Navigating Pricing in Large Organizations with Shah Choudhary, Salesforce’s Monetization Leader

Speaker A: What is the return on investment, how much I'm going to spend, and what's the value I'm getting out of it in those instances? You want to drive adoption, you want to get the solution in the hand of people. Now to get in the hand of people, you want to follow a land and expand strategy. You're now listening to Monetize, the art of pricing. Hi, Chef, how are you doing? Doing great. Great to meet you, Abhishek.

Speaker B: Likewise, Shah. Uh, thank you so much for taking the time out to be on Monetize, a podcast that is going to be dealing primarily around pricing. So we have Shah with us here today who is a director for product and pricing strategy at Salesforce. Great timing to be speaking with him after all the conversations around pricing and how Salesforce has been enabling that to happen. So welcome Shah, and I'll probably start off checking in with you for a quick introduction and a background about what you do. And then maybe we can get deep in and start talking about interesting things in the world of pricing.

Speaker A: Thank you, Abhishek. Again, pleasure to be here. Hello everyone. I always love speaking about pricing and pricing strategies. So again, you'll hear me nerding out a lot all throughout this podcast. So first of all, what I do, I do pricing strategy at Salesforce. As Abhishek mentioned, I am the monetization lead for our service cloud portfolio. So if you use service cloud or you're using AgentForce today or tomorrow, you will see that some of my work is kind of like what you're paying for. So I've been working in pricing strategy for, uh, quite a while. I've been at Salesforce for almost three years. I've worked across different clouds. Started off with marketing cloud, then I was the monetization lead for commerce cloud and now service cloud. So it's been pretty interesting going across different clouds and learning about the different parts of the businesses. I have been working in pricing strategy even before I was in Simon Kutcher, uh, people familiar with it, one of the world's leading pricing strategy consulting firm and also an expert in growth strategy. So I was there for three years, did a lot of work in terms of SaaS pricing, working with Unicorn, CZA, uh, enterprises, and a lot of pricing around restaurants. So I've done a lot of pricing in terms of burgers, fries and shakes. And you will be surprised, there's a lot of similarities and I use a lot of fun fast food analogist to explain pricing. So as we progress in our conversations today, beware that it's coming. So yeah, all of that, six years in terms of pricing strategy, I love the work. I feel it's super interesting. It's very complex as well. In today's world with all of these things, generative AI, consumption, subscription, what is the silver bullet to make money? It's a uh, burning question but again it's interesting and keeps us up at night. So again back to you Abhishek and I'm looking forward to all the questions you're going to ask me.

Speaker B: So awesome. Thanks for that introduction and especially with your background in pricing consulting and having worked on non software pricing as well, that's something very interesting and we are going to be touching into how that works and maybe draw correlations with software. But just starting off from the start, like I'm getting right into the key aspect of the interesting thing that's happening around us today. So of course Salesforce recently moved or recently came up with pricing that's based on conversation or conversion, right? Like essentially moving a value metric from what's been subscription to this. So let's talk about that a little bit. Right. And maybe the first thing was what led to the change or when did this thinking around changing this start and how did that come about?

Speaker A: So let's take a step back and think about the changes in the industry and the direction you needed to take as an organization. And it's not just Salesforce specific but every kind of like organizations working in the realm of generative AI and kind of solutions which are more autonomous and everything. So the first thing is that you have a lot of cost in today's world. AWS cost, computing costs, LLM gateway costs and everything. So when you are kind of like selling your solution or people are using your solution, the costs are also scaling. So when cost scales it becomes very difficult to create subscriptions. Right. So you then you kind of like start thinking about how do I scale my pricing in terms of the usage which takes care of the cost itself. So that's one of the let's say key principles or reasons why you will see consumption based or hybrid kind of pricing becoming more popular. The second thing is when you have solutions which are revolutionary, let's say technology, which is going to change the whole arena of how we do work, how we think about things, how we think about a solution, how we think about cost even, that's where people are more skeptical about the solutions because they don't really know what they're going to get out of it. What is the return on investment, how much I'm going to spend and what's the value I'm getting out of it in those instances. You want to drive adoption, you want to get the solution in the hand of people now to get in the hand of people. You want to follow a land and expand strategy. Generally product led growth uses various pricing or all of this play into that realm and helps you to kind of like get in that regard. So I would say that's the second thing and the third thing which is also very important, that companies have been successful doing consumption on users based pricing. Look at the snowflakes of the world, the AWS of the world. They have figured out a way, they have made the market also adopt the way they go to market, the way people think about technical solutions and everything. So that's another thing. So if you take all of these three in account, like the cost piece, market expectation, the solutions, but they're more revolutionary now than before and it's more of let's say greenfield. And then the third one is there have been companies who have done this very well and have been able to drive the market confidence. So taking all those three things together, I believe that it is at the right time to make this shift and it is a necessary shift and it is a pivotal moment as well.

