Ibbaka Powers Growth

In Pursuit of Deep and Lasting Impact Through Value and Price

MANAGING PARTNERS Karen Chiang Steven Forth Managing Partner Managing Partner Karen Chiang has extensive experience growing technology Steven has been identiﬁed by OpenView Venture Partners as product and services business at all levels of scale and one of the world’s leading experts in SaaS and software maturity. pricing. His work combines design thinking, data analytics and parametric design to pricing. She leads workshops on pricing and investment across North America and has contributed several important innovations to He is an active member of the Professional Pricing Society, pricing best practices. leading workshops and giving talks. Karen is an active angel investor, applying her pricing insights Steven demonstrates his commitment to innovation through to due diligence. angel investing and by managing the 325,000 member design thinking group on LinkedIn. See her skill proﬁle Connect on LinkedIn See his skill proﬁle Connect on LinkedIn PeakSpan Master Class I Ibbaka © 2023 3

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AGENDA ● Why care? ● A three step process ESTABLISH A BASELINE ALIGN GOALS PLAN PRICING ACTIONS ● Consider multiple scenarios ● Takeaway: Pricing Planning Checklist PeakSpan Master Class I Ibbaka © 2023 5

POLL What is your pricing goal for 2024? One can have many goals, but it is easier to plan if there is one goal that the others support. ● Grow recurring revenue ● Improve cash ﬂow ● Increase net revenue retention ● Revisit package / platform ● Price new functionality PeakSpan Master Class I Ibbaka © 2023 6

WHY CARE? ● Pricing is one of the most powerful levers you have to impact growth ● But pricing is often an afterthought ● And most pricing moves are reactive ● To use pricing to impact growth ● You need to plan “If You Fail to Plan, You Are Planning to Fail” — Benjamin Franklin” PeakSpan Master Class I Ibbaka © 2023 7

PACKAGING AND PRICING - PART OF EACH OTHER ● Packaging (the solutions you are offering) and Pricing need to be considered together ● Introducing new functionality is an opportunity to test that current packages are working as intended and for pricing to be tested PeakSpan Master Class I Ibbaka © 2023 8

ESTABLISH A BASELINE ● You won’t get where you want to go if you do not know where you have been ● A baseline is not just a point in time - it is a trend Make sure you know ● Position ● Velocity ● Acceleration For each key metric Picture adapted from Hyperphysics: http://hyperphysics.phy-astr.gsu.edu/ PeakSpan Master Class I Ibbaka © 2023 9

ESTABLISH A BASELINE - WHAT ARE YOUR KPIs? ● SaaS is layered with metrics - consider having one key metric from each of these buckets. This will give a balanced approach to goal alignment. Category Goals PnL & B/S Goals Unit Economic Goals ● Average Selling Price (ASP) ● Add logos (new business) with a ● Deﬁne value and pricing for a new ● Recurring Revenue (MRR/ARR) common proﬁle category ● Net Revenue Retention (NRR) ● Grow revenue - existing business ● Grow an existing category ● Number of customers ● Improve gross proﬁt ● Win market share in an existing ● Number of Users ● Improve cash ﬂow category ● Value to Customer (V2C) ● Optimize costs ● Enter an established category ● Lifetime Customer Value (LTV) ● Reduce operating capital ● Capture more value across the ● Customer Acquisition Costs Requirements value chain (CAC) ● Increase value of assets ● V2C/LTV ● LTV/CAC ● Months to Recover CAC PeakSpan Master Class I Ibbaka © 2023 10

ESTABLISH A BASELINE - WHAT ARE YOUR KPIs? ● SaaS is layered with metrics - you should have at least one key metric in each of these buckets Category Goals PnL & B/S Goals Unit Economic Goals ● Average Selling Price (ASP) ● Add logos (new business) with a ● Deﬁne value and pricing for a new ● Recurring Revenue (MRR/ARR) common proﬁle category ● Net Revenue Retention (NRR) ● Grow revenue - existing business ● Grow an existing category As you plan pricing for 2024 do NOT have too many metrics ● Number of customers ● Improve gross proﬁt ● Win market share in an existing ● Number of Users ● Improve cash ﬂow category ● Value to Customer (V2C) ● Optimize costs ● Enter an established category It is difficult to focus on more than three metrics ● Lifetime Customer Value (LTV) ● Reduce operating capital ● Capture more value across the ● Customer Acquisition Costs Requirements value chain (CAC) ● Increase value of assets One can generally only optimize for one metric ● V2C/LTV ● LTV/CAC ● Months to Recover CAC PeakSpan Master Class I Ibbaka © 2023 11

