Dan Balcauski
Understanding What Customers Value and Why
In this episode of Brave UX, Dan Balcauski makes product positioning and pricing easy to understand, and shares techniques for uncovering what customers value and are willing to pay for.
Highlights include:
- What is product positioning and why does it matter?
- How do you know if your product has great positioning?
- Why is it so difficult for companies to build what customers value?
- How do you determine what a customer’s willingness to pay is?
- What can researchers and designers do to increase their impact?
Who is Dan Balcauski?
Dan is the Founder and Principal Consultant of Product Tranquility, where he helps high-volume B2B SaaS CEO’s to dispel the pricing and packaging illusions that prevent new products from growing to their potential.
A reformed software engineer, that went on to earn an MBA from Northwestern University’s Kellogg School of Management, and become a Head of Product, Dan knows a thing or two about what it takes to create products that serve users and deliver on business objectives.
Dan’s product leadership experience has included time as the Product Strategy Principal at SolarWinds, a cloud platform for DevOps. Dan was also the Head of Product at LawnStarter, an Austin Texas based platform that connects consumers to lawn service professionals.
Transcript
- Brendan Jarvis:
- Hello, and welcome to another episode of Brave UX. I'm Brendan Jarvis, Managing Founder of The Space InBetween, the home of New Zealand's only specialist evaluative UX research practice and world-class UX lab, enabling brave teams across the globe to de-risk product design and equally brave leaders to shape and scale design culture. Here on Brave UX though, it's my job to help you to put the pieces of the product puzzle together, I do that by unpacking the stories, learnings, and expert advice of world-class UX, design and product management professionals. My guest today is Dan Balcauski. Dan is the Founder and Principal Consultant of Product Tranquility, where he helps high volume B2B SaaS CEOs to dispel the pricing and packaging illusions that prevent their new products from growing to their potential. A reformed software engineer that went on to earn an MBA from Northwestern University's Kellogg School of Management and become Head of Poduct, Dan knows a thing or two about what it takes to create products that serve users and deliver on business objectives.
- Dan's product leadership experience has included time as the Product Strategy Principal at SolarWinds, a cloud platform for DevOps, where he was responsible for leading strategy and new product development. Reporting directly to the CTO. SolarWinds was acquired by Silver Lake for 4 billion US dollars in 2016. Dan was also the Head of Product at LawnStarter and Austin Texas-based platform that connects consumers to launch service professionals. I think that means people who mow lawns there amongst other achievements. Dan assisted the company to grow its customer base by 10 times, the program leader for Kellogg's executive education course and product strategy, and a regular speaker on product pricing, packaging and segmentation. Having appeared on podcasts including Product Mastery Now, CX Passport and Revenue Engine. It's now my pleasure to welcome Dan to a conversation with me on Brave UX. Dan, welcome to the show.
- Dan Balcauski:
- Thank you for having me, Brendan. It's a pleasure to be here
- Brendan Jarvis:
- And it's a pleasure to have you here, Dan. It's something that I discovered when I was preparing for today was you as someone who has done something that many of us have only dreamed of doing, and that's traveling the world. In your case it was to 21 countries for an extended period of time. I also noted that you had exceptional timing as you returned home not long before Covid 19 descended on the world. Reflecting on that time that you spent away, which I believe was 18 months, what did you learn about yourself and the world during that time?
- Dan Balcauski:
- Wow, what a question to start off with. Well, thank you for the wonderful intro. That trip was a life-changing experience in many ways, external and internal. During the trip, I completed two 10 day meditation retreats, and so learned quite a bit about my own mind and the internals that we often get distracted by in our day-to-day experience, and I can talk about that for a very long time. But I think one of the best parts of traveling is your culture is constantly exerting pressure on you like a fish in water. And when you travel, you're able to experience different cultures in a way that frees you from that existing pressure that you have experienced and opens your eyes in a way that is not readily apparent otherwise. You can read about different value systems or different philosophies, but you kind of goes hand in hand with the internal aspects of doing the meditation retreat.
- We are products of our society and our environment, and one thing I like to say is that the US society has optimized for maximum G D P, not personal happiness. And so that was one of the major things that I learned in traveling and seeing people with material possessions of a level here that would be looked at as destitute or nearly homeless, way happier than most Americans ever meet. And so really forced me to reevaluate where I wanted to drive my life and the values I wanted to continue to uphold even as I returned back to the us.
