How to increase customer retention through personalized pricing

Cactus Raazi


Author and Partner


Cactus Raazi
Cactus Raazi

Episode Summary

Today on the show we have Cactus Raazi, author of Price. 

In this episode, we talked about what drove Cactus to write Price, his theory on; should pricing be personalized to individual customers, and the different building blocks to create a more personalized pricing approach. 

We also discussed the starting point of the pricing conversation within a company, why pricing is often a guesstimation, and why that’s a problem, and lastly Cactus shares different ways to drive expansion revenue from existing customers, by rewarding loyalty.

Mentioned Resources



What drove Cactus to write Price and what was his unique insight. 00:02:05
The building blocks to a more personalized pricing approach. 00:10:14
The starting point of the pricing conversation. 00:17:02
Why pricing is often a guesstimation, and why it’s a problem. 00:21:44
Ways to drive expansion revenue from existing customers, by rewarding loyalty. 00:25:24
How would Cactus reduce churn for a company in 90 days. 00:32:57
The one thing Cactus knows about churn today that he wished he knew when he first started with his career. 00:34:32


Andrew Michael: Hey, Cactus. Welcome to the show. 

Cactus Raazi: [00:01:26] Thank you. 

Andrew Michael: [00:01:28] It's a pleasure to have you today for the listeners. A Cactus is a partner at EXOS a platform designed to deliver all the services of a traditional investment bank re-imagined and tailored to modern digital world. All integrate into powerful model technology platform, driven by data and data science.

He's also the author of Price, where he challenges outdated pricing methods and sets up a framework for companies to be in harnessing the power of modern analytics. To create personalized pricing for customers, the end results pricing innovation converts one-time transactions into recurring revenue through customer loyalty.

[00:02:00] So my first question for your Cactus is what drove you to write price. And what was the unique insight you believe you had? 

Cactus Raazi: [00:02:05] I'll answer that sequentially. What drove me to write prices is a combination of what I was doing in my day job at the time. I had started a a startup that was focused on using analytics to price bonds.

And this is, this was something you in 2015, 2016, and 17, where the application of data analytics to price bonds, which is the industry that I'm an expert in. And at the same time, I started to think about the marketing notes that I was receiving the, my pricing experiences, both at. In hospitality and travel because I was doing a lot of traveling.

I have friends in the restaurant industry, my mom's a hairstylist, and I really started to think more and more about price. And I started to read books about pricing theory. And although I, by no means I'm representing that I'm necessarily an expert on pricing theory. I found that the perspectives in most of the books [00:03:00] were a I would call it a pre data analytics revolution type of a perspective.

And what I mean by that is even a small, all business can now use the customer data. Who are they selling to who's coming back on a recurring basis to start to be thoughtful and think about whether every customer should get the same price. And so the book is really a point of departure. It's a, it's intended to be a conversation starter within a company, anything from a sole proprietorship to a multinational corporation.

Around a, should we be rethinking how we price B should our prices be personalized to our individual customers? And if so, see which segment of our customer base do we want to favor, or do we want to start to generate greater levels of loyalty through pricing and essentially then that pushes you towards the Holy grail, which I think most people certainly on this show and in general would agree.

The degree to which you can turn your revenue into a recurring revenue stream is the degree to which you're going to [00:04:00] grow your enterprise. And so this idea that look, some of our customers are going to be episodic and they're useful to our business, but the core customer is one who is inclined to come back and return to our company or do business on a repeated basis.

And we should be recognizing these customers and rewarding them in a it through price. You and I both know that there are loyalty schemes out there, and there's all sorts of various ways that you try to give a premium to your better customer. But my argument is that in this day and age, giving them a S unique price is something worth discussing.

I think it's better. You can argue it may or may not be better, but I think it needs to be discussed. 

Yep. I love the concept in not in practice, but in like theory in the sense that I personally believe as well. Like when you're looking at software service and business in general, I think quite often they're not, we treat prices like this fixed.