Speaker B: Absolutely right. I mean we see that happening quite a bit in the market right now over the past few years. But each company has its own journey of making that pricing change. Like the market definitely is indicating the directions. And especially at very large companies, there's always a slight distinction between what the CFO of the company who's thinking from predictability perspective and then there is a significant change that somebody else is thinking of with respect to changing pricing. So typically what is the reflection moment? Is it externally driven or does it come from an internal driven? And how was that at Salesforce? Did a customer come up and say was it like looking at the market? How does that inflection point come about in this journey?

Speaker A: Very good question. So there's three pieces of how to think about it. So the one thing is when you have billions of dollars in a business through a revenue model or a business model, it's very hard to risk it. Let's say Google, they made their move to Germany and everything, but when after ChatGPT and OpenAI kind of like pushed them towards that. So that's one thing. So we are a $35 billion company. So every decision you will have to be thinking through what is the uh, implications or risk to our revenue cannibalization and everything. So that's one part that is super important. The second part is again what is happening in the market, what is the trends telling us, how fast is the change happening and if we don't move, what is going to happen? We don't want to be the Kodak of the future. I mean so that's another thing. So innovation, speed and then also like how fast and how like uh, how are your competitors reacting? So all of these things will go into like push and pull in different directions. So yes there is an internal challenge. Of course there are people who will think about changing it quickly. Of course there are people within different business units who do think this is a risk because it's a huge company like not just Salesforce, every company like Microsoft and all of these world they have different business units. Everybody has their revenue targets and everything. Suddenly Generative AI, uh, you're changing the price model. There are implications. Some might win, some might lose. Not everybody's going to win in that big change. So that's one internal challenges and then to the external challenges. If you don't move, if you don't making progress enough, if you're sitting, everybody's noticing investors like there was a lot of initial excitement around generative AI when kind of like OpenAI and chat GPT came out soon we saw like articles coming out as hey this is great but how do we make money with this AI thing? And now we're at that inflection point of figuring out how to monetize all of these use cases, all of this value, this productivity gains and everything. And it is going to happen. Somebody is going to do it. So the smart companies I would say is the ones trying to do it at uh, the forefront.

Speaker B: You're right in the sense that this move that came about was slightly on the news because it was a pivotal shift in terms of how you price. Right. So everybody's been talking about it but taking a step back, I'm sure there are uh, more simpler changes to pricing that happens on a more regular periodic basis. Like that must have happened in your journey. So ah, as someone who does pricing, I mean of course we'll talk about the highlight moments like changing a whole pricing model but on a daily basis or on a uh, quarterly basis. How does somebody within a company think about pricing or pricing and packaging? If I can kind of extend that and I'm just not talking about pivotal changes but even incremental changes or smaller changes.

Speaker A: Yeah, a very good question Abhishek. I would like to explain it uh, let's say, let's kind of divide it into two pieces. Uh, and this is kind of like my day to day job and so I'll go slowly about it. So the first part is, let's say I work very closely with product managers. I work with a bunch of product managers across service cloud and they're all working on different features, different products which they want to launch. So they will come to me. I am kind of like the commercial gatekeeper. They'll come to me, hey Shah, I want to launch this product or this feature and everything. And then we start our assessment. The assessment is in terms of understanding, is this product going to make us money? Is this feature going to make us money? Is it going to make our portfolio stronger? Is there upsell potential, cross sell potential? What are the jobs to be done? Is this something sales can sell? So I'm going to do a uh, assessment in terms of the feasibility of the benefits and then an assessment on the effort side. I mean we don't going to launch something which is going to make us a few million dollars with using all these resources. So I would say that's the first thing. Should we launch a product or not? And if we launch it, should it be an add in or an add on? What it means that should you bundle this feature into an existing product to make it stronger or should it be a separate product of its own? That's I would say.

Speaker B: So does that mean like when the product team comes to you, they're more often than not coming to you at uh, a uh, planning stage, like even before they're thinking of launching a product. So you get to have all of these insights.