- Brendan Jarvis:
- And these retreats that you went on, were they the kind where you're not allowed or not supposed to speak for that time?
- Dan Balcauski:
- Correct. 10 days, no talking, no reading, no writing, no music. You wake up at four 30 in the morning, 4, 4 30, and you go to bed at 9:00 PM and you're meditating pretty much the entire day when you're not eating. So
- Brendan Jarvis:
- That seems to me at least to be something that could be quite challenging, especially coming from, you know, talk about the sort of western, Western American culture where it's kind of go optimized for G D P output, not a lot of time in therefore self-reflection. Can you take us back to maybe that first day or two and give us an idea of what that was like for you? What were the kind of things that were running through your head?
- Dan Balcauski:
- Oh my God, I don't wanna hold myself up as any kind of hero. I nearly left the first day of the retreat. I had signed up for the retreat and actually delayed leaving on my travels. And so I'm sitting there the very first full day of the retreat, and I had had a meditation practice that I had established. The ego is tricky. Oh, I got this. I meditate for 20 minutes a day. I'm now into hour six of day one sitting in total silence. My brain starts to say, you can't do this, run away. This is only six hours in. You've got 10 full, more full days of this. And the only reason I was able to push through it was I played a little trick on my own ego. I had had some very good friends that had completed a couple of these retreats and had been inspiration for me to go do them.
- And there was no way that I was going to allow myself to leave and then call them up and be like, Hey Dan, how was it? Oh, I left on the very first day. So was able to use a little bit of future shame of myself to keep myself engaged as well as people do leave these retreats. It's not prison, you know, go into this with just a bit of surrender that this is what I'm going to put myself through and it's part of the process. But I also said to myself, I'm not going to be the first person to leave. So that was the second ego trip I pulled on myself. So through a little bit of self pride, I said, look, if I feel the same way when I wake up tomorrow, I'll let myself go. And basically played that over the first couple days until my mind quieted down and I got into the flow and definitely worth every single moment. Very transformational experience overall.
- Brendan Jarvis:
- Well, let's talk about that transformation, and I realize that we will come to product pricing and product strategy and other things soon, but this, I feel is quite an important thing to go into, particularly given the pressures that everyone actually who's listening to this will feel on a daily basis working in design and product. What was the arc of that transformation like for you across those 10 days? Can you give us an idea of the highs and lows and what may be one of the key realizations or parts of that transformation was for you at the end?
- Dan Balcauski:
- So what happens is when you enter these retreats, part of the silence, the code of silence that you adopt is there's external chatter around the world that is constantly bombarding you, whether that's pings, rings and dings on your cell phone or work obligations or other people needing things from you. So you go into this environment to quiet that noise, and then you wanna make sure that environment is still, what you find when you enter that space though, is that you've got a lot of other chatter going on up inside your head, and those first several days are really a confrontation with that chatter in a way that you never really have the chance to do in your day-to-day life. And so what you see is over those course of those few days is a slow progression to a mental silence. And really that's the first stage we talk about that in terms of having a sharpening your sense of personal awareness and a quiet mind so that then you can do the real work, which is going deeper and deeper inside of what is grounding you.
- What is this mind body thing that we've inherited that we didn't get an instruction manual for, but yet is maybe one of the most complex systems in the entire known universe, but no one gave us the owner's manual for it. And not in a western Freudian psychotherapy way where you're, oh, now I'm going to deal with trauma A, B, and C from my childhood. Those memories may arise, but it's much more getting in tune with what the Buddhist call this ping ponging your mind is constantly doing between aversion and craving, moving away from bad stimulus and craving good experience. And really we're not aware that our mind is doing that to us, and it's putting us in a position of perpetually, no matter what experience we desire that we achieve, those are perpetually unsatisfactory. And so we end up on this hamster wheel. And so really getting a sense of, okay, now that we are in this space, can we fully embrace what's going on in this machinery that's working behind the scenes so that when we go back into normal life, you, to tie it back to the life of a product manager or designer, there's always this go mentality.
- We have to ship this feature, we have to finish this sprint, we have to achieve this milestone, but at the end of that milestone is yet another set of problems and another set of issues. And so what I found it useful in my work and my life is being constantly reminded that yes, this is the problem of the day and I need to have focus and presence to solve the problem of the day, but I can be peaceful and mindful in this moment without worrying that yes, there's these problems that have yet to be unsolved.
