How Customer Segmentation Leads To Better B2B Pricing Strategies

Christian Klepp  00:00

Chris, welcome to this episode of the B2B Marketers on a Mission podcast, and I’m your host, Christian Klepp, today I’ll be talking to Dan Balcauski. He’s the Founder and Chief Pricing Officer of Product Tranquility, who helps high volume B2B SaaS (Software as a Service), CEOs define pricing and packaging for new products. His approach emphasizes understanding customer segments and measuring value in ways that drive long term growth. Tune in to find out more about what this B2B marketers mission is. All right. Dan Balcauski, welcome to the show, sir.

Dan Balcauski  00:37

Good to be here. Christian, thank you for having me.

Christian Klepp  00:39

Great to be connected, Dan, and I’m really looking forward to this conversation, because this is going to be a first for the show. We’ve never had anybody on to talk about this topic. Nonetheless, it is very relevant and very pertinent for B2B marketers. So let’s dive in. Shall we?

Dan Balcauski  00:57

Let’s do it. Hopefully I can clear the high bar you’ve said already for your listeners.

Christian Klepp  01:02

No pressure whatsoever, none. Okay, so Dan, your mission to I think what you called it was help dispel B2B, SaaS pricing illusions, right? So for this conversation, let’s focus on the topic of how to leverage customer segmentation in pricing for B2B. So I’m going to kick off the conversation with this question, why is segmenting your audience crucial for setting prices that reflect true value and maximize revenue?

Dan Balcauski  01:33

Well, I’m really excited to dive into this topic, and I’m going to actually probably do a faux pas right off the bat, which is I’m going to ask the host a question to his question. So Christian, what should a beer cost?

Christian Klepp  01:50

Where is it brewed? Is it imported? Is it local? Ingredients, alcohol content, I don’t know. Maybe $1?

Dan Balcauski  02:02

Maybe $1 okay.

Christian Klepp  02:03

I’m hoping it’s $1.

Dan Balcauski  02:05

Okay, so, Christian, you just articulated several different, what we call attributes of that product. What type of beer is it? Where is it brewed? What’s the alcohol content, things you didn’t comment on is that beer in the grocery store. Are you at a bar or nightclub? Are you at a sporting event or a concert? That same beer that might cost you $1 you’d be happy to pay $1 at the grocery store. You’re at your sporting event, they’re going to charge you $20 I don’t know what the Canadian US conversion is this day, so I’ll stay in the US denomination. I think it’s about parity, last time I checked. But nonetheless, that context is incredibly different. 

Dan Balcauski  02:51

You know, I’ve asked this question before, and people are like, well, I don’t know. I don’t drink beer. I’m not a beer drinker. So they’re a non market participant. So I think it’s interesting, because where your head went to is incredibly common when we’re working with technical teams, technical founders building software products. Hey, why is your product better? Well, we have feature a, b and c, and our competitors don’t have they don’t have those or or they have x, y, z, but they don’t, aren’t as good as ours. 

Dan Balcauski  03:22

Value, like beauty is in the eye of the beholder. It’s only exists in the consciousness of men, and it’s contextual and relative to everything else. When you’re at the ball game and the guy’s selling you that beer for $20 you may not be happy, but what are your alternatives for you may be in a celebratory mood, okay? Whatever I knew kind of getting into this, but there’s also very legitimate what we might term price fences. There’s security at the front, patting you down, making sure you didn’t bring in your own alcohol. The cruise lines know this extensively, heavy screening on your luggage, because that cruise ship ticket relatively cheap, almost no margin. They make all their margin on alcohol, so they want to make sure that you’re buying what they have on ship at a captive audience. 