ESTABLISH A BASELINE - PRICE PIPELINE AND ENGAGEMENT ● Another way to organize your pricing metrics is to use Kyle Poyar’s SaaS Metrics 2.0 1 2 3 4 5 Activate Discover Start Convert Scale ● Ask ○ What role value communication and pricing play across customer engagement ○ What metrics you should be tracking to measure the impact or pricing See SaaS Metrics 2.0: The Case For Next Era Metrics Playbook PeakSpan Master Class I Ibbaka © 2023 12

ALIGN GOALS ● Pricing supports key business goals ○ Positioning ○ Target Segments and Ideal Customer Proﬁle (ICP) ○ Revenue ○ Cashﬂow ○ Proﬁtability What are the key company priorities for 2024? How will pricing support them? (If everything is a priority nothing is) PeakSpan Master Class I Ibbaka © 2023 13

ALIGN GOALS - STRATEGIC CHOICE CASCADE ● The strategic choice cascade for pricing is a powerful framework for pricing governance ● Alignment with overall strategic goals ● Pricing goals Winning Aspirations ● It is adapted from Roger Martin’s ● Pricing Metrics and Targets Strategic Choice Cascade Adapted from Roger Martin’s ● Market Segments ● Target Segments Where to Play Strategic Choice Cascade ● Revenue and Monetization Model Inform ● Value Model and Metrics Constrain ● Pricing Model and Metrics How to Win ● Go to Market Strategy ● Metric Speciﬁc Tactics (ARR, MRR, NDR, LTV, V2C, VR, GtN) ● People Acronyms ● Data ● ARR Annual Recurring Revenue Capabilities ● Systems ● MRR Monthly Recurring Revenue ● Connections ● NDR Net Dollar Retention ● LTV Lifetime Value of Customer ● V2C Value to Customer ● Pricing Management ● VR Value Ratio (LTV / V2C) ● Value Management ● GtN Gross to Net ● CRM Systems ● CRM Customer Relationship Management ● CPQ ● CPQ Conﬁgure Price Quote ● Analysis ● Artiﬁcial Intelligence PeakSpan Master Class I Ibbaka © 2023 14

PLAN PRICING ACTIONS It call comes down to the actions you will take and how you will measure the results + 1. Figure out what you need to learn to make effective choices 2. Develop a portfolio of actions that you could take 3. Have a pricing playbook so that you can take action quickly 4. Explore scenarios about what could happen in 2024 and how you would respond PeakSpan Master Class I Ibbaka © 2023 15

PLAN PRICING ACTIONS - WHAT TO LEARN Every company needs its own list of what it needs to learn - developing this list is the ﬁrst step in planning pricing actions for 2024 (you can only learn by taking action) Here are some possible questions to get you started, but you need your own list None of these questions can be answered inside the walls of your own organization ● How do your customers get value? ● How do competitors respond to a price ● How does a price change impact demand? change? ● How does a price change impact revenue? ● Is our price fair given the value we provide ● How does a price change rebalance customers? ● demand for different packages? ● What packages or functionality do our customers value most? … value least? ● Do we really need to discount? If so, how much? PeakSpan Master Class I Ibbaka © 2023 16

PLAN PRICING ACTIONS - ACTIONS TO CONSIDER The choice of pricing actions will be unique to each company, but here are some you should at least consider ● Increase or decrease prices ● Add a pricing metric ● Rebalance packages ● Redesign packages ● Redesign packaging ● Control discounting PeakSpan Master Class I Ibbaka © 2023 17

PLAN PRICING ACTIONS - FIX DISCOUNTING Diagnosis 1. Prepare a price dispersion graph, plot the Average Contract Value to the pricing metric and look for groups overpriced or underpriced 2. Dig into the these groups and understand why the groups are priced as they are 3. Document all the reasons given for providing discounts Treatment 1. Develop discounting guidance and rules, including both maximum discounts and target discounts 2. Document reasons for applying discounts (implement in Ibbaka Valio, your CRM or your CPQ) 3. Support sales with tools and training to help them use What is the shape of the discount curve? Why? value rather than discounts as a way to close deals PeakSpan Master Class I Ibbaka © 2023 18

PLAN PRICING ACTIONS - CHANGING PRICES Before you make a decision on changing prices perform the following market segmentation Before changing prices 1. Segment your customers by value you provide them and value you get from them 2. You need different strategies for each segment 3. Enhance value or increase price 4. Some customers, in the bottom left, should be allowed to churn out PeakSpan Master Class I Ibbaka © 2023 19