- Brendan Jarvis:
- That's a really, really important thing for people to realize. Is that something that you feel that you would've come to on your own without doing something like what you've done with these retreats?
- Dan Balcauski:
- It's a tool like anything else, I think there are modalities, whether that's talk therapy or gratitude journaling or Tony Robbins, there's many ways to truth. There's no one way to truth. I'm not to say that there, it was a very powerful tool for me, and I think it's one that anyone can approach. It does not require any belief in supernatural. It only requires you to dedicate the time to understand what's actually going on inside. That's really the only belief it requires. And so I think it's approachable, and they've discussed this, we've had priests and nuns from almost every world religion that have taken on these type of retreats and found them entirely consistent with their own religious philosophies. There's nothing inherently different and many have had very positive experiences. And so anything else, it's a tool to get you there. I think it was critical on my path, and even my company name Product Tranquility comes out of that experience and it mostly is a reminder to me to constantly have tranquility in these experiences. So I was very intentional about naming my company because of those lessons I was able to learn from that experience.
- Brendan Jarvis:
- Yeah. Well, clearly you don't name a company something like that if it hasn't been a transformative experience. Dan, thank you for sharing that with us. I want to come back to something before the retreats that you did not that long ago that was also seems to be transformational in your trajectory of your career, which was that before you were a head of product, you actually started out as an engineer and you were writing kernel level drivers and C and c plus plus. What's not to love about writing drivers?
- Dan Balcauski:
- Oh, these kids today with their web apps and APIs and AWS that they get to leverage? It was a great experience at the time, and part of this goes to my curiosity and how I look at problems [laugh], how I got into the computer engineering space was I was perpetually curious about how computers actually worked. So there was some computer at the beginning that originally had to do a thing that involves some electrical signals, and now we've built all these advanced programs on top of it, and this is what I do with problems. I go dive [laugh], whether it's meditation or computers, let's go to the fundamental analysis.
- Brendan Jarvis:
- It's a bit of a theme, isn't there? Yeah, yeah. Because I mean, ker level drivers, that's pretty close to binary, I would imagine.
- Dan Balcauski:
- Oh, well, yeah, absolutely. Bit banging registers. That's not a dirty term that I just threw out every, and I've blue screened more windows machines than I care to admit.
- Brendan Jarvis:
- Did they ask you to leave being an engineer because of that reason?
- Dan Balcauski:
- No, I realized that I got more energy out of dealing with people and understanding the value behind doing what we're doing than the job of an engineer day-to-day really entailed. I have massive respect for engineers, work with them constantly both as a product manager and when I was an engineering manager, requires very structured discipline thinking, but we have to all know where our passions lie. And that's where I decided that I was much more interested in these things that we're building, building, how are they actually creating value for customers and how is that turning into dollars and cents for the business? That's where my curiosity was more so than I had peers who were doing book groups on design patterns books for engineering architecture, and those things weren't as exciting to me as those other questions.
- Brendan Jarvis:
- So you've, you followed that curiosity. I've also heard you describe yourself on another interview as someone who is an introvert and you also, I believe you have quite a pension for maths, so I can see how you would lead yourself to engineering or could lead yourself to engineering through that. How do you reconcile your introverted nature with the demands for managing people and managing various competing interests that product management placed on you?
- Dan Balcauski:
- That's a great question. In many ways, I'm probably more of an ambivert. So
- Brendan Jarvis:
- It
- Dan Balcauski:
- Switches contexts. I definitely noticed that I have, if you have a gas tank that's all of the social energy you have, I'm excited to use that up and then also need to go back and replenish that internally. So for me, it's a matter of balance, like many things in life of making sure that I'm not constantly on stage or constantly having to interact with people. And I have time blocked outta my schedule either for a couple hours a day or perhaps if I'm lucky, setting my own schedule a week or more at a time where I can really recharge and go back internal to refill that tank.
- Brendan Jarvis:
- And we were speaking before we hit record about the life of running your own consultancy, which is something that we both have in common and some of the pressures that we place upon ourselves. And doing that, particularly we were talking about how we were both unwell recently, and there's no sort of forgiveness when it comes to catching up on work that we may miss out on by giving ourselves time to be sick. How have you found your sort of experience with managing stress and that internal chatter through your meditation practice has served you in this transition from working for other people in big responsibility roles to now ultimately having all of the responsibility on your shoulders?