Component of our business and people are very scared to [00:05:00] experiment and to change it. And in my personal opinion, I think pricing is just so much a part of your product as the features that go into it. And like having that mindset in an organization allows you the freedom and flexibility to move things around.

I think typically in consumer's minds that people tend to be very like sensitive when it comes to price changes and price updates. I'm interested as well, because This idea of being able to provide a like a unique price to individual customers, some filter in my mind, while you were saying that would just be like, how would you know then in terms of what preferential treatment looked like, how would you know what the price is that you're getting is right.

In practice from a data analytics perspective. I think it sounds like doable. It makes sense, but from maybe more psychological perspective, because a lot of like pricing and packaging work, I know comes from more the psychological side of things. It comes from more like interviewing panelists. What would you pay for using different types of studies on that side?

But on the flip side is once you've actually got the pricing strategies is going to play like, this is something that you've touched on in your book. 

We don't [00:06:00] touch necessarily on psychology. What we talk about in the book is, look, if you're thinking about moving in the direction of personalized pricing, what are the building blocks of getting there?

So we talk a bit about what data to store, how to store it. And then what we avoid is getting too prescriptive only because the answers are different depending on the industry that you might be in and the scale of your business. The psychology of pricing is an interesting point of departure here, because it's not clear to me that there is necessarily a a conclusion on this point.

I think a lot of it has to do with the interaction of pricing, individual and product, which is to say, it's not clear to me that a luxury good that's discounted is necessary necessarily a good outcome for the consumer. For example, as one obvious example so we haven't really gotten into the psychology component of it, but I do believe that in general the loyal customer and loyal is of course, a continuum.

You're S you're when you make a second [00:07:00] purchase, you're more loyal than someone who's only made one purchase. But of course it's a continuum, but the loyal customer, I believe, always appreciates a recognition of their loyalty. So then next question becomes, how do we do if you go to your neighborhood restaurant regularly, maybe you'd get a free dessert as an example.

And we could use many illustrations the points on a Starbucks app, and there's a lot of these real world illustrations in the book. I am of the opinion that if you've already come to the conclusion that you want to reward loyalty, then doing so via price is a conversation that needs to be had. Yep.

Connect with the subscription economy as well. There's nothing specific to the subscription economy in the book. But I think conceptually, what you're trying to do in a subscription economy is as maximize your customer base and minimize your churn and thinking about how to do that moving beyond this idea that I'm selling a product to a hundred thousand or 500,000 customers, and start to think about 500.

Not necessarily 500,000, but [00:08:00] multiple customer personas and who, or what may respond best to certain price modifications. And how would we start to do this? It doesn't necessarily mean that you have to have 500,000 customer profiles. If that's how many customers you have. But as an obvious illustration of the path that ACOs that a company could go along is to say, look, we've done some research.

And based on age, there's actually a high level of price sensitivity in the under 30 category. That's an important growth category for us. And we're going to, we're going to treat them a little bit differently. We're going to give that segment of our customer base, an option of buying, for example, six months up front at a significant discount.

Yeah. That's not exactly personalized, but it's started it's heading in that direction. 


Andrew Michael: [00:08:48] Yep. I, I see where you're going with it because typically as well in studies, when you do if you're using the van Westendorp study and trying to understand sort of price sensitivity in the market, you're generally start with segments like that.

You would try to see. [00:09:00] Okay. Are there any specific roles? Are there any specific demographics where we see price sensitivity increase or decrease? Depending on the value they're extracting. One of the areas I think is also interesting is a look another way to look at it as well, in terms of pricing itself and giving like personalized pricing is actually on the usage side in some businesses have slowly started to do this where you have variable pricing.

So I think Slack in like the B2B SaaS is an interesting example where they basically charge on active seats. So typically like in, when you pay per seat, you're just. Purchase of lumber of seats and pace, like actually took the inverse and said, okay you can actually pay for the number of people using the product, not for how many seats you have.

So if people aren't using our product, you're not paying for it. I think this is like things like this can be really interesting and unique and also add customer loyalty. But then some of the things you mentioned as well, I think like putting a discount on high luxury, good can actually have a negative impact on the brand.