Speaker A: Exactly. So there is this book about Madhavan wrote about monetizing innovation. He's a partner from Simon Kutcher and his book, if you read it, it talks about doing this research, thinking about what the customer needs even before you build the product. Because you don't want to build a product with 10 features where customer requires six features or wants six and are willing to pay for six and then what do you do with the rest of the four? So yes, we do have these discussions very early on. As before, even the product work and the hypothesis building and everything in terms of the pricing and packaging is happening and uh, after a project is approved then we start working on the commercial framework and all.

Speaker B: So that's awesome.

Speaker A: Yes.

Speaker B: I mean I have read the book and I've had a chance to meet Madhavan very briefly once as well and very fascinating thoughts like in terms of how to think about pricing, but how does it get in implemented in reality? So for example, many, many early stage companies, I have built a couple of early startups myself. Theoretically what he's saying makes sense, right? Like, but more often than not till you reach a certain stage, right. You're primarily worried about gathering logos, getting customers, trying to get feedback and very difficult to think of pricing as a lever. Very, very early. Right. Maybe very seasoned companies do that. So how do you kind of like think through that? Like on a practical level when do companies should be thinking about it from implementing pricing? Because let me put in a different way, a company who thinks about pricing very, very strategically, very early, at an early stage is still going to give fairly large discounts of workaround if you have a big customer coming and signing up with you. So how do you work through this paradox in a certain way?

Speaker A: Very good question. So first of all we were talking about products we, we approve or we don't. And then let's say from a list of 10 there's two or three which get prioritized or like resources allocated and then we start building the pricing and packaging which is obviously the research and all of that. Now going back to your question, how do we do it? Smaller company and everything and bigger company, I would say the biggest challenge and uh, there's two pieces of it. Uh, when you are a large organization like the Salesforce and the Microsoft of the world, you can actually do a lot. You have resources, you have 10 paths you can take. So it's more about should I build this feature first because it helps my product today or should I build this feature first because it is going to help me gain customer acquisitions and everything. So that is a very important thing how you prioritize projects at large enterprises because you have resources. When you go to the smaller scale or uh, let's say down market, you already have a market leader. Let's say you are going into the commerce e commerce world. You already see Shopify is there, they've done all these 50 features and everything. And you know out of those 50, 20 are uh, must haves. So then the prioritization and project approvals and everything becomes a little less important because you know already what you need to do and then how do we get there? So execution and implementation becomes a little more important. So I'm just saying like yes there is a strategic part but then again for the bigger companies it's more of the choice. You don't want to make the wrong choice. No, that makes sense.

Speaker B: Right, like so I'M um, just going to go back to the early conversation which we kind of moved away where you said you had talked about how a pricing team works within the org, right. So you spoke about the product working with you very early and you said there were two parts. So I'm just going back to that because I think that's an important aspect to understand how pricing teams function within a large organization.

Speaker A: So we talked about projects coming in, we do an assessment, then we work with our Execs like the CPO and people were reporting to about uh, different GMs and all. And then we get projects prioritized. But let's say out of 10, three projects on products got uh, prioritized, which we are planning to launch in the next three to six months. Then I start working on the real pricing and packaging work. So you build your hypothesis in terms of what is. There's three pieces. When you were doing pricing, the first piece is packaging. What is the offering that is going out to the customer. So you want to make sure you have all these must haves the customer really needs. Your packaging includes those. If you are targeting different customer segments, you make sure your product or packaging is aligning to those different customer segments. So very important piece. We spend a lot of time creating hypotheses around those. The second piece which is very important is the price model or how you charge your customers. So whenever people think about pricing they're like, oh, what's the price? The number? I mean yes, it's important, but the more important part is how do you charge your customers? So what is your price model? Is it a subscription, is it pure consumption? Is it hybrid? Very important question today. And then the second piece is what is that price metric? So how does your value scale for your customer? And when that value scales, how do you get a cut of that kind of value your customer is realizing? And also how do you make sure it's something simple and predictable? So if you have those two pieces sorted, you are kind of like sorted on um, how you charge your customer and you have made sure it's a win win situation. And then the last piece is we have to figure out the price. How do you figure out the price? Price is a result of the perceived value in the market. So you want to understand the perceived value of your solution versus the perceived value of your competitor. So you have that. And then the second piece is your strategic objective. So you can have a lot of value, but you can price yourself low because you want to gain market share, but you can have A certain amount of value and then charge a premium as well, because you want to maintain your price premium and brand premiere. So that's like the last. So if you think about pricing, packaging, first, price model, how you charge your customer, and the last and important piece is what you charge your customer. This is how I would say, generally the work goes in. So you do the hypothesis building, you create the hypothesis around all of these three pieces. You go into market research, again, very important, talking to customers, talking to sales, talking to people on the ground. And you validate these hypotheses, you gather the insects with which helps you to finalize and craft the final pricing and packaging recommendation. So I would say that's kind of like the process takes around four to six weeks. And then in the final two weeks or one week, you do like a lot of modeling in terms of understand, like what happens if you go into this new pricing and packaging? What is the impact to your existing customers, new customers? And the end goal is always to make more money. So if you're making more money, so it's good.