Dan Balcauski  04:16

And we could play this it’s not just alcohol. We could play this game with any commodity. You’re walking down the street and you stop, it’s a hot day, you pop in a gas station, buy a bottle of water. I guarantee you your valuation and how much you pay for that bottle of water be very different if you were wandering in the Sahara desert for seven days. What does all this have to do with the topic that you hinted at the beginning is that customer segmentation is important to pricing because the value rests in the eye of the consumers. And what we do with customer segmentation is we try to create relatively homogenous subgroups of customers that. Have similar needs or in or in similar contexts, and that way, we can create offers, create products and price them to meet the needs of those specific customers.

Christian Klepp  05:14

Wow, you went really deep, really fast, and all of that from man, I just wanted a beer like but um, you brought up something earlier in the conversation then, and that was a great segue to the next question, because you and I both know the word value gets thrown around these days, and there may or may not be any context, but I know in your world and in your area of expertise, there is context to it, and I’d like to get into that a little bit deeper here. So let’s talk about value, and what are some of the different ways to think about value concerning pricing, I think is one part of the question, and the second question is, why is a clear definition of value essential for successful pricing strategies, and you hinted at it earlier. 

Dan Balcauski  06:03

Well, I’ll answer the second question first, because I think it’s simpler and helps ground the first part. I imagine at some point, many of your listeners took some sort of ECO (Economics) 101 course, where they were introduced to this thing called a demand curve. Supply curve, demand curve, they intersect. Where they intersect is a market, what they call the market clearing price. Those are great tools for economists, and yes, price does have a relationship to volume, but unless you’re probably the professor teaching that every day, a detail that they you probably have faded with the Sands of Time is that those curves often depend upon a very specific market context, which you tend to get taught in Your ECO101 classes are two very specific and rare market situations, the situation of the pure commodity I’m selling, pork bellies, steel, gold or the pure monopoly, I’m the only provider of a good in a market. The rest of us live in this messy middle, and I think most of our econ teachers just didn’t have enough time in the semester to go over what happens when you’re living in that messy middle. But unfortunately, most of us work at companies that are not on those extreme ends, probably for the good, because it’s really hard to be on either of those ends. And you know, the government tends to go after you if you’re a monopoly, might seem like a good thing. Seem like a good thing, and if you’re a pure commodity business, it’s hard to be a go to market leader, because you’ve got a real tough job on your hands. The other foundational relationship besides volume that pricing has is to value. And so it’s one of these areas that folks we really need to understand what that means in order to do a rigorous pricing well, and especially as we’re developing innovative products, because value clarification is a really crucial lever. 

Dan Balcauski  08:14

Again, going back to the technical teams who are building products, we tend to talk in feature language, but put yourself on the other side of that table on a demo call. We’ve got feature a, b and c, and you’re leaving it as remember those old textbooks, they say we leave this as an exercise to the reader to figure out you have left as an exercise to the reader what feature a means in the life of your customer, and so not only in pricing, but also in being able to properly describe how we’re going to make an impact in a customer’s life. Value clarification is the most has the largest room for improvement. So as you mentioned before, value tends to be really over abused, vaguely defined, probably just as much, if not more, than customer segmentation I find. I rest on the shoulders of giants. 

Dan Balcauski  09:09

I use a couple of frameworks that really help to make this specific. So I’ll just name them quickly, and then we’ll kind of elaborate them a little bit more. So the first is what’s called the value cascade. It was elaborated, as far as I could tell, first, by a gentleman named Tom Nagle who wrote what might be considered the Bible of pricing, the strategy and tax, the pricing. If you’re really, really into this topic, it’s kind of a must for anyone who’s serious about this topic. It’s a little bit dense, but he outlines this concept called the value cascade. And then I use a lot of Jobs To Be Done, which has many fathers, Theodore Levitt, famous Harvard Business School professor back in the day, Clayton Christensen, Bob Moesta, Tony Ulwick, many people have contributed to the evolution of Jobs To Be Done. And both of these come together to really give a crisp understanding of value. 