If it's perceived to be giving out discounts, you have their component. I'm interested now. Let's say, let's imagine somebody decides, okay. Yes, they want to [00:10:00] go down this path. They want to see, okay. Like how can I start offering a more personalized approach to pricing and staying away from things like discounts or coupons, like what are some of the things you've seen people in the market doing?

How are they going about how they're using data to make these decisions? 

Cactus Raazi: [00:10:14] It's interesting. You asked that I. I have been reading pretty carefully on these concepts of personalized pricing. I try to stay on top of it and I believe we're still in the relatively, very early stages of these conversations.

I have seen some. Commentary out of restaurant tours that the, I'm using these as illustrative examples, but the concept of paying the same for a meal, regardless of what time of day what time of the evening, if you will, or what day of the week, and also regardless of the customer, whether they're a first timer or a regular, if you will.

That, that doesn't make any sense. And of course it begs the question how do you implement some personalized pricing in the restaurant industry and that we touch upon that briefly in the book, but it's definitely a conversation that I think needs [00:11:00] to be had. . 

In addition to that, I think the actual steps very clearly start with who are your customers. And I find that so often again, going back to the restaurant example, most restaurants don't keep a customer log.

Now that's changing slowly but surely with the integration of your point of sale system with your reservation system. But first and foremost is who are our customers and who are we selling to? This can be done by most businesses. If your business does not have a meaningful repeat customer base arguably we could use maybe some fast food type businesses or other things that are highly episodic.

Then, perhaps this doesn't apply, but most businesses need to start to understand who specifically their customer is. Could be through a traditional data collection of reservation systems could be through an app. It could be through e-commerce any mechanism by which you learn a bit more about your customer, even traditional brick and mortar retail often asks you to input your phone number.

And from there, there's plenty of third-party marketing databases where you can [00:12:00] figure out who this customer is. That would be the first step. And the second step would be to take this information and be thoughtful around what behaviors are you observing that are consistent with that, which you hope to see?

And again, this will be specific to a business, but it could be around average sale price. It could be for example, around the purchase of wine with meals, a lot of different components, but whatever you believe is optimal for your business or that whatever you're striving for recognize the segment of your overall customer base, that is.

Most well aligned with that, what you would love to see and use that as the starting point. 

Andrew Michael: [00:12:37] Yeah. Can I jump in there as well? And I think just to draw some analogies as well, too, like B2B SaaS or two to think, I think in this concept as well or it sounds like you're saying to me as well as look at the behaviors that you hope to encourage within your product.

So yeah. Typically like you want to see good engagement. You want to see people using maybe specific features like just it could be an interesting concept in as well as like rewarding people based on price, based on engagement, because [00:13:00] ultimately, that the more people use your product or service, the more likely they are to retain.

And the more likely they are to think. So it's interesting that the sexy something we discussed in an earlier episode as well with Jenna Besta from ProdPad. Where they gave them part of their onboarding experience, where they initially had like a free trial for 15 days. They shortened it to seven and then they gave you extra days on the trial, depending on the actions you took in the app.

So encouraging like good behavior. So you can maximize your product, but the same principles can be applied to pricing in the sense that like you actually get rewarded from being. A more active user and more engaged within the product. So sorry, you can continue better. I just want to draw, 

Cactus Raazi: [00:13:35] I agree with that a hundred percent.

In fact, I'm glad you bring that up because if you're, if you know the audience is thinking to themselves, Oh goodness. I'm going to have someone sit down at a dinner table or sit down in my hairstylist chair. Or jump on an airplane. And I happened to run an airline and I'm not, I'm going to hit them with 25 questions, your age, your gender, your income, your education level.

Absolutely. I don't believe that's going to be particularly fruitful, gamification engagement. These [00:14:00] are smart ways of doing it. I don't find that. Overall the marketing and data acquisition efforts in the broader marketplace are particularly sophisticated. So often the marketing effort is a blank blanket email.

