to be able to go into too much depth with today. And I can find out that those people who care about taste are willing to pay about 30% more. Those who care about temperature are willing to pay about 20% less. And then, finally, the hipsters in the audience who care about country of origin, there's not a lot of them, but there's a few of them who really care about country of origin as the most important feature, they essentially, are willing to pay about 40% more. And what's cool about this is I can, basically, map these types of features, and this is what we've done for thousands and thousands of companies. And we can find out that if we have a feature, or an aspect, or functionality of a particular product, or even a value proposition for a particular product where the group or the segment really cares about it relative to the other features. And then also the people who really care about it have high willingness to pay. That's a differentiable feature.
Patrick Campbell:
Those individuals who are basically liking features but they're low value in aggregate, but those who care about that feature have a high willingness to pay. That's an add-on, something like premium support. Those features that have high value relative to the other features and low willingness to pay are core features. And then finally, there's trash, essentially. Now, we went out to about 1300 product leaders and we asked them after they understood basically what this model looked like. And we said, "Hey, based on this model, where would you put your last end features as many as you want?" And they put about 5,000 features on these particular quadrants, all of which were essential, not all, but most of which were in the high-value areas, right. We then went out to about 1.2 million different customers of these products and we asked them, and this is an aggregate study using some of the functionalities that we've developed at Price Intelligently, basically where the value actually was for these features and these functionalities. And this is what the customer said.
Patrick Campbell:
So, this is what we think we're building, and this is what our customers think we're building. And again, it's not to say, "Hey, we're always going to listen to our customer," or that we're going to ask them what do they want. But, we need to understand where value actually exists within our products, in our roadmaps, in order to understand where we should be building towards. And the reason that this should be so scary from the pricing perspective is that everything in your business, remember, is used to drive that customer to that point of conversion, or to justify the product or the price that you're offering them. But if you're not sure who those customers should be that actually value the product. You're not sure what aspects of the product they actually value, what functionality actually boosts their value in their perception. It's really, really hard to set up a pricing strategy, let alone an efficient funnel or an efficient product development process. And so what we want to do, is stop focusing so much on just acquiring customers and that's the end of the game.
Patrick Campbell:
We want to essentially take advantage of the beauty of the subscription model. If you're a subscription business, especially, which is that the relationship is built into how we make money. And if that's the case, we want to make sure that we're focusing on other aspects of that relationship besides just acquiring that customer. And you're still going to spend 50, 60% of your time and your money on that aspect. We've got to spend a little bit more time on these other aspects. So, in the context of pricing, the way that we fix this, we focus on what's called value-based pricing. Which, I'm sure you've read some Forbes article on that, but no one actually explained what in God's name that actually means. What that really comes down to is, basically collecting data not only from your customers, your prospects, your target customers, the market data, as well as usage data. Melding this all together, and then making a particular decision on where your pricing strategy should go, and pricing based on that value.
Patrick Campbell:
And what you're not doing is pricing based on your costs or your competitors. Because your customers don't care about your costs, they care about their costs. And your customers also don't necessarily always care about your competitors because you probably are over-indexing how much your competitors actually matter in these types of sales. There are exceptions to that particular statement. But, for the most part, your competitors probably aren't as big of a deal as you think they are. And you also are probably assuming that your competitors have done their homework, which all data indicates that your competitors have not done their homework. And so it's one of those things you have to get away from these particular data points. Not saying that they don't matter, but they're definitely secondary or tertiary compared to value data when you're coming up with your actual pricing strategy. So, how do we do that? How do we collect this value-based data? I'm not going to be able to go through exceptional depth on this, email me at patrick@profitwell.com, I'm more than happy to send you the book that we wrote on this.
Patrick Campbell:
It's 130 pages. Well chaptered and paginated so you don't have to, necessarily, read the entire thing to get out some of these models that I'm about to show you. But, it really comes down to this value-based pricing process. In order to implement that, you have to make sure that you're talking to your customers and not just throwing stuff up against the wall, but actually going and researching those customers like a scientist, or like a prosecuting attorney or whatever metaphor that you think works for you. But, it's really understanding that customer base. And if you don't take anything away from this particular presentation, please, for the love of God, talk to your customers. It's one of those things I am amazed at the number of companies I go into that aren't doing any customer research, they're not doing any customer development. And again, we're not saying, "Oh, the customer is going to tell you exactly what to do." No, but you're getting the data and the insight in order to make that informed decision as a product leader, as a marketing leader.