Speaker B: Absolutely. So you're right. So essentially what you're saying is it's something that takes about two months and on an average to kind of like change, soak. What's the operational lift behind that? So yeah, of course the product and the pricing works very closely, but who else is typically involved in this process? Every time you do, you're looking at something like price, right? Who do you need to buy in internally? Like for example, does the finance team figure in? Right. Is that like a business team or a business case that you have to go make? So who are the different stakeholders that have a say in it? And who needs soft or hard influence when it comes to pricing? And I asked this because we've built like a pricing billing company, and many times we talk to customers and we ask them, hey, who is responsible for pricing? And many times till a certain scale, it's always the answer is like, hey, it's something that we do together. It's just different people involved. Like of course, at companies of scale, that is a pricing team. But I'm sure even you need buy in because such a key think about the entire company, this pricing aspect. So who all do you need to get in? How does your job work as, uh, a diplomat within the company? If I might put it that way.

Speaker A: A very good question, and this is one of my favorite questions, because when you're working in pricing strategy or growth strategy, you're working across organization. So yes, in salesforce, the Pricing organization is part of corporate strategy which reports to our cpo. So we are working closely with product. Yes, There are, uh, key stakeholders. They're a partner in client and everything. But then we work with very, very important other stakeholders who are critical to the whole process. So let's go one by one. We work on the strategic part. Like, oh, um, I'm like, this is the strategy and everything, but is this strategy something that can be implemented? Can this be something delivered to the customer? There's a lot of nuances there. Product operations is our partner in time there. So every time I build a strategy, I would reach out to my product operation contract, like, hey, man, I'm putting this together. Does this, like, work? Are these skews available? Does this work with this solution? Does this work for here and there? So that's definitely the feasibility of your strategy needs to be figured out. So they're important. Go to market is super important. Go to market is the ones who help us in terms of we are targeting different segments, right? So are these the right segments? Is this the right bullseye? Uh, is this the right ECB up, let's say revenue uplift, we are projecting and everything. So they help us in that regard and helping us with some of the modeling and making sure we target the right segments and everything. Then we have revenue recognition. So when we are creating our different solutions, we have different clouds within Salesforce, like, as I was mentioning, and they operate like different companies. And then there is a revenue attribution recognition piece. So I have to work with them very closely in terms of making sure that the pricing and packaging works in the way it's expected to recognize the revenue in the appropriate way. So there are another one, finance, again, very critical. Right? I mean, we have cost, we have margin targets. So you have to go to finance every time and try to understand what are their expectations and you aligning your product and pricing strategy, your discount approval matrixes and everything accordingly. Then we have another team, which is renewals. So again, you're bringing a new solution, but then again, you have existing customers. How does it impact them? What do we do with them? What is the migration strategy and everything? We work across that. And then last, I would say, is product marketing super important? We are, uh, doing all this strategy and we are thinking this is the value we want to communicate to the customer. Then our amazing product marketers are the ones who are able to translate our thoughts into, let's say, promotions, marketing materials, stories and narratives which help in that regard. So, yes, I'm working Very closely with all of these teams, more closely with product, of course. But as we move from the strategy part into like, hey, this is what we want to do. That last two months of the product launch, we're working all together. Fair enough.

Speaker B: Right. That, that brings me to two actually very interesting problems that I've faced. And like, you know, many, many people

Speaker A: who uh, have speak about, maybe I'll

Speaker B: go one by one. The first aspect is respect to the timing of it because you just spoke about it, it seems like such a large lift. So let's take the example, for example, Agent force, like when you move for that big, hey, we're going to do $2 per conversation kind of. This could be something that takes six months, 12 months, like the, from the way you talk about in a large company. And once that kind of becomes the timeline, then are we only looking at pricing lesser than we should? Right. Because that is the school of thought where, hey, pricing should be something that you look at every day. It could be to be super granular, it could be different for different customers, different segments. But just the lift associated with that is so large it makes it increasing. So how do you bridge this gap about wanting to be very flexible? I think about pricing more regularly and the time taken to just simply implement m any change or operationalize this change.