For example, everyone who's shopped at Diane Von Furstenberg receives the same email that says a whole bunch of clothes are now 40% off. That to me is not a value enhancing, nor is it a particularly sophisticated way of going about connecting with your customer? So gamification is a great way of doing episodic engagement.

These days. You do have the mobile phone number of many of your customers. And again, asking a simple question and then I've seen this a little bit where you get one question and they leave you alone. Maybe two weeks later, you might get a different question. And these are really interesting bits and pieces of information.

They also, by the way, allow a lot of cross-marketing you ask people how often they go to see I don't know, after COVID is over in the pandemic is over. For example, how often do you do activity X? And then it allows a lot of really interesting cross-marketing [00:15:00] and you learn a lot more about your customer and allow it allows you to segment them and then personalized prices.

Andrew Michael: [00:15:04] Absolutely. I think in like the software space, we are fortunate that we do have quite a bit more data at. And so probably step one in the process you mentioned now doesn't apply too much to these businesses because at signup, generally you asking for the name, they're all the company. So we do tend to pick up a lot of things, but I think as well, like having a little bit deeper level, like what is the use case that you're trying to achieve with our product?

What are you trying to achieve? Like these sorts of elements, all add to that. And again, I'm going to keep trying to like bring analogies into, to our space to see how it can be applicable. But I really like this idea of not only like having a variable pricing, but rewarding customers with better prices based on their activity.

So I think even To give you another sort of side of things. I think when companies start to think about increasing prices, like a typical process that happens is their grandfather, their existing customers into the old price. And they start [00:16:00] charging new customers for. The new updated price.

So in a way, this is almost a way of like rewarding loyalty, because essentially you, all the customers are getting that better price, the older price, but then you don't have a way to drive new magnetization with your existing customer base. So it almost feels like a happy medium is really trying to like always be working on the pricing, but then seeing, okay, how can you reward people in their price that they pay you based on how they're using or not using the product essentially.

Cactus Raazi: [00:16:26] Yep. That's exactly right. That's exactly right. 

Andrew Michael: [00:16:30] So next step then as well, like we have some data points, we taking it a step further now as well. We have a little bit of better understanding of who these customers are. We started to think about the different strategies. Like how do you go about implementing this thing within an organization?

Like how do you go about from a communications perspective? I think these are some of the gray areas. I think it gets a little bit more complicated as well. Yeah. From a legal standpoint, even just like your prices, your pricing, if it's always changing, what does that mean for contracts and [00:17:00] which is probably different in the B2C space, 

Cactus Raazi: [00:17:02] but it's interesting. One thing I wanted to say, I'm going to come back to your question about how to implement, because I think that's a really important question. And of course, as the deeper and more detailed, you get the more specific to the company, it starts to become, obviously it particularly if you introduce regulatory, but one thing I wanted to say about SaaS is.

There's a number of SaaS companies that are out there providing business support software of many different sorts there's CRM systems. Obviously there are e-commerce systems. We could use Shopify as an example. And so some of what we are all talking about should likely fall on the shoulders of the software provider.

If you will, these are. These are tools that really should be offered by the providers who are supporting other elements of your business. And I think this is an interesting side note, for example, in hospitality, there is a, the dominant hospitality booking system. Gives you the ability to sign up to some sort of a, what I would refer [00:18:00] to as a price comparison element, and you are able to choose the five hotels within your geographic area that you would like to benchmark yourself against.

And this is an opt-in sort of system. So as long as you opt in, you pick the five and you may be one of some other people's five, and then the system gives you a sense of what the other hotels are charging. For like rooms like cat similar category rooms. And so it's this idea that we can get a localized price comparison against our competitors and allow us to then power our own pricing algorithms.

The problem with that is it totally divorces the price from the customer. And so as a customer, your experience as well, I've stayed at this hotel. Now, for example, six times, this will be my seventh visit and I have a totally undifferentiated experience against four other hotels in the area. They all seem to be the same price.

How does that make any sense from the perspective of the hospitality provider? So part of what I'm bringing up here is really around the starting point of the pricing [00:19:00] conversation. It does fall on the shoulders of the business owner, but I believe that this is also an element that. That software of record providers or operate the providers of operational software should also be thinking about.