Dan Balcauski  09:16

So the first part of the value cascade. So why is it called the value cascade? Thomas Nagle, he drew a diagram. Sorry, this is not a visual medium, but I’ll try to briefly describe it. If we think of it. What is a cascade? Cascade is another word for waterfall. So if we think of a bar, a series of bar charts where each bar proceeding from left to right is shorter than the one next to it. In order, you have use value, exchange value, perceived value, and then willingness, customer’s willingness to pay and eventually price. So it really helps us understand how we get from understandings of value and tying it to price. So the first part of that is what’s called use value. So this is where something like Jobs To Be Done is super helpful, because use value is really the sum of all benefits a customer could potentially receive from a product. Economists might use a term like utility within the frameworks of jobs to be done. We tend to focus, especially a lot in the B2B world, around what jobs to be done might call functional jobs helps me make more money, save money, decrease risk, save time, those type of things. 

Dan Balcauski  11:09

Why do I love jobs to be done, though? Is because jobs to be done helps remind us that functional jobs aren’t the only type of value we get. We also have emotional jobs, which jobs theory breaks into both personal and social job. So what would be a personal job? Personal emotional job is, help me increase my status, help me increase my confidence. We see this all the time. A Rolex and a Timex have the same functional equivalent. They will tell you exactly what time it is. Why do people pay $20,000 for a Rolex and $20 for a Timex? Because they’re paying for status and emotional value, right? Social value very useful if we’re working for the government or NGO (Non-governmental organization). So, you know, we’re humans. We’re social creatures by nature. We don’t do things only for our own good. Thank God. So we would have things like increasing access to education or health care or voting rights, right things like this. So those would be social benefits. So that’s kind of where the economists lay right. It’s like, okay, what are all the benefits that someone would get out of this? But we don’t live in that pure world, because, especially when it comes to pricing, like use value is almost never relevant in a pricing exercise, because there’s always some option, some status quo. We live in a market environment, again, assuming you’re not in a monopoly situation.

Dan Balcauski  12:30

So Tom introduces this idea of exchange value. So exchange value is okay. I have some reference value. I’m getting some job done, and then I’m positively or negatively differentiated from that other option. So example I like to use would be, imagine our good friend Elon Musk is he’s swapped place with Tom Hanks is on the Cast away Island, and he stranded there for years, and he finally sees in the distance a ship coming. Ship captain arrives on shore. Says, Elon, I’m here to take you to shore. The use value for Elon is tremendous, right? It doesn’t matter that he’s got $500 billion in the bank. All of that is useless to him, like getting back to civilization should be the only thing that matters. So his economic cost is equal to his use value. He should be willing to say, I will give you, let’s leave the ethics of the situation aside, a bit willing to give you all my money and borrow from all my friends for whatever you want to get me off this island. 

Dan Balcauski  13:34

But then, while they’re having this discussion, ship Captain B shows up. Elon’s lucky days he hasn’t had anyone for years or two show up at once. The ship Captain B says, Hey, Elon, you don’t need to pay him your entire fortune. You only need to pay me a million dollars. So now we have a new market price. So now ship Captain A has a decision, right? He could bow out and say, Well, okay, I couldn’t get 500 billion. I can only, you know, now there’s a mark rice. Or now you start creating this situation where ship Captain A says, Hey Elon, I’ll do it for, you know, 1,000,005 but you can sleep in my captain’s quarters, and I have a band on deck, and we’ll entertain you. And, you know, with free flowing alcohol, whatever you want. And so now they’re talking about differentiated value. And this is the, this is the area we most live in but it doesn’t stop there with this value cascade. So this is the transition from use value exchange value. 

Dan Balcauski  14:26

Because even though we may, we do this all the time as marketers, we say, hey, our widget is so much better than what you’re doing today. I’ve got a spreadsheet that proves it. If you’re pumping out this many widgets in your factory per hour. We’ve got, you know, case studies, etc, that prove that, you know, we could increase the amount of revenue in your fact, your factory will generate for your company by 50% that only matters to the extent that your buyer understands that value and believes that value. And so this is where the. The next level comes in, which is customer perceived value.