Patrick Campbell:
So, if you're not doing that, put a number on the board, put a recurring calendar invite out there, just get something that can help you focus. Now, in terms of the actual pricing process, it's very similar to the scientific method that you learned in fifth, or sixth, or seventh grade. Basically, what we're going to do is we're going to go out to our target customers, our current customers, people who are targeted customers who have never heard of us, and basically collect data from them. And if you don't have any customers or any individuals that you can go after there're these things called market panelists companies. Their entire job is to get you to access anything from a soccer mom or dad in the middle of the United States, all the way up to a fortune 500 CIO. They cost very differently, but it's one of those things where you can get access to actually getting them to take a survey, getting on a phone call, et cetera.
Patrick Campbell:
You got to go out and collect that data and put it through some basic statistical models. You can make this much more complicated if you have a background in math or economics, that's going to help us quantify those buyer personas. And then basically allow us to earn our paycheck and make a pricing decision. I've learned a couple of things in collecting this type of data. There're going to be occasions where you have something that's super, super obvious. This feature is so important. The willingness to pay is very, very clearly this. But, for most of the time, what you're going to be doing is you're going to be trying to find these different margins of opportunities. And then based on all the other information that you have, you're going to make an informed decision and essentially, basically, make sure that you're testing things in the wild as you collect this data. But the data allows you to basically shrink the search space of what you should be doing when it comes to your pricing.
Patrick Campbell:
The two models that we can't go deep into, again, emailing at patrick@profitwell.com and I can send some more information over. One is called the relative preference analysis and the other is called the price sensitivity analysis. Now there are many other models that are out there. But, essentially what we're trying to do is we're trying to get that X plot data and the Y plot data from the cup of coffee example. And relative preference data is something called MaxDiff and then price sensitivity is like a modified Van Westendorp if you've heard of those. We've just found these to be extremely efficient for most folks who don't necessarily have heavy math or heavy economics backgrounds. Now, if you do have those, there's plenty of other models that are out there, but we still think that these are pretty efficient in terms of the amount of value you get from the data relative to the cost and the time that you've actually put in collecting the data. But, these are the two models that we suggest using, and again patrick@profitwell.com, so you get more deep dives on those models.
Patrick Campbell:
Now taking a step back, no matter what you're using, you need to make sure you have a pricing process. And the reason for this is because the market continues to move. You got to make sure that you're measuring this. And the average amount of time between pricing changes, for most companies, is about three years. Which is insane if you consider how often you're changing your product to changing your market for most of us, we're hopefully in pretty fast-growing companies. But, even if you're not, you're changing things pretty constantly, and you're not taking advantage of an actual growth lever that's there. And so this is why we recommend you should be making some sort of change to your monetization every six to nine months. Now, ideally, it's actually every three months or even every single month. But, you have to keep in mind this doesn't mean you're raising your price every month or every three months, or every six to nine months. But, you're making different changes to the monetization.
Patrick Campbell:
And if you're struggling to figure out, "Well, what can I do besides raise my price when it comes to monetization?" Well, you can move features around. You can adjust the actual value metric that they're getting per tier. You can adjust, basically, where different add-ons are, you can add different add-ons, you can adjust the discount they get for getting an annual plan versus a monthly plan. You can change up your value propositions, you can change up the case studies that they see, you can change up in role positioning. There're so many different things that you can do that go into monetization. And it's one of those things that's really, really important to be making these changes because it's the only way that you're actually going to learn. And for those of you who might have some pushback here, you got to keep in mind, as your product or your brand improves your price actually has to improve as well because your price remembers that exchange rate on the value that you're providing. And to give you some data to support why you should make these changes.
Patrick Campbell:
You're looking at ARPU over time for different types of companies. The top line here is basically those companies that are making changes to their pricing every three months. The bottom line here is those who have made it every three years. And essentially like most things, if you focus on something, you will eventually improve it as you continue to make changes towards it. And so the way to do this, we recommend using what's called a pricing committee. This is made up of product marketing, finance, and sales. Typically, you can add some other, or parts of your customer success as one to add in here as well. But the big thing to keep in mind is because pricing is one of these sensitive type topics, you want to make sure that you're including basically the folks who can cause problems when you actually want to make a change.
Patrick Campbell:
Normally what I mean by that is, I don't think sales, based on the data we've seen, sales should probably never be in charge of pricing. But, it is one of those things where obviously they're selling the product. And so it's one of those things you want to make sure that they're included because they have really, really good input. But, you also need them to evangelize those types of changes. As for who should actually lead this? Typically it's product or marketing. Those folks, depending on the org structure, are typically much closer to the customer. Whereas, sales the incentives aren't as great. And then finance is typically really good at Excel, engineering things, but not necessarily the inputs that go into that. And the big thing here is that you're probably going to have a little bit more junior of a person, a marketing manager or product manager. About 20% of his or her time is going to be focused on doing this type of pricing research, chasing things down. And the product cycle that we recommend is about 10 to 13 weeks, basically a quarter.