Andrew Michael: [00:19:12] For sure. I think though, just going back as well, like on competitor pricing, like if that's what you're setting your baseline, like you're setting yourself up for failure to begin with. If that's how you price your product. I think it should never be on like, what is other people in the market charging, but more, what is the value.

What is the main value metric they're getting out of your service. So figuring that out 

Cactus Raazi: [00:19:30] That's 100% you're exactly right. And particularly what's particularly galling about it is that if you think about you using hospitality as an example, and, hospitality has anything from restaurants to hotels, and God knows what else.

But you typically, if this customer has stayed with you before or dined with you before, in some way engaged your service, you have knowledge about this customer that others don't, you could be a hairstylist you'd be allowed to. And so what we're arguing is use that knowledge to your advantage through the mechanism of price.

You [00:20:00] may know what they like or what they don't like, and you may be able to offer these things in some differentiated way. 

Andrew Michael: [00:20:07] Yeah. And a lot of what you're saying as well, sounds like rewarding loyalty. I think at the end of the day, like it's like, how do we reward loyalty through an efficient pricing plan?

That's not like a blanket spray all, and everybody gets the same deal, but really honing in understanding. Who these customers are and what can we do to provide them like better deals to make sure that they come back for the next purchase. And then also feel in the sense that they're appreciated from the brand, from the company because of this loyalty I think in sauce, this is a little bit different in the sense that people typically purchase your product.

With the recurring nature in mind with that sort of loyalty in my life, you're solving a problem for them. That problem you have every single month you're looking to solve the problem every month, where a lot of what you're saying as well as like from the restaurant side, from the hotel side, like these are things that you don't necessarily.

Have to do every month. You might do them every month, but you don't have to do them. So you, the incentive [00:21:00] to incentivize there is much stronger, I think. But I do like some of the concepts you're talking about from a B2B perspective or what you can be applying into the nature of the business. Yes.

You're rewarding loyalty. But at the same time as well, you're taking a little more hands on approach to how you price and package your product. You're treating it more as a variable entity rather than a fixed. A entity, that's there to make sure that you're improving your product as a whole. So you're just making a part of your product better by making it more personalized and customizable.

So interesting. Through like the research in this book that you've been doing now as well, what's been one of the things that's maybe surprised you the most when it came to pricing in general, like how people view their pricing and how they put together, what's something that you just looked at as this can't be right.

Do people really think like this or 

Cactus Raazi: [00:21:44] the the degree to which pricing regardless of the size of the industry tends to be really a guesstimation. Or some sort of a rote process, multiple of input costs or some other, how should we do it and to pick a price. And I would argue with [00:22:00] you that a lot of subscription-based map, you could push back on this, but I would argue to you that a lot of subscription-based companies have also done something where product experts, domain experts sit around and think to themselves, what do we think we can get away with charging?

And there's a little bit of a debate and that becomes the price. It's a heuristic approach. Do you think that's 95% 

Andrew Michael: [00:22:22] of businesses, like 95% of SaaS starts out like that. There's three people in the room, we've got a product. What should we charge for it? Ah, that sounds reasonable. Let's do it.

Cactus Raazi: [00:22:30] Let's do it. And I experienced this in the corporate boardroom. I've been on the management committee of a number of financial services companies. And so it, I was surprised by the approach at the corporate boardroom level. I'm not surprised at that approach at the sort of.

Sole proprietorship level, but across the board, the approach to pricing tends to be really underwhelming and unsophisticated. And this is particularly true of companies, as you mentioned, that poor, huge amounts of time and energy and effort into product. [00:23:00] And then that becomes the dog.

The tail is pricing. I'm not suggesting that the, that it should be the other way around, obviously, but I'm suggesting that not only is. The question around pricing under sort of under considered, but I would argue it's not considered necessarily in the right way. If the question is, what should we charge?

Then the answer is probably going to be a price. And I believe that might be in some cases, perhaps in many cases, the wrong starting point of the conversation. Imagine a conversation that says, how many prices should we have? Or something along the lines of who do we expect, what do we expect the breadth of our customer base to be?