Dan Balcauski  15:02

Why does this matter? Because humans are not spreadsheets. It’s a very messy economic world. Rarely do we have just a choice between two options, two ship captains trying to outline just between two things. Anytime you’ve gone to buy a complex piece of B2B, hardware or software, what do you do? You ask a couple friends for Hey, what have you used to your companies? You go to G2 or Trust Radius or one of these review sites. You get a kind of short list of candidates. You go to their websites. You look at Logo Gardens, which you know, hey, this is used by Samsung or Disney or JP Morgan. Oh, okay, does everyone go to the pricing page and look at all 300 features, if that’s even available, publicly listed, and if they could, could they even understand what they were looking at? No, because we only can have time for so much where most people are, what economists would call satisficers, not maximizers, like we’re not going to the finest detail on every single piece. And so again, this idea of value only exists in the consciousness of men, and therefore, I guess you should be politically correct, using it for mankind. We have a lot of work as marketers to increase the perceived value of our product. That’s why we use things like customer testimonials, case studies, logo gardens, etc. So and perceived value is finally what drives customer willingness to pay. So that’s how those things tie together. 

Christian Klepp  16:28

Yeah, no. Thanks for, thanks for packing that. Because I kind of knew that this wasn’t going to be a very straightforward answer, right? You’d have to, you’d kind of have to get into the weeds of it, right? I did have one follow up question before we move on, and do you feel that from your experience with the folks that you’ve worked with, you feel that perhaps their lack of understanding of this value cascade leads them to do things where they just default to, well, they compete on price, which then means They’re competing with features, instead of actually understanding, to your point, how their product or their solution delivers value to the customers.

Dan Balcauski  17:10

It constantly boggles my mind how common it is for companies to not understand the value they provide to their customers. I wish I had a bulletproof explanation for this, because I am not the first and only person to say, talk to your customers, figure out their world, where you fit into it, why people made a choice so I would say too often. You know, I have talked to CMOs, VPs of marketing in charge of very important large B2B software companies, who say we have no differentiation. And I’m sorry that is a cop out, if, if the brand manager of Evian can charge a 3x price premium over Dasani, which is charging a 10,000x price premium over in the US, what is almost perfectly suitable substitute coming out of your tap. You as a B2B software person. Do not need to say, cannot say, we have no differentiation. You just have not thought deep enough about why customers choose you. It’s even more extreme, because in many situations, especially as you get into higher dollar value B2B goods, you don’t just usually have one person making the decision. You’ve got one person who maybe this vendor is interacting with, but then they’ve got to turn around and make a justification to the CTO (Chief Technology Officer), or maybe the CEO (Chief Executive Officer) and the CFO (Chief Financial Officer), right? Why we charge? Why we go, Oh, we’re buying a CRM (Customer Relationship Management). Why did you guys just go Salesforce? We went with this other company because XYZ. 

Dan Balcauski  18:49

So if you’re CRM, VP of marketing, and you’re like, we have no differentiation, but they, they bought you, like, at some point, your end buyers had to go have that conversation. It just reflects that you, haven’t done your due diligence to go do that, and therefore it creates a lot of confusion for the rest of the go to market organization, because you’re then sort of left guessing and guiding everyone in terms of, what should we put first? How do we talk about what we do, why we’re better? So yes, I agree, lack of this understanding is incredibly prolific, and I think it leads to a lot of dysfunction down the line. 

Christian Klepp  19:30

Yeah, no, absolutely, absolutely. All right, I’m gonna move us on to the next question about on the topic of leveraging customer segmentation and pricing for B2B, what are some of the key pitfalls to avoid and what should be done instead?