Speaker A: That's uh, a very logical question. And you're right. Pricing should be iterative. You should be keeping an eye out. We should like trial and error and all of those. Yes, that's exactly correct. All of those things. So when you think about a large company, yes, it takes a long time to launch our, uh, pricing or let's say launch a product or everything because again, you have prioritization, all of these different stakeholders, and then you want to button it up before you launch it. We have more flexibility as well in terms of different things. So let's say you send out something, you priced it, maybe the price is not right. How do you notice that the first thing, it's not selling as much. What you'll do is you change your discount approval metrics. You make it looser. So that is easy. That doesn't take two months to change. That is something I can do in two, three days. I'm just saying. So then you have more flexibility and you're driving that. And then you're doing some more research in terms of figuring out the price and everything. There are other ways you can provide concessions to the customer. So going back to your original question is, yes, it takes time to fix things. Obviously a Larger company, but we also have more things we can play with. So even if the price is something I am anticipating is not correct, I uh, can have that time doing fixing some other things like making the discount approval metrics more flexible, providing some promotions or swaps or something else. I can buy some time in order to fix the pricing and packaging. So just like, yes, it is iterative something you should look at. But then again at larger companies you have that flexibility. And another thing is larger companies, things move slower. Like even if it's a deal, the deal is going to be huge and it's going to take six to eight months to happen. It's not like oh, somebody's going into an app and buying something, right? So that's another piece as well.

Speaker B: You know like went to the famous dialogue in Dune, right where they say like we plan in centuries. So that kind of like is applicable to pricing in a certain way. Because you plan something that's going to take a fairly long time to even understand whether this is right or not. So as someone doing pricing, how do you measure success in smaller intervals? Because it would take, you've done something, it would take two years, three years, five years for you to actually see the impact of it. But how do you know you're on the right track? Or how do you measure like okay, this is what needs to be done in a shorter time frame.

Speaker A: So one of the key things in these instances is setting the KPIs accordingly. Because when you are thinking from a uh, portfolio standpoint, a product standpoint, there's a long term view that okay, I'm going to do this, maybe I'm not going to get any benefit in the next 12 months because it's going to increase the value of my product. It is going to create like some perception and everything. But then the next year onwards I'm going to include this add on and they're going to sell like hotcake together. So having those incentives, like short term, long term, what are your goals? You set those up and then measuring accordingly. So is your goal regarding cross sell? Uh, is your goal regarding upsell? Is your goal regarding getting more new customers or a particular segment of customers, is your goal improving price realization. So I think people have a uh, challenging time setting up the goals, goals and what they want to achieve with their monetization strategy. I think that's the first piece and a lot more focus should be going in there. And then the second piece is obviously you should look that this was what I was planning to achieve and to achieve this, this was the strategy I was taken. And so you do like that backtrack calculation or look back and why it's not happening. So yes, I would say it is challenging, but we should set up the goals in the right range so we can measure that.

Speaker B: Yes. Can we go a little deeper into that? Because this is something that fascinates me a lot about pricing. Because end of the day there's a lot of data that you use to kind of like take a decision, but then you have to make that case to somebody who has to see in this case, it could be the CPO or like, or Alex Minioff, in which way where you're saying, okay, and, uh, somebody has to buy into that and then wait for it to play out over a longer time. So maybe in your experience, like maybe even one before Salesforce and one we can talk in Salesforce, you, uh, can take a couple of projects or if I might say, like some things that you got a pricing change or an arts thing that you did and how it worked out. Maybe we can go into what are the things, like when you say the goal, set a goal or make a plan, how do you go about doing that? How was the research done with respect to pricing? Are there tools, techniques to do that? And can we maybe use one example of a use case to go through that in slightly more detail?