PLAN PRICING ACTIONS - CHANGING PRICES The key question when changing prices ● Price Increase: How much volume (unit sales) can I afford to lose and still have the same revenue … gross proﬁt ● Price Decrease: How much volume (unit sales) do I need to win and still have the same revenue … gross proﬁt ● For SaaS businesses you need to ask these questions in the context of NRR ○ Impact on renewals ○ Upsell and downsell ○ Growth and shrinkage in package PeakSpan Master Class I Ibbaka © 2023 20

PLAN PRICING ACTIONS - REBALANCE Price x Volume = Revenue When you designed your GBB pricing you designed in expectations for the role and performance of each Package ● How is each package performing? ● Is it still playing its intended role? ● What needs to be rebalanced (price, fences, scaling)? PeakSpan Master Class I Ibbaka © 2023 21

PLAN PRICING ACTIONS - REPACKAGING Packaging patterns New functionality, new target markets, new customer needs may mean you need to repackage Modular package design will give you the ﬂexibility you need to redesign your packaging New packaging implies new pricing Modular operators CREATE SPLIT COMBINE CONNECT INVERT SUBSTITUTE REMOVE BIRTH PeakSpan Master Class I Ibbaka © 2023 22

PLAN PRICING ACTIONS - RECAP 1. Address discounting (changing pricing without ﬁxing discounting is like pouring water into a leaky bucket) 2. Change prices Align price changes with value delivered to customer and value captured from customer 3. Rebalance packages or 4. Redesign packaging PeakSpan Master Class I Ibbaka © 2023 23

TEST DIFFERENT SCENARIOS The future is not determined - more than one future is possible - explore alternate future as you plan 2024 pricing 1. Identify critical uncertainties 2. Generate alternatives 3. Select the most compelling 4. Brainstorm how you will package and price under each scenario PeakSpan Master Class I Ibbaka © 2023 24

TEST DIFFERENT SCENARIOS - SOME CRITICAL UNCERTAINTIES Each company should have its own list of critical uncertainties Here are some ideas to get you started ● Customers will find ways to implement AI in ways that make your solution irrelevant ● Competitors will find ways to implement AI in ways that make your solution irrelevant ● Costs increase (computing, storage, bandwidth, perhaps as a result of AI usage) ● A competitor cuts prices ● A competitor raises prices ● A new competitor emerges with a different business model (maybe a multi-sided market) ● Government introduces new regulations on data sharing across customers PeakSpan Master Class I Ibbaka © 2023 25

SOME BASIC PRINCIPLES Is it clear how we set prices? Can we explain this to ourselves? Can we explain this to our customers? Is our website clear on this? Can sales communicate it? Is our pricing unbiased? Do we treat all of our customers in a way that respects their backgrounds and needs and does not take advantage of their situation or weakness. Are we creating differentiated value? Do we use this to set prices? Do we adjust prices based on the value we are creating? Are we sharing that value with our customers? PeakSpan Master Class I Ibbaka © 2023 26

IBBAKA VALIO Ibbaka Valio is a software platform for Value Story managing value models, creating value stories and connecting price to value. It is supported by Ibbaka’s professional services Pricing Model Value Models and Pricing Models are implemented and managed on Ibbaka Valio Ibbaka Valio Stories are customer branded to be used by sales and customer support Value and Pricing Insights are Value Model collected into an easy to understand dashboard Dashboard & Analytics PeakSpan Master Class I Ibbaka © 2023 28

ADDITIONAL RESOURCES ● Ibbaka blog ○ Pricing and Planning: Preparing for 2024 ○ Pricing and Planning: Establishing a Baseline ○ Pricing and Planning: Strategic Alignment ○ Pricing and Planning: Explore Pricing Actions ○ AI Pricing: AI as extension or platform ● Ibbaka on LinkedIn ● Ibbaka’s LinkedIn Newsletter: Grok Value and Pricing CONTACT US Download Ibbaka's Karen Chiang [email protected] Pricing Planning Checklist Steven Forth [email protected] PeakSpan Master Class I Ibbaka © 2023 29

WHY IBBAKA Integrate all 4 of the 4 C's of Experience across critical Team has track record in pricing business functions growing B2B companies ● Customer value ● Product Management ● Customer willingness to pay ● Marketing (not the same thing as ● Sales And having a 2X 10X customer value) ● Customer Success impact on Average ● Competition Contract Value ● Costs Integrates value models into pricing design ● World leader in value model Deep expertise in development CyberTech, MarTech and FinTech ● Directly connects price to customer ● Have worked with numerous value enabling better price design and companies in the security and price setting business communications sectors (names redacted for Advanced analytics platform security and privacy) ● Proprietary software in Julia for segmentation and trend analysis ● Aggregate all data for pricing and value in one place Focus is B2B SaaS PeakSpan Master Class I Ibbaka © 2023 30