Dan Balcauski  19:45

So there’s a couple of different pitfalls that I would highlight. So the first is maybe the most extreme, and probably your audience of marketers don’t run into this themselves much, but they may run into. It from the C suite executives that they have to talk to, which is we don’t this idea of customer segmentation can be anathema. Within an organization, all our customers are the same. If you are in an organization where your C suite talks like that, I might leave that organization. Might be my point of view, because you’re gonna have a really hard time doing anything well, what you’re probably going to have to do a lot, if that is a situation you’re dealt with, is the product or innovation teams are going to build a product, and then you are going to get told, Hey, go position it for why audience. But it almost never is a good I was saying it is never a good strategy to have either a vague group in mind when you develop a product and go try to sell it to another, or have or have one group A in mind, then try to go sell to Customer B, because there’s just going to be misalignment. 

Dan Balcauski  20:56

So that leads me to step two, assuming you’re not an organization, or a kind of tactical approach too, which assuming you’re not an organization where you’re in that I would say first is look around the building and see if everyone is on the same page in terms of how we’re thinking about customer segments, because it’s more common than you’d imagine, where maybe product and design have a set of personas that they developed, because somebody in their agile training said that they had to have a persona so they could write a user story, and so they went and did some work independently. And then marketing maybe has some personas that they’ve developed. And then maybe sales doesn’t think of personas, but they’ve sort of developed demo scripts or kind of walk throughs based upon some qualifying questions. And if those things aren’t in harmony, you kind of end up in that same situation. So kind of walking around the building and trying to figure out, okay, hey, we’ve got these things, but is everyone on the same page in terms of who we’re talking to? 

Dan Balcauski  21:57

And then I would say number three, and this one is a little bit more intense, assuming that you know the first two are not a problem. A lot of B2B marketers have suffered from inheriting this idea from B2C around using demographics, which in B2B we call firmographics as primary segmentation criteria. And so what the root cause of this is, okay, hey, we’ve got a set of customer segments or personas that we’ve defined, but they don’t actually drive decision making within the organization or determine what customers buy. Because, you know, the simplest example at a high level is SMB (Small Medium Business) mid market enterprise. It’s like, okay, I get it. I guess it’s better than having an all, all one size fits all approach. But you may have an enterprise customer that is acting very much like a SMB because of their particular use case, or how their organization is structured, or the other contextual tools that the department you’re selling to is using. And so that would be the third thing is, if your personas segments are purely defined on kind of firmographic basis, and just quickly, what I mean by firmographics usually some sort of size variable, whether it’s employees or amount of revenue, industry, vertical, department, head, region like, yes, there can be differences between those, but they usually are not what’s underlying the defining purchasing criteria or why they make certain decisions over others.

Christian Klepp  23:39

No, those are some great insights. And I had a follow up question for you, Dan, and it kind of like lends or opens the door to talk a little bit more about market research. So that third point about the personas and them not basing them on firmographics, because that could lead folks down the wrong path. What do you think that they should be doing instead. So what should they be basing the segmentation, or this, these personas, on? Right?

Dan Balcauski  24:07

Yeah, it’s a great question. So there’s, there’s also right, like, who is, who should be doing this in an organization? And usually this is probably something that should be driven by marketing or and, or product, probably jointly together. It’s not something that you I wouldn’t leave it to any other group outside those two, because it does require some intense work. So let me just start at a very high level. When we do a segmentation well, at the end, we need to know two things, who customers are and what they want. The problem with kind of relying on firmer graphics alone is we only we kind of stop and end at the first part who they are, right? We do need that, but we also need to know what they want, because what they want determines the context, the and the value. Goes back to the beginning of our conversation. And so then the question is like, where do you start? And so if you are, I’ll give a little bit of a contextual frame here. 