- Dan Balcauski:
- It's definitely a big shift the day, so I mentioned the 10 day meditation retreats, and the way they discuss them is they're called meditation courses. So you spend 10 days mm-hmm. Getting taught a technique and it's not to leave like, oh, I had this experience I that your ego says, oh, check the box. I did the 10 day meditation retreat. But it's really how do you then take that technique back into your life? The recommendation from the school that I was took the course from, it's a worldwide school, but the recommendation is an hour in the morning, an hour evening. I maintained that practice while I was traveling for 18 months. I still maintain it for about, I would say 45 minutes a day on a daily basis. That has been crucial to managing that stress. So to give you, I'm not in a pursuit of some long-term becoming a Buddha, becoming fully enlightened.
- The practice really helps me on a day-to-day basis where the thoughts of my daily to-do le to-do list, the stresses, the issues that need to happen, they will arise in my mind. And the practice is to observe them go back, focus on your breath, and doing that allows a transformation or minimizing the emotional energy associated with that particular problem. So going into my working day, what that allows me to do is those problems, you know, have this every day, I'm sure everyone does, you're working on something and then you're like, oh, I need to remember to go do this other thing. All right. Oh, this other argument or whatever came up. It then allows me to be much more in control of, well, that's not what I'm focused on now, let me go back to what I'm doing and that's for another time. And so that's been incredibly important because as you alluded to, when you're running a solo practice or you're a leader there's no end to the number of potential [laugh] ways your business might fail or critical problems of the day. And so having that ability to sort what's urgent from important and being able to focus on those particular things, it's been incredibly helpful.
- Brendan Jarvis:
- So let's pick up on that. Let's pick up on focus and things that are important. You chose to focus on pricing as your specialty in this consultancy that you've established. Product tranquility. What was it about pricing? Why pricing?
- Dan Balcauski:
- So I had, as I mentioned, the experience of being an engineer and really being curious about what is this stuff that we're actually building? Why does that matter? As I grew up in my career, the company I was at, national Instruments at the time did not really have the concept of product management. It was a company that was founded by engineers for engineers. And so we had the concept of product marketing, but they were mostly sales support and outbound messaging. And so engineering management, which I eventually became an engineering manager before I left, I actually had product management responsibility. And so I found myself getting more and more curious about, okay, how do we actually create value with what we're asking these engineers to build? When I went to my MBA program that got further accelerated, I found out in retrospect that most business schools actually don't have pricing courses.
- I was very lucky that Kellogg actually had several of them. I took everything I could, combined with my internship, I worked for a Silicon Valley startup that summer during my MBA and the project, or of one of the projects that I was primarily tasked with was, Hey, we're thinking about going and converting our products to a freemium model, should we go do this? And so I got thrown into that world monetization models very early, I guess, in my full transition over to the business side. And I just found it absolutely fascinating. Tldr, for your listeners, I do not recommend freemium to almost anyone. It very rarely works. It's generally a bad idea. We could talk, put a pin in that, talk about that more. But as then I got into, well,
- Brendan Jarvis:
- Give us the era of why it's generally a bad idea.
- Dan Balcauski:
- So generally, I like to create products that create value and solve problems. And when you solve problems well, customers are generally willing to pay you to solve those problems. And if you think your marketing strategy is, oh, we'll get a bunch of people to use our stuff for free, and then somehow we'll convince them to pay us, somewhat avoids the hard issue of finding the hard problem that people are willing to pay for. It also generally only works if you have an incredibly large market. So think consumer size, like millions of customers. Most of my work is in b2b and even in large scale b2b, you often really don't have millions of companies that you can sell to even for high scale B2B prosumer type products. Even on that side, it also creates a lot of unfortunate use of energy inside the building. Executives are constantly looking at this giant pool of free users, and I use users very precisely here.