Patrick Campbell:
And what you can do is this whole committee might meet in the first week, decide what they're going to focus on that quarter from a pricing perspective. The marketing manager, the product manager goes off, does the research, collects the data, the sizes of the data, does what they needed to do. Comes back in week four or five, presents this to the committee, maybe they need some edits or some extra data cuts. Week five or six, make some decisions. Then based on those decisions, and the gravity of those decisions, might do an impact analysis, or a customer advisory panel, like make sure that the changes that you're going to make aren't going to be catastrophic they're actually going to be helpful. And then finally implementing those changes and then tracking and starting the cycle over again. But it's really, really important to basically run some sort of ongoing process. So you don't run into a situation where you're doing this every three years and then it's a huge project. And then the project, by the time it gets done, it's actually outdated by the time you actually do the implementation. So, deadlines, decision-makers, hugely, hugely helpful.
Patrick Campbell:
Now in terms of a Speed Round here, I want to make sure I give you some extra value here on some actual pieces, that you might not be thinking about when it comes to your monetization. And just some things that we can point to. One really underutilized part of monetization are value propositions, we've done a number of studies here to actually find that value propositions can actually sway willingness to pay pretty considerably. This is both B2B and in B2C. So, in B2B and B2C, what we did is we set up fake products. One was a sales enablement product on the B2B side. One was a fitness product on the B2C side. And then what we ended up doing is, we basically adjusted the value proposition against a control to see how the value proposition would change willingness to pay. Or on the B2B side what we found is that, basically, you had a pretty big swing from negative 20% willingness to pay all the way up to plus 20%, or 25% willingness to pay for these fake sales enabling product. And the point here isn't, "Hey, these value propositions were really good."
Patrick Campbell:
But, the point is that just adjusting what the value proposition was, actually influenced the change willingness to pay pretty dramatically. And we saw a similar story on the B2C side for this fake fitness product. Where you had some swings from about negative 10% to about plus 15%, which was pretty cool to see. Another area that's related to this is case studies and social proof. Now, we talk about social proof in an ethereal manner like, "Oh, yeah, of course, have some social proof." But, case studies and the type of case studies you have can actually influence things pretty considerably. One thing that's cool is we set up similar research and looking at how they influenced willingness to pay based on what we provided for those particular products. What we found is that in B2B basic customer ribbons or testimonial quotes. And a customer ribbon is just, "Hey, here's a bunch of logos that use our product," or boosted willingness to pay about five, 6%. Whereas case studies, all of a sudden that influence willingness to pay 10, 15%, right.
Patrick Campbell:
Very similarly on the B2C side, all of a sudden you're seeing an environment where the ribbon and testimonial didn't do as well as B2B, but those full case studies actually influence things considerably. And this is why every weight loss commercial that you've ever seen has some sort of a case study on someone who had before and after, right. Now, if you're willing to go through some work where it's like, "Hey, we're already doing some stuff where I'm pricing, I feel pretty comfortable that my organization can handle it." The one silver bullet, when it comes to pricing, is utilizing what's called a Value Metric. Now, Value Metric is what we charge for. And we're going to go through and I'll show you some examples here in a second. But, the reason that this is so important, is because if you get everything else wrong in your pricing, but the one thing you get right is your value metric, typically you're going to be somewhat okay. Because when you charge based on where the value is in your product, it's really hard to basically have high churn.
Patrick Campbell:
It's really hard not to have expansion revenue. Because as people use more or less of that particular value metric they'll upgrade or downgrade, but they're not necessarily churning. And that's what's so powerful about this type of Value Metric. And so to give you an example of some value metrics, this is the Intercom's old pricing. They price based on the number of people that were flowing through the product. And they're a messaging product, those little chat bubbles that are in the bottom right-hand corner of the page, they're the leaders in that particular market. And then we also have Drift, who's a competitor of theirs, which is basically doing pricing based on seats. This is from their old pricing as well. And the reason I'm showing you these two is because, you can have competitors with very, very different types of pricing and still net out in terms of being successful. And the reason Value Metrics is so powerful. I explained the concept to you. But, this is what you're looking at, is the extremes is light green and these are companies that are strictly Value Metric based companies.
Patrick Campbell:
This dark green is strictly a feature of differentiated pricing companies. And you're seeing that those Value Metric folks are growing at a much higher clip because that upgrade and expansion revenue is basically baked right into the product. Rustling churn rates considerably lower for those Value Metric type companies. Where the churn rates are essentially half of those who are doing feature differentiation because again, you're probably going to have higher downgrades. Downgrades are better than churn in the grand scheme of things. So, I would say, if there's one thing that you're like, "Yep, I'm at a pretty good clip. I feel pretty comfortable doing some work." Your Value Metric is the big thing here. Now, if you've never done anything with pricing and you're like, "Ah, I think there's going to be some politics. And we don't really have a good tech stack to implement with our billing system." The one project that I would start on is something called price localization or price internationalization.