Dan Balcauski  25:08

If you are in an organization where you have nothing, your first battle is to try to make sure that everyone understands that not all customers are the same. You do not sell the same thing to everyone. People have different needs, and so one way that you can do that is by starting with something like a firmographic segmentation, right? So if you’re starting from zero, where that’s your battle. I would not go off on a deep qualitative research project, because you may have a battle on your hands to even convince people that, hey, we need to think about our different customers separately. And so that’s a good place to start if you have nothing, or if that’s the battle you’re facing. And assuming that you have at least sort of an A, what we might call an a priori framework, right, a firmographic framework, and maybe you use something like Mark, maybe you bought a research report from Gartner, Forrester, or one of these analyst firms, right? And sort of inheriting that like, I even think of those the same way, because, because when we think of a priori segmentation, we’re using sort of characteristics that people have already defined, right? I can go to this CIA Factbook, or, you know, the World Bank, right? And these people have data sets that are already sort of sliced and diced, you know, worldwide, right, that I can already use. And so maybe you start there, and then I want to go and do the next level, which is in depth customer insight gathering, right? 

Dan Balcauski  26:36

And I’m using customer in the broad sense, because some of these people may not are, are unlikely to even be your customers, but trying to figure out, okay, these are all the different market segments that we have from our a priori. Now we want to go in depth and talk to different groups of them. And this is where Jobs To Be Done really helps us, where the idea is that we want to really understand what their context is, what they’re trying to achieve, what they’ve tried at the past. Why that doesn’t work, how they ran their process, who was involved? What were the decision criteria that they used? There’s some really good talks if you want a sort of master class on how to do this. I think it was the business of software conference. Bob Moesta did this live on stage for everyone, where he did a very in depth, jobs to be done, level interview. And I think it was about like buying a car, and I’m going to do a very poor impression of him right now, but the things that he was talking about is like framing it like a you’re filming a documentary. Who was there, what was going through your mind? And you talking to the guy on stage, it’s like, well, we were looking at this hatchback, but, you know, the earlier in the conversation is like, Oh, my wife was about to have a baby. I knew our our new co our old car wouldn’t work for our growing family, and so we’re at the car dealership, and we had the stroller with us, and we tried to put it in the back of the car, and the stroller wouldn’t fit, and he goes, I’m not living the rest of the 10 years I have this car with this struggle, right? Or however long the stroller was be needed for it, right? 

Dan Balcauski  28:08

That’s the type of thing that you don’t get out of, oh, we’ve got analytical data, you know, from our Google Analytics of the people things we’re looking around their websites. Like, no, you’ve got a real idea there of how. Like, okay, oh, people have to be able to fit their stroller in the back, right? Because, I mean, look, you can go on the website and be like, Oh, the trunk diet, you know, dimensions are 3.7 feet by 4.8 and nobody knows what that means until you’re there living it, right? And so, but that makes a lot of sense. And then you have a whole way as a go to market, as a marketer, to talk to that and then build, you know, your messaging around things like that, because you really understand deeply the customers, you know, context and why that matters to them. You know, because they’re not. They don’t need a bigger trunk in their hatchback, because they’re, you know, they’re not also looking at the Ford, f1, 50, because they’re looking at haul and gravel every day, right? And so they need it to be rough and tumble. They gotta put the stroller in the groceries and back, right? So knowing these deeper things only really comes from this in depth customer conversations. And then, as you do that, you have these patterns emerge. And then you can use other statistical analyzes, more quantitative methods, once you have those to further refine if people want that advanced class, I’m happy to go down that road, but I’ve written pretty extensively on my blog about it as well.

Christian Klepp  29:28

Yeah, yeah. I would save that for those who are going to be inspired by this conversation, and then give them an excuse to reach out to you and find out more about that master class. 

Dan Balcauski  29:40

I love that. 

Christian Klepp  29:41

Okay, now we’re gonna get to the point in the conversation where we’re talking about actionable tips, and you’ve given us quite a bit already, but if, let’s just say that there’s somebody out there, whether it’s somebody who’s in the who’s a B2B marketer, or maybe even somebody in the product department that’s listening to this conversation, and you you want them to. To walk away with three to five things they can take action on, based on today’s conversation, what would those things be?