- So I view a customer as someone who's paying you money. A user is just using your product. So looking at these free users, obviously if you're the cmo, you're trying all these marketing channels, you're trying to get people to come in and buy the product. And you see this pool of people who are like, oh, if only we could get them to convert. The truth is that only about, I think world class conversion on freemium is about 2%. Most executives refuse to believe that. And so you see this pool of people who will never convert, who you're going to spend a bunch of time and energy trying to move over to the paid side. So it's problem number one. And then problem two in terms of unfortunate use of energy is that every conversation you have as a product manager, you have this additional tax that you pay, which is how do we divide this up between the free side and the pay side? And it's a very pointless conversation that I think should just be avoided generally. There's some other arguments that are put forth of, oh, it helps you lower customer acquisition costs. I think people are just playing games with the income statement. I don't really believe that that's the case. And generally what I would say is, for the most part, all of the problems that people pose freemium as a solution can be better answered with a 14 to 30 day free trial,
- Brendan Jarvis:
- Which is also a common way of getting people to enroll and get into a products mm-hmm. Way of helping them with their problems. So we want people to pay us because we want to have solved a proper and a real problem for them. You've said that pricing and packaging are a function of positioning, and by packaging, I assume that what you're talking about there is the way in which you bundle up your products and group them into pockets of value for people to identify with and choose the one that suits them the best. So let's start with, and so correct me if that's wrong, but let's start with positioning. What is product positioning and why does it matter?
- Dan Balcauski:
- Positioning is an exercise you do internally, but it's really what is the space you're going to occupy in the mind of your prospects, in the mind of your market. So positioning in the classic sense thinks through several different variables and tries to align them all. So who is the target customer that you're trying to serve? What are their relevant competitive alternatives? What benefits do you provide to you to that particular customer? How does your product do that in a unique and compelling way? So those are the items that you think through. And why is that important? Because we need to understand that we cannot be the best at everything. And if you try to be the best at everything, you are going to be unmemorable. We need to have carve out mind space in the mind of our market participants to help them make sense of what it is that we do and how we play and how we deliver value.
- Because while [laugh], my mom might be very interested in the hour long story of all of the things that I can do, I really don't have time when I'm meeting a, for example, I'm meeting a prospective c e o, he's got a million fires. Like, no, I solve your pricing and packaging issues for new products. That's what I do. If you have other problems, I'm sure there are other people who do who and I, it's not necessarily that I can't help them with more than that, but we really just don't have time. And so we need to spend the energy upfront being very deliberate about how we deliver value and how folks should think about us in the context of a broader market. There's just too much noise. Otherwise maybe if you go back a hundred years, you didn't have to be as specific about your positioning.
- But I love, for example, the Chief MarTech landscape diagram. I don't know if you've seen that before with over the course of the last decade where it has all the logos of all the marketing technology stack companies, and it's just gotten more and more ridiculous every year, where now it's literally unreadable in its current format because you have tens of thousands of companies who are competing in every aspect of helping. So if you're a cmo, you just look at that and you're like, all right, I'm going to go do something else with my time. I can't spend all time's too overwhelming. So you need to be very prescriptive in terms of who you're serving and how you're helping them solve their problems.
- Brendan Jarvis:
- So if we think about the people that are listening to the podcast to this episode, and they're obviously going to be working somewhere for someone, what are some of the tells or what's the litmus test if they were to think about where they work that would help them to determine whether or not their company or their product that they're working on actually has that clarity and that deliberate decision that they've made around getting Claire in their consumer's Headspace?
- Dan Balcauski:
- That's a great question. One test would be, next time you're at a bar, have one person go up to a stranger and tell them what their company does and have another person come back 10 minutes later and ask them,
- Brendan Jarvis:
- I love that. Have you actually done that? That's brilliant.
- Dan Balcauski:
- I got that idea off of some UX design research thought leadership that I had found, which was, if you really wanna find out how usable your product is, bring it to a bar and have some inebriated people walk through it. And then you'll find out how user friendly your designs actually are if they can muddle their way through it.
- Brendan Jarvis:
- So let's assume that we do have a company that someone who's slightly inebriated can understand and Andrew call after the second glass of beer. How does having that clear positioning help you as a C E O or as the leadership of a company to price and package your product?
- Dan Balcauski:
- When it comes to pricing, one of the first decisions you need to make is price positioning. So price positioning would be, I'll use the automotive market cuz maybe the examples will resonate with a wider group of folks. Are you the Toyota Corolla, the very base level of product? Are you the Toyota Camry, the average mid-layer? Are you the bmw, Mercedes-Benz, Lexus, or are you the Tesla Roadster, Ferrari, Lamborghini? Because when it comes to pricing, you need to make the strategic decision of how are we going to be compared from a price value ratio. If I'm in the market for a Toyota Camry and a guy comes to try to sell me a Lamborghini, this is going to be a very short conversation. We are not not looking at trade offs at all in the same way. I'm looking at a very different set of comparables.