And how many prices should we have given the answer to that question? In a perfect world, you would have a data profile for every single customer. And arguably you could, this sounds a little ridiculous, but you could potentially have a separate price for each customer. I'm not necessarily advocating for that level of granularity.

I'm not sure there's a. Marginal benefit to that higher level of granularity. I am certainly advocating for [00:24:00] the starting point of the conversation, which is multiple prices. 

Andrew Michael: [00:24:03] Yep. And you're right. I think that's generally not something that is discussed, I think specifically early on, like you just need to get it out you and to start charging.

And I think companies really start to realize the impact and how important pricing is when they start to look at that next lever of growth and It ends up becoming one of the biggest leavers that you can pull if you nail and effects the pricing and packaging strategy, because ultimately a specific in a revenue and a recurring revenue business, like those impacts are compounding.

If you're able to correctly price your product increase like our pro ASP for your customer, yeah. That's every single month afternoons, every new customer after that. So it really has a huge impact on the overall growth. And it's a step change if you're able to nail a solid pricing and packaging strategy like that effectively also encourages expansion.

You can do so I'm interested in that concept as well in terms of expansion. So I mentioned like a lot of the ideas around the around rewarding loyalty and recurring payments. But [00:25:00] then how do you see this sort of falling into ways of driving new revenue streams in driving expansion revenue from existing customers?

There might've in the restaurant example, they might've always come to you and spent 20 years thing. Like how can you now, have these new pricing package strategy that enabled them to come maybe the next time to spend 30, but there might still be being rewarded for their loyalty, but at the same time now you've driven them to new. Features within your restaurant with new use cases. 

Cactus Raazi: [00:25:24] Think that's a great question. And it's true that this idea of differentiated pricing so often does imply some form of a discount for your better customer. And the pushback on that would obvious to be, Hey, a lot of times our better customers don't necessarily need a discount and it may not even be particularly effective.

There are certainly there's Other elements of the customer experience that could be included as part of this, as an example, a premium seat at the same price as a regular seat, as a way of giving someone rather than addressing price by discounting the regular seat.

What you're saying is you actually getting something better and [00:26:00] So you're not, that would not be a revenue enhancing example, the revenue Hansen example would be you're getting a premium seat and you're going to pay more than you would have in regular seat, but perhaps a differentiated price from someone that we've never done business before for that premium seat, that would be an example.

You add as a sole proprietorship, you would be thinking about tacking on additional goods or services at a differentiated price for the customer. That's already showing you loyalty at that lower level of spend. Another example would be using your marketing effort to make your satisfied customers aware that there are other goods or services that you also offer.

And giving them again, a unique price towards those goods or services. And you might say how do you know if a customer is satisfied? And the answer is because they're already a customer of yours on some form of a repeat basis. Even a second purchase is a strong indication of some level of satisfaction right now.

There's a breakfast supplement meal supplement company called Keshava. I have nothing to do with them and I'm not advertising for them, but I happened to have picked them up recently [00:27:00] a couple of months ago. I tried it. And it's a recurring revenue business. So why not use it as an example?

I've now resubscribed to  three or four times. I'm not complaining that they haven't given me a unique price. What I am saying is I've clearly demonstrated I liked their product. I'm a perfect customer for them to say, Hey, by the way, if you like this product, we are now offering some additional products.

Even if those additional products are a joint venture with some other company could be. Yeah, vitamins. It could be anything you think about, and we're going to give you a premium of some sort, a differentiated pricing experience of some sort to then expand into these additional products. You've already shown that you like our current product because you continue to repurchase it and reuse it.

We've also had, by the way, we've also suggested it to some of the people, some neighbors nearby, and they're now customers as well. So there, there are a variety of ways to contemplate how to get this ecosystem going, how to capture that data and then how to then reward the customer. 

Andrew Michael: [00:27:59] Yeah. And [00:28:00] then you say this sort of the ability for this to scale, you need to have providers that are supplying these types of services to use here, aware of what's happening in terms of like you mentioned, like the, in the restaurant industry where you have the, it was the payment process or the booking engine.

They need to be the ones who letting you know about the customers so they can be two-sided might be your CRM or it might be an analytics product. That's raising awareness is how you would then go price and package. And then ultimately I think you would need then on the backend of that would be like your billing infrastructure to be talking to the systems to know, okay, this customer's done X, Y, Z.

This is the new price they need to be presented with. This is the new promotion they need to be given. And because I think. In practice sounds interesting, but automating this at scale can then also get pretty complex, pretty fast, I think to basically, but obviously 

Cactus Raazi: [00:28:49] you raised an interesting point and a, there's a couple of things that are moving in our direction.

The first one is that mobile commerce in general, was it definitely a growth category? So with that, you [00:29:00] have a huge amounts of data, obviously at your fingertips around what these customers are actually doing. And one of the challenges that brick and mortar stores are having. Is your, is that they're getting real-time price comparisons and real-time price challenges in store.

So you're looking at an item and then you have a little software device that tells you exactly where you can buy it at the lowest possible price and that this concept is addressed in the book. And then with the pandemic, we've gone a big shift to away from. What I would call analog pricing in general.

Restaurant menus, as are so often now they come up on your phone and I believe that this sort of shift to mobile slash electronic engagement partially just that, that was a natural social phenomenon that was taking place. And now being accelerated by the pandemic is a wonderful opportunity to then move forward with some of the things you're mentioning as an example, the the booking engines of Rezi and open table and some of these other things.

Again, this is a conversation that I think they are hard. They have a huge amount of this data and information. How should they be [00:30:00] making it available for their restaurant customer? I don't only mean the diner. The actual, the operator of the restaurant. 

Andrew Michael: [00:30:07] Yeah, absolutely. And I'm pretty sure they probably are thinking about a lot of these things.

Cactus Raazi: [00:30:11] As an operator of a restaurant, if you had a reservation from someone who's been to your restaurant, six times over the last six months, as an example, and then a new person, wouldn't it be nice to know that the new for ascent has on five of the last six occasions spent over $70 on a bottle of wine with their meal.

Yep. Because that will allow you to do various things for that customer and differentiate them in some way enough, one last point I'd really like to make. And I think this is an important one. Sometimes people push back on me by saying, Hey, this is really a mechanism to reward the rich. And in certain instances, that's true.

If you happened to be Hermes or Cartier, you are almost by definition catering to rich people, but actually that's not necessarily true across the board. You're really catering to loyal people. And even those of us, myself included who are lower down on the income spectrum. [00:31:00] W I have certain places that I go to and certain services that I use more consistently, and that's where I would like to be.

That's where I would like to be recognized. And I think that's an important differentiation here. It's not as if we're running an auction and it's wherever you can get the highest price at any one moment. And that simply is the pricing process. That's not the case at all. It's really around understanding your customer rewarding, the loyal customer.

Andrew Michael: [00:31:24] Yeah, absolutely. I think there's definitely a lot of ideas that this is, this conversation is brought into my mind to think about. I think again, like from B2B SaaS space, the rewarding loyalty is slightly different because you already have that recurring purchase nature, but they are areas where you can definitely add innovation in towards our customized pricing to increase further loyalty and engagement.

Maybe not necessarily just by discounting, but finding unique and interesting ways to provide tailored plans. Actually keep customers around for longer. 

Cactus Raazi: [00:31:54] Yeah, a fair amount of work done in Sharon, as you know about predicting churn. That's that was one of the early applications of [00:32:00] data analytics.

And some of my professors at NYU were actually pioneers in that field. So to bring these two things together to the degree that you're able to predict churn is the degree that you're able to then go to your customer, that isn't an existing customer say, great news. We're going to unilaterally give you a unique price for the next six months.

Yeah. So long as you, for example, contract with us to addition for an additional six months. So there's a lot of ways of using price to preempt churn as well. 