Dan Balcauski  30:08

Well, I definitely would point to those things I already talked about around customer segmentation, in terms of, you know, making sure that your executive team not all understands all buyers are alike, making sure that at least, if that’s the case, the departments are not misaligned on what are those descriptions of buyers and or customers, and then go, if you have that all good going on, talking to you’re actually talking to your customers, because there is no end substitute. And I was actually talking to another CEO who had come to this realization as well, because they, you know, this is the thing. Founders know this in their bones, because they had to work so hard to figure out what customers needed. It’s when companies get to a certain scale and you bring in non founders who are trying to run this process, that insight gets lost, and if you’re still a CEO, founder running the company, potentially, you may just think that everyone has the same understanding as you do, right? But all even that information can get out of date, and markets can change, etc. And so I was asking him, I was like, Well, why don’t people do this? Because the talk to your customers is so it’s, it’s almost cliche at this point, but he’s like, it’s because it’s uncomfortable. It’s like, we like to look at our dashboards because they tell us the story we have in our minds already, and we have this confirmation bias, but we in front of a customer and they’re reaming us out because the product doesn’t work in their environment because of some situation you can’t avoid that. I guess we could rationalize anything else away, but know that it’s gonna be uncomfortable, right? So I guess that’s just, you know, know that going in, but do it anyway, right? I and learn to really love that feeling when I walk out of those conversations and I’m like, Man, I had a totally different view of how customers used our product. And now I have something different, like, now I love that feeling, right? That’s like, that’s a good day. It was like, Oh, I learned, right. So I think a reframe there is helpful as well. 

Dan Balcauski  32:08

And then look, I would say for pricing in general. You know, we could talk about a whole lot of techniques, etc, but two basic things, make sure there’s an owner in an organization that’s explicitly defined, and then have a process. And that process does not have to be perfect from day one, but pricing and packaging is a thing. Your product is constantly evolving. Your value is evolving. Your differentiated value is definitely evolving because your competitors aren’t standing still. Even if your product is the same, your competitors are moving, as some of the AI (Artificial intelligence) companies found out, unfortunately, this week.

Christian Klepp  32:45

Oh yeah, oh yeah.

Dan Balcauski  32:47

And so, okay, well, what happens? Like all right, now, we have a process to revisit it. We have a cadence, right? And someone is what. Someone is in charge of that. And you know, again, one of these things that you’d be surprised how often you know it’s this thing that nobody owns, and there’s not a regular process to revisit when it’s such a powerful growth lever, right? It’s like, we have a marketing department, right? And everyone’s laser focused on MQLs (Marketing qualified lead) and sales pipeline, right? And that’s all around quantity, and that’s good, and we need that. And just you’re like, Wait, there’s only three ways to grow a SaaS business, acquisition, monetization and retention. And all the you guys are only looking at one of these levers most of the time, retention comes up when we hit a recessionary period. Then everyone really cares about their existing customers. Make sure they don’t leave, because acquisition gets really, really hard. But I would say, yeah, having a process and paying attention to it, right? And look, it’s not going to be perfect, but, you know, there’s you’ll get better over time, and those two things will go a long way.

Christian Klepp  33:51

Absolutely, absolutely. And you know, on the topic of retention, you don’t want to ever wait until times are hard. And then you go, and then you get your teams to go to the customer and say, hey, please stay right. I mean, by that point in time, they might have already like abandoned ship, gone somewhere else.

Dan Balcauski  34:09

Yeah, no, I have been violent agreement with you. That is a, not a good strategy, but in times, especially as we saw in the zero interest rate era, where it was kind of growth at all costs, things like retention got put on a back burner as people were trying to do a mad land grab of capabilities and growth. So.