- And so having a clear sense upfront of your price positioning is one of these first key steps. Which level are you going to? And that's a strategic decision. Now that can be informed by different parts of your industry and your market. So if I'm the low cost player, I have an opportunity, I have some part of my technology stack that allows me to do something incredibly efficiently or a specialized way I operate my workforce or my factory, that gives me some cost advantage that might inform, oh, I take that low end positioning because I can still drive a very strong margin off of what is considered a relatively low price point versus am I the Rolex, Burberry Armani and I'm, I'm going to make a decision not to sell very many units, but I'm going to have a very high margin on each one. And actually the fact that I don't have many units in production is actually part of the value proposition.
- If everyone's walking around wearing a Rolex all of a sudden that is less valuable than, oh, I only have, they're very rare. So making those strategic decisions upfront helps you as well as giving you a sense of what those competitive alternatives are going to be. When it comes to pricing, it's important to understand that all conversations around price ultimately drive to a conversation around value. And one of the things that we have to be aware of is that we live in a market economy. The market will set the price on non-differentiated value. And so when I'm looking at my positioning, I'm isolating now my set of competitors so that now I can decide how I'm uniquely differentiated from that group of competitors. So I know the value I can charge for where I'm potentially value advantaged or disadvantaged. You can play a discount game where I'm value disadvantaged, but I'm also slightly less priced than those other competitors. So that whole conversation is all wrapped around the fundamental positioning that your company adopts.
- Brendan Jarvis:
- So let's break that down for the designers and the product managers that'll be listening to this episode, when you talk about we exist in a market economy and therefore the market will exert forces on the company and the product that it provides, eventually reducing it to, I think you described it as differentiated pricing as the way that you have to, I suppose, distinguish yourself against your competitive set. What does that mean in practical terms for the people that are working on the products day to day? How does that impact their ability to create value over the long term?
- Dan Balcauski:
- I always start with the customer. I use a varied jobs to be done approach. And when I'm inside working as a product manager or as a designer, what I'm looking for is what are I particularly partial in this context? There's many sort of flavors of jobs to be done, but Tony Olwick has his version focused on customers are trying to achieve an outcome and so they have some level of importance of achieving that outcome and some level of existing satisfaction with the existing competitive alternatives. And one thing I really like about jobs to be done is it gives us yet another F frame to look at competitive alternatives. Many B2B SaaS companies are actually competing with email and spreadsheets and not necessarily the startup down the road, but there's certain jobs, there's customers are trying to get done. And so we really are trying to understand where are we uniquely to solve a customer's problem that is important, but that they're currently unsatisfied with? And when we're looking at value creation, that's the first thing we wanna focus on. So the way I look at pricing is two sides is sort of econ 1 0 1, which is value creation and then value capture. So the first is focusing the innovation team on problems that customers care about and they have a high level of dissatisfaction with the way they're currently able to solve it.
- Brendan Jarvis:
- I would imagine that those problems, and this is a huge assumption because they sound like they seem obvious to other competitors in the marketplace that they would get a disproportionate amount of attention focused on them when it comes to developing new features.
- Dan Balcauski:
- This is a great point, and I think it's actually, Clayton Christensen talks about this in his book Competing Against Luck, which is his sort of opening salvo in the jobs to be Done world. I think you've pointed out two things. One is always be wary of worrying about what your competitors are doing because that assumes that they know what they're doing. So as a product manager, be aware of your competition, but don't necessarily be obsessed with your competition and be more obsessed with your customer. Second, this feature for feature battle is rarely where, at least in my experience, I've seen the battle one and what Clayton Christensen talks about is when you solve are looking at solving a customer's job in its entirety. It's not just the feature you've built in into bits, but the set of experiences that are around that. And solving a job entirely from beginning to end requires such focus and customization.
- It's not just the features there, but have you educated the market about its importance about the problem that solved? Have you gotten those customers onboarded to use it? Do you have a way to support them so that they're successful in using it? There's a whole set of experiences wrapped around the actual bits that might also be partially in bits and partially with humans. And those set of process experiences are very hard to directly mount competition against because even if someone copies the bits, they didn't really copy the full experience. And so it's really not solving the full customer job. Does that make sense?
- Brendan Jarvis:
- Yeah, that does make sense. I know you've read good strategy, bad strategy because I've heard you reference it before. Have you read