Speaker A: Let's do one. Like in details for sure. So in Simon Kutcher, when we used to work there, one of the, uh, key projects I would say is like a pricing diagnostic. So, uh, what you basically do is, let's say you hired me for your company. I'm like a doctor coming in. I do a diagnosis and I tell you, these are like the 10 things you should do. These and this will give you this benefit. So now let's kind of like go through what are the things I, as a pricing strategist would look at. Let's say Abhishek, you hired me, I come in. First thing I would ask you is like, for all your transactional data, all of your transactional data and everything in terms of revenue and everything. So then I'm trying to look at what I'm trying to look at. Okay, you have these different products. I, uh, will look at what is your discounting trend. So if I see there's a lot of discounting happening, and that gives me an idea. Okay, maybe the list price is not correct or you don't have the right discount approval metrics of the processes to do good price realization. So then you look into the next layer of things, maybe your list price is not correct because market research will tell me that we'll fix that or your discount guidelines or uh, processes, uh, are not set up. We'll set that up. So that's one second thing you'll look at is, okay, what is your packaging structure? I will ask Yabhishek, who are you targeting? And you will be like, oh, I am targeting small medium businesses and enterprises with these two packages. And then I will look at your package, uh, like the customers who have bought it. If I see all the enterprise customers buying your small medium package, that means your packaging is not correct, you're giving away too much in your basic package. And then enterprise package is high price, even more things that people don't want. So then we will work on fixing your packaging structure. That okay, let's go back, let's look at all the features, let's distribute them. Um, again, so we get the enterprise customers to buy the enterprise package. So that's one of the packaging ones. Another thing we would look at is are there cross sell opportunities? Maybe you're selling burgers and then you're selling fries and drinks. Altogether, how do we create a happy meal? So you try to see which product is getting attached with which product, what percentage, how frequently and everything. And that helps you to create bundles, which promotes cross sell. So first you have to identify that opportunity for a cross sell and then you try to grab that opportunity. So I would say, and that's another one. Then if we kind of like continue. So we talked about price, another one would be, let's say your win loss analysis. I will look into that. Generally companies who have a recording like, okay, why did we lose this deal? It becomes easier to dig into it if I see that we're losing deals against competitors because of price more than 20, 30% of the time. Then let's dig into that. Like maybe our price and value that is not connected or not aligned, it's misaligned and that's why we're losing so many deals. So these are like the common layers of things you'll be looking at instantly and making hypothesis around them. You'll have an initial hypothesis like, oh, win rate is declining. That means there's a misalignment maybe. And then you do a uh, double click. And when you do the double click, you might see that, oh, it's not just you specific, there is something happening in the market itself. And uh, that's why this is happening. So it's not related to your product or your Value or your price, it is mostly related to something else and it'll pass within three to six months. So just to give you an idea, so generally in Simon Couture, I would go into a company and we will run a diagnosis and at the end of the day we'll come out and saying like, hey, you have 10 issues. Your pricing is not right here. So you fix this, this is a $10 million opportunity. Your packaging is not right. So you're missing out on this customer segment who you were supposed to target. You fix this, this is a $5 million opportunity. And then uh, you see like 10 initiatives you can run which will give you this amount of impact. And even in Salesforce, this is how you do it as well. But then we're not like a consultant right now. You don't look at the overall portfolio every day and do diagnosis. You know, the initiatives that are coming in different directions and you try to drive them.

Speaker B: So it's the same example if you had to take it from, let's say some coach and put it to Salesforce within a bigger company, how would that work in terms of like, I mean, however specific, whichever we can talk about, like in case of a price changing happened and how did you go about that and maybe even talk a little bit about the result of it. Like if there's something that, where he could go back and say, hey, we did this and this is how it eventually helped or even a failure. This, we tried this, but it didn't work out because of some reasons.

Speaker A: Yeah, I mean, eventually there's two ways I would say we're thinking about pricing is. And um, one is when you are like a consulting firm like Simon Kutcher, you're going in, you're thinking about how do we improve revenue, how do we increase it, what are the revenue leakages and then how do we stop them? We make the company grow and everything. So they're looking at a holistic portfolio. On our organizational standpoint, we do the same thing in Salesforce as well. We have a different team which works across the different clouds and does company wide initiatives. And then there are people like me who are more focused on new product launches. So I don't look at like, okay, this is the overall Salesforce portfolio. We make $5 billion today. I'm just making up numbers, but we are missing out on 500 million because of these. These things are misaligned. So there is a team who's working on that and they do those diagnosis and they're thinking about company wide initiatives, how do we do a uh, company wide price increase? How do we monetize something across the overall organization and everything? So those are more company wide initiatives in terms of my day to day, as you were asking, how do I use those frameworks on a daily basis? Yeah, definitely. Like when you are thinking about pricing and packaging. I was just talking to a friend today about a different discussion and he was asking me the exact same thing. He works in consulting and he's like, man, what research and everything do you do and all that. I was like, one of the things you have to understand the difference between consulting and corporate is in consulting you're trying to prove your value, prove your worth and prove that I have looked at all these 10 things and this is the right answer. In corporate you are using common sense a lot as well. Why I'm saying that is that let's say you have an anchor solution which you charge $100 for now you are bringing something incremental. It's like you have a car. These are heated seats. Now you don't need to do all the research in the world to come up with a price of a heated seat. You already know that nobody's going to pay 10% more than the car as well. Um, so you already have your upper limit and then it's more about like what is the relative value compared to the anchor product itself. So let's say when I'm pricing it, I already know that this hundred dollar product I can charge something between five to ten dollars. And now let me try to fine tune this. If you are like a consultant, you're like, let me do all this research and I'll come back and this is the right, right answer. So nothing wrong with it, it's just that how you're doing the work you're assigned to do. So that's what I was telling my friend was talking to that whenever it's a revolutionary thing, like it's very native where there is no common sense to prevail. Right. It's so new. I think it's right to do a lot of market research and everything and you also have the flexibility to do so. But when you are in kind of like launching products every now and then and you really know the portfolio, you know the market trend and everything, common sense is what actually helps in terms of making a lot of decisions. So yes, you might think, oh, you're doing all these things and numbers and all of that art and science. Yes. But common sense is also very important.

