Pricing Strategy for AI Software and SaaS: When to Change, Who Should Own It, and the CFO's Role with Dan Balcauski

**Ray Rike** (0:08)
Welcome to today's episode of the AI to ROI podcast. Today, I am joined by Dan Balcauski, the founder and chief pricing officer at Product Tranquility. I'll be covering four main topics with Dan today. First, signs of needing to review pricing or even transform your pricing. Two, the role of customers in the pricing process. Third, pricing ownership and governance. And fourth, the role of the chief financial officer in pricing programs. Dan, please take a moment to give a brief overview of your journey to becoming my guest here on the AI to ROI podcast.

**Dan Balcauski** (0:48)
Yeah, well, it's good to be here, Ray. Glad to see you again. And thank you for having me on. As you mentioned in your intro, my name is Dan Balcauski. I run a small consulting firm in Austin, Texas called Product Tranquility. We focus explicitly on helping B2B SaaS CEOs to find pricing and packaging. And so I spent 20 years plus of my career in software, starting off as an engineer, moving into engineering management, and then product management. And early on, noticed most tech companies obsess over acquiring customers, but neglect how they capture value. And I saw that a lot as I was building products we were shipping, and then kind of looking at it with a question mark of how is that pricing and monetization system designed after the fact. And that insight really crystallized during my MBA internship. I did an internship with a successful Silicon Valley startup where it happened to be a freemium project that was on the CEO's desk. And so they asked me to take a look at that among several other things I looked at that summer. And through my research, I uncovered that popular pricing model, works only under very specific and surprisingly rare circumstances.
And today, you know, focused explicitly on helping the CEOs of B2B SaaS companies transform their pricing from a confusing liability into a strategic advantage, whether that's helping them find millions of dollars of revenue leakage or establishing a pricing process to become their standard approach for future product initiatives going forward.

**Ray Rike** (2:17)
Okay, Dan, you're the right person to talk to, because there sure is a lot of buzz, online discussions, and overall, dare I say, noise around B2B software pricing today. Consumption pricing, usage pricing, outcome pricing, value pricing, hybrid pricing, tokens, credits. I can't even keep up. So, first question I have for you, for our CEO and CFO and GoToMarket executive audience, what are some signs that suggest a pricing review is needed?

**Dan Balcauski** (2:50)
Well, the thing is, there's not a magic number on how often folks should revisit their pricing, but there are some guardrails. So, in general, a best practice is to probably review it at least annually. I would say best in class companies have a review at least quarterly, if not monthly, or when significant product or market change is occurring. And so, for your particular case, that timing can depend upon things like, how fast is the product evolving, or the maturity of the product, or market competitive dynamics. We're seeing that explicitly right now in the AI space. The hottest AI native companies and even the foundation model providers themselves, it seems like, if not weekly, at least monthly, they're iterating and putting out changes, because everyone else is iterating and trying to figure out what's working for their customers as well as to match their competitive dynamics. So, it could really be dependent upon those frames. But also, it's going to be dependent upon your sales cycle speed, right? If we are taking a measured approach, we're going to make a change. We want to then be able to observe the market's reaction for some period of time. And that often the limiter on that is going to be how long your sales cycle takes. So, if you have a very enterprisey sales cycle, 6 to 12 months, you probably can't make multiple changes per year because you're not going to be able to tell the impact of those one after the other within that cycle. But if you have a 10 day sales cycle on average, you could potentially get multiple iterations of sales cycles per month in order to get that market feedback.
But, you know, there's a couple of maybe telltale signs I would encourage folks to look at. Often what I see is impact on net revenue retention. It's not growing as fast as either the execs want or the board wants or some combination of both. And that usually points to a problem in the broader pricing and packaging. Also looking at changes. So, you know, often you have some amount of win-loss conversion that you expect. And all of a sudden that starts trending in a different direction, right? Which can mean a couple of things. One could be, you know, a competitor entrant or new value you're being compared against, or your competitors could be, you know, changing pricing or you could have other macro effects, right? So I'd be looking at a few of those things as well. And, yeah, so I'll stop there and see if you want to dig in any further.