David Caughman has had a remarkable career in monetization, with experience in consulting at Simon Kucher, pricing strategy at Stripe, and now leading pricing at Docker. In this conversation, David & Fynn discuss the importance of pricing in software companies, where pricing should live, and what pricing leaders must excel at.

David emphasizes the importance of understanding the strategic context of a company when developing pricing strategies and the multidisciplinary skillset required for pricing professionals, including data analysis, communication, and influencing. David believes that pricing should be treated as a product and should be aligned with the product roadmap. He also discusses the operational complexities of hybrid billing models and the need for customer control in AI pricing.

At Simon Kucher, David learned the fundamentals. At Stripe, David learned the value of unbundling products and pricing them separately based on customer needs. And at Docker, he's learned about the operational complexities of evolving pricing & packaging as a company pursues a multi-product strategy.

Takeaways

- Pricing strategy should be developed within the strategic context of a company, considering customer segmentation, go-to-market strategy, and other components of the business strategy.

- Implementing pricing recommendations in-house requires collaboration with various stakeholders and consideration of operational aspects.

- Unbundling products and pricing them separately based on customer needs can drive incremental revenue.

- Developing pricing models for new products and ensuring a seamless purchasing experience are crucial for growth. Pricing should be taken seriously and treated as a discipline that requires full-time focus.

- Pricing professionals need a multidisciplinary skillset, including data analysis, communication, and influencing.

- Pricing should be aligned with the product roadmap and treated as a product management function.

- Hybrid billing models introduce operational complexities, but implementation complexity should not lead the decision-making process.

- AI pricing should provide customer control and be aligned with the value customers are getting, not just the volume of output.

- Involving implementation stakeholders in the pricing decision-making process helps build trust and ensures feasibility.

Sound Bites

"Pricing strategy is so much more than pricing. It touches all parts of a company's strategy."

"You have to lead with value. You can't lead with anything else."

"Going from free to paid is a great way to get yourself on the front page of Hacker News."

"Pricing is multidisciplinary. It's hardcore data analysis, but at the same time, a very strategic qualitative component to it.""Wholeheartedly believe that pricing belongs in product."

Chapters

00:00 Introduction and Career Journey

11:14 Foundational Learnings from Simon Kutcher

15:10 Lessons from Pricing at Stripe

23:57 Monetization Challenges at Docker

30:22 The Importance of Pricing

33:24 Aligning Pricing with the Product Roadmap

36:04 Operational Complexities of Hybrid Billing Models

49:41 Involving Implementation Stakeholders in Pricing Decisions