Speaker B: Like I said, I agree in the sense More often than not in a category that exists. So that is not too new, right? I mean more often than not, common sense prevails in terms of how do you want to price? Like you have data from competition, for example.

Speaker A: Agent Force is completely new. I mean generative AI and everything totally new.

Speaker B: Exactly. So in an existing thing it makes sense. But let's take Agent Force for example, or any new revolutionary technology or just something new where the value metric is not that evident, right? You want to iterate and say, okay, should I be charging based on how

Speaker A: much it costs me?

Speaker B: Should I be charging based on what the eventual customer is finding? Value or an Agent Force itself? How is it different? Does the process change or does it become different in terms of how you go about doing that for a new versus an existing system? Right? Where there's competitive data that is understood mechanism when the customer comes and says,

Speaker A: hey, you know, this is the need

Speaker B: and uh, this is how I get built. So tell me, your pricing is very different from when a customer comes in and how are you going to price me? Why are we pricing me on this metric and not on this metric? Did you face customer backlash? For example, when positive or negative, I would say backlash. Wrong. What are positive or negative feedback from customers with respect to Agent Force? Maybe some stories on how that worked out.

Speaker A: I mean custom price is something everybody complains about. So that's like yes, but I'm just kidding. But going back to your overall question, right? I mean, how do we do it differently? So Abhishek, the answer is simple. If it is something new, you just talk to customers more. I mean you do more market research. If you, let's say it's existing. I, uh, talk to five salespeople, I figure out, I talk to five product people, two interviews with customers, done. If it's revolutionary, let's do focus groups, let's do surveys, let's talk to customers more. Let's see what the experts are thinking. Like what are the uh, generative AI experts? What are the consultants of the world? So we do a lot more research, we do a lot more kind of like information gathering. I would say that is the biggest change in the process. And then also when you have a lot more information, how do you align people to that information? How do you make decisions? So everything gets a little bit elongated in terms of the depth of how you are looking into it. But other than that, the principles are the same. You still need a packaging, you still need a price model, and you still need a lease price. So these are your Three pieces you will try to answer the large companies

Speaker B: also you mentioned about like having a lot of information so talking to experts. So do large companies also use external continuous. For example, do you work with external consultants on projects where you being the internal, the pricing team or is it more often than not beyond a certain scale, something that becomes in house?

Speaker A: Oh, of course, I mean like consultants. Where are they going to work? I mean of course large companies hire consultants. But yes, we do work with consultants, of course. I mean it depends on the initiative, depends on the corporate goal and everything. What are the questions we're trying to answer? But yes, of course we work with them fairly close and definitely they answer like high level questions and we take parts of that or those insights and build on um, top of it, fine tune it and go to the final level. But again, to answer your question, yes, they work with us. Of course it's not like in house like all the time, but it's uh, case by case specific, initiative specific. I would say is it fair to

Speaker B: say that external consultants bring in the market perspective because they have data across a wider variety of this thing of the market kind of customers and then the in house team can then put their needs onto that model in a certain way to find what's the best pricing? Is that a fair summary?

Speaker A: I would say yes. I would say there's two pieces of it. One is they have expertise of best practices they've been implementing. They know like they've worked across different companies, they have their own benchmarks and all of that and also their own processes which have been successful as a consulting firm. So I would say that's one thing. And the second piece is yes, they have market insights but at the same time, let's say you want to run a large scale market study, um, so you can engage the consulting, you can do it in house like hiring vendors and everything and doing it yourself or you can use the consulting firm to run it generally be able to run it in a proper way, get the right insights and everything because they're doing it much more regularly. But then again there is no right answer. But generally consulting firms, they have best practices. They're used to running market research, uh, market large scale market studies. And that's why they're able to answer some questions or give some insights which are very valuable.