Christian Klepp  34:29

Yeah, absolutely, absolutely, okay, Dan, get up on your salt box. Man, what is a status quo in your area of expertise that you passionately disagree with and why, and I know you’ve got a million, but just I’m only asking for one.

Dan Balcauski  34:46

It would probably be my general dislike of freemium, especially as it applies to B2B companies. I think this is something that was. Are imported, again, from B2C companies, where it sometimes works on the margins, but rarely is a good move, if ever, for a B2B software company. It tends to, you know, the flames are fanned by folks who wave the exceptions when it does work around, versus really understanding that those are the exceptions, and the rule is most people should avoid it.

Christian Klepp  35:28

Yeah, I think, if I’m not mistaken you, you wrote about it on LinkedIn. It’s definitely on your profile, and I think you wrote a post about it, and I’ve written about it a lot, yeah, yeah. But you know, that’s a fair point, and that’s a fair point. Okay, the bonus question, and we talked about this in our previous conversation, so let me see here, in your bio, it says that you completed a solo round the world expedition to 21 countries. That’s a handful, a lifelong dream involving several life changing volunteering experiences and a new collection of friends and good stories. So the question is, tell us about one of your most unforgettable moments during that trip around the world and how it changed you.

Dan Balcauski  36:13

The experience that I would say changed me the most was right at the beginning, which is I did a while I was traveling for a year and a half. I did two 10 day meditation retreats. But the first one, I would say, was there. Every single one I’ve done has been very, very impactful. But that has changed me tremendously. If we were talking about status quo in general that I severely disagree with it’s that we are given this incredible piece of machinery called the human mind with no instruction manual. There are ways of finding out what that really is in 10 days of silent meditation that are not available elsewhere, and the ability to clear the lens of the way you process the world and so many different aspects. You know, there’s so many ways of being that we did not choose consciously. And I’m not one to say that this is the only way to truth, or even that there is truth at the end, but it is a way, at a very powerful way, to unwind What are probably ways that you didn’t even know you were looking at the world through, let’s call it non rose colored glasses, because we all too often account our perception of reality with reality itself. So sorry if that got too philosophical there in the last. 

Christian Klepp  37:55

Very profound, very profound. May I ask where you did the Silent Retreat, or the silent meditation? 

Dan Balcauski  38:00

I’ve done several of them, and two I did while traveling. I actually did the first one here in the States, up in Dallas, and I did the second one while I was traveling down outside of Buenos Aires, Argentina. 

Christian Klepp  38:10

Wow. Okay, so you’ve seen a bit of the world then, huh? 

Dan Balcauski  38:15

Little bit. 

Christian Klepp  38:16

Yeah. Any tips for getting over jet lag just as we’re wrapping up?

Dan Balcauski  38:20

None, none. I’m not. I’ve not conquered that as a skill set. 

Christian Klepp  38:25

That’s a hard one to tackle, huh? Like, yeah, no, fantastic, Dan, this has been an absolute blast. I mean, thank you so much for coming on the show, sharing your expertise and experience with the listener. So please quick introduce yourself and how folks out there can get in touch with you?

Dan Balcauski  38:41

Yeah, well, I really appreciate the opportunity to share what I’ve learned along the way. I try to do that pretty regularly on LinkedIn so folks can reach out to me there. Just let me know. You heard on the podcast, I get separated from the rest of the LinkedIn spam. I try to blog semi regularly, although not as much as I’d like on my website, producttranquility.com, you can also reach out to me there. And I also have a podcast myself called SaaS Scaling Secrets, where I interview CEOs of scale up B2B SaaS companies about how to grow software businesses from 5,10, 20 million and beyond.

Christian Klepp  39:19

Awesome, awesome. And we’ll be sure to drop the link to the show in the show notes for this episode. All right, once again. Then thank you so much for your time. Take care, stay safe and talk to you soon.

Dan Balcauski  39:31

Thank you, Christian.

Christian Klepp  39:32

All right. Bye for now.