Andrew Michael: [00:32:27] Absolutely. I see we're running up on time. I'm going to ask you a thing, a question I ask every guest that joins the show. Like obviously we showed at the beginning of the bit of the show that the book's not necessarily around the subscription business and so forth, but let's imagine anyway, hypothetical scenario now you get a new job at a company.

You arrive at the company churn and retention is not doing great. And the CEO comes to you and says, okay, just like you need to turn things around. Do you have 90 days? What are you gonna do with your time?

Cactus Raazi: [00:32:57] But my first question would be what do we know [00:33:00] about our customers? That would be my first question. I, my assumption is that we know a lot about, let's just make the assumption that there's ample amounts of data. My next question would be how are we using this customer information? And in what way are we using it to try and address the churn problem?

My assumption is also that there's going to be a fairly robust effort. Do you use this information around a churn in some mechanism? My assumption is going to be the best practices thus far have been maintained, and yet there exists a churn problem. My next question would be if we're having a churn problem, is it a question around product and the competitive set around our product?

Do we in fact have an inferior product or is there some other problem? Why are we experiencing problematic levels of churn in our industry? And that would be my next question. If it comes to pass that our product seems to be from a competitive standpoint in the mix, and yet we're suffering a churn problem.

Then I would then at that point, start to advocate around how have we priced it and have we correctly segmented our [00:34:00] customers to price appropriately and reduced churn. 

Andrew Michael: [00:34:05] Absolutely. Yeah. And obviously like pricing has a huge impact on general attention, like indirectly without realizing like you set the tone by setting the wrong price to begin with can have a big impact on that.

Let's last question then again, something I ask everyone, but what's something that you know today about urinary retention that you wish you knew maybe when you got started in your career.

Cactus Raazi: [00:34:32] Probably that a certain level of churn is is par for the course that there's no such, I wouldn't say there's no such thing, but that the goal of a hundred percent retention is lofty, but not achievable for most companies. The reasons for the departure of a customer are so diverse.

That and frankly much of the time out of your own control. And it's important to recognize that as you think about your churn numbers, Absolutely. 

Andrew Michael: [00:34:57] I think having that idea of what's involuntary [00:35:00] versus voluntary, like really allows you then to set your strategy on what you can actually fix fish.

You can't because if you're arbitrarily sitting like a goal of a hundred percent customer retention it's it's almost impossible. There's just. So many reasons. I think this is something we chat with Emeric about with  early on was they didn't interest in the exercise of seeing, okay, that an exit survey, they looked at the reasons for churn.

They said, okay, these are the reasons we can control these. Or they can't. This is the percentage that they make up of our current churn rate. And then they went and reevaluated what the target there would be of the churn that they could actually fix, versus that there was out of their control and to okay this is what we're shooting for.

So giving the team a much better. Idea of the impact that they can have, and really like the sitting a lot more realistic goals. It's not just at least reduce it by 20%. Is that even possible with the cows? Yeah, exactly. Cool. Okay. It has been a pleasure speaking to you today. Is there any final thoughts you want to leave the listeners with?

Like anything they should be aware of? Obviously we'll have a references to the book in the show notes for [00:36:00] them to have a listen, but anything else you want to in your final thoughts? 

Cactus Raazi: [00:36:04] Just is, regardless of the company you work at or whether you are running your own company, is your approach to pricing consistent with the outcomes you're looking to achieve.

Andrew Michael: [00:36:13] Yeah. And definitely something to think about specifically in our space. It can have a monumental impact on your business. So thanks so much for joining us today, and I wish you best of luck now with the launch and 2021. 

Cactus Raazi: [00:36:25] Thank you very much. Thank you. Best of luck to you as well. Appreciate it. Cheers.

Bye bye.


Cactus Raazi
Cactus Raazi

The show

My name is Andrew Michael and I started CHURN.FM, as I was tired of hearing stories about some magical silver bullet that solved churn for company X.

In this podcast, you will hear from founders and subscription economy pros working in product, marketing, customer success, support, and operations roles across different stages of company growth, who are taking a systematic approach to increase retention and engagement within their organizations.


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