Speaker B: So maybe, you know, thanks, thanks for that. Maybe a couple more questions before we kind of wrap like one question that's something that I have given a lot of thought about and how does this affect sales? So for example let's say somebody's been selling a product that is on a fixed plant like and um, they have, the sales teams have incentives that are right to it. Now uh, suddenly with the change to more of a usage or hybrid kind of model now your entire incentive structure has changed. So how does somebody now the question then become the second order effects rather hey, do I send to this customer or do I send to one customer who probably is going to use me more and so on and so forth. So how does incentives and sales of field teams sell differently because of pricing changes? Have you seen that happen in naivel? Have you seen kind of questions that comes back from there with respect to this?

Speaker A: Definitely. So when you think about pricing, growth strategy, they're all kind of like connected. So when I was in Simon Kutcher we were always like we work on packaging and pricing, we work on go to market and then we work on sales effectiveness which is basically you need to structure your sales incentive and everything in such a way that you get your price. Like all of these strategies getting implemented in the way you want. So very important question you ask here Abhishek, because let's say you're uh, compensated in one way and you're used to one way of selling. And then there's the big shift. Previously you'd be like, oh, I sold 1 million. It's predictable revenue because it's subscription and I'm going to make 10% of that. Everything's great. Now you're selling something worth five bucks and then you expect them to use up to 1 million and if they do, you're going to make that money. So that is the big disconnect and it is something we are working through. And I think because the whole industry is shifting towards so you're looking at best practices. What are the snowflakes of the world have done? It's not like Salesforce or others who are moving into consumption based pricing are the first ones to do it. So what have the others done? Um, how have they structured it? Even the way you go to market becomes a lot different because previously yes, customer success is very important, but it's not as important as it is today. Because unless your customer, you can't have shelfware anymore. I mean your customer needs to use your solution so you can compensate yourself. So all of those pieces very, I uh, would say fluid right now. People are trying and thinking through them like how do we make it predictable not just for like the salespeople but also for our customer. Because at the end of the day you can't go and give them a big surprise as well, like, oh, you were supposed to spend $1 million, but for some reason it became 2 million. So still fluid and still to be worked through.

Speaker B: Fabulous. And one last question before we wrap this. We've spoken about what happens before pricing changes and how does somebody working at a big company or the pricing team, um, think through pricing? So to leave our audience with one thing would be like, what happens after? So a, uh, pricing implementation is done, you've changed pricing. So what is it then? Also the pricing team's responsibility to continuously be and track that. So what happens after a pricing change? How do you evaluate success, failure of something that you've implemented?

Speaker A: Perfect. So first of all, as I was mentioning, you have a set of objectives. So for example, I launched a product, the main goal was we wanted to increase, let's say our customer count in a particular segment. So we did the packaging, we increase the features or the value in that particular segment specific package. So we can kind of like drive adoption more in that use case. So now you have a specific objective. You have also made sure, like, what are the different things you're going to look at, like win rate, you're going to look at that, you're going to look at price realization for that particular segment, all of the things. And then after three months or two months, you make that time period, what is your deal velocity and how frequently you want to look back. Maybe every quarter, then you look back like, is that being met? If it is not working the way you want it, then there is something happening. So then you have to double click and figure that out. Um, so that is the responsibility, I would say, for pricing strategy team, setting up the objectives, the monetization objectives, what you are really trying to achieve. Like there can be 10 things you're trying to achieve and it is not just specific to only revenue. People become very siloed onto like revenue uplift and everything. Yes, that's important, but that's the most tangible thing. But there are a lot of intangible things you can also be playing with. Set that up and then go and track every quarter. Look back if you see things are not working accordingly, do double click.

Speaker B: Awesome. Thank you, Shah. Thanks for your time. I mean, I really enjoyed this conversation and speaking about pricing specifically in big companies, and it's been something that I've grown to like a lot and I think adds a lot more value than companies realize. So thanks for this conversation and I hope you enjoyed speaking with me as.

Speaker A: No, I loved it. Abhishek, thank you. You asked tough questions. But then again, what's the fun if you didn't so always love talking about pricing and everything. It is super important. Getting more complicated day by day with everything that's happening and all of these shifts and everything. So again, thank you for inviting me and, um, giving me the opportunity to speak about a topic I.