Patrick Campbell:
And frankly, this only applies to folks who have at least 20% or more of their base out of their home region or customer base. But with localization, what you're essentially doing is you're updating your pricing in different regions. So, your UK-based price is different from your U.S.-based price. Not only in terms of the currency symbols or British pounds in the UK, and dollars in the U.S., but also in terms of the effective rate. So, you might be charging $100 in the U.S. but $150 effectively in the UK. And the reason this is so powerful is, mainly, because different markets have different willingness to pay and different demand. And what we've noticed is that those companies that are doing even just cosmetic localization, just making sure the currency symbols are updated, they are seeing pretty good gains in ARPU, the measure of pricing. In addition to those companies who are doing actual demand-based localization, meaning different prices in different regions. And you're essentially taking advantage. Like I mentioned how people in different regions think about willingness to pay.
Patrick Campbell:
What you're looking at here is about 1.5 million different willingness to pay data points to different customers relative to the United States. And what you'll see here is Southeast Asia their willing to pay about 40% less than those in the United States. Whereas, the Nordics is about 25, 30% more than the United States. And there're tons of different types of products. This is a very, very aggregate study. But the big thing is, is there's just different costs of living, standard of living. And that's something that you can take advantage of in terms of optimizing your pricing. And the reason I recommend this as a really good starter project is that your packaging remains the same. your product remains the same. Everything remains the same. You're just changing the actual price point based on different regions. You're going to probably have to get some technology into place to do that. But essentially if you use this as a starter project, that next project becomes a lot easier. Because, all of a sudden, you've had some cycles, you've got a little bit of momentum. You can actually push things forward.
Patrick Campbell:
So, with that, certainly can recap here again. The big thing, keep in mind, the market is moving so dramatically from where it once was. And our advice, frankly, has basically lagged behind. And this is one of those things where you have to focus on what makes sense for your business, and no longer can you just throw stuff up against the wall and see how it works. There's a bunch of different things you can do. There's a bunch of different pieces of monetization that are super, super important. But the biggest thing to keep in mind here is that this stuff matters. We have seen time and time again, the companies that take this stuff seriously are the ones that are just growing at a high, high clip. Or, at least, are turning around their companies in a lot of ways as well. Because monetization is one of those things where it has really good extra analogies. Because if you figure out your customers, you figure out your packaging, these types of things, that has implications on your sales, your marketing, your product, and the rest of your business, because pricing is so central there.
Patrick Campbell:
And I think the one thing that you'll realize as you start to dig into this stuff. It's not rocket science, there's definitely some intelligence you need, but if you're on this, I'm sure you're intelligent, because you're building a company, building a product, et cetera, but you just have to put in the work. And that's the most important part. A lot of us aren't doing the work when it comes to monetization, and we can't expect to get the gains from monetization if we're not actually going to put in the work. One thing here if you want to contact me, obviously, patrick@profitwell.com, we do offer pricing audits. So, it's one of those things where if you're hooked up to ProfitWell, we can actually get you some really good benchmarks on where you are relative to other companies that are similar to yours. Just in terms of what your expansion rates look like, your ARPU growth, these types of things.
Patrick Campbell:
So it's one of those things that I would take advantage of because it's going to help you understand where you should be focused when it comes to your monetization. Because you might be totally fine in some areas, and just not so great in other areas. But in addition to that, again, if you have any questions at all, seriously. We have probably written something on the question that you're going to have, or we have some data on it just because we've been in the pricing trenches for a long, long time now. Don't be afraid to reach out patrick@profitwell.com. Obviously, we can hook you up with those pricing audits as well. And even for your startup where you're just like, "I know I'm not going to be able to pay you, Patrick," it's totally fine. We're in this for the long haul. We're big into evangelizing this stuff, and just being helpful because it all comes back eventually in terms of referrals and stuff like that. So, don't be afraid to reach out.
Patrick Campbell:
But, yeah, with that, thank you so much to the Product-Led Institute here. I think they're doing some really, really excellent work. The ton of content that's around here is just out of our world in terms of the amount of research, and the amount of just really, really great content that's being produced over these past couple of days. I think this is on the last day, and so, I hope you've enjoyed the summit up until now. If you have any questions, patrick@profitwell.com, but also make sure you basically thank the Product-Led Institute and West. Not to mother you or father you here, but I think it's just one of those things where it's a lot of work to put all of this stuff together, and all of these resources. And so it's huge for us all to learn and I hope you've learned a ton. So, have a great rest of the week, have a great weekend. And we'll see you on the other side. Okay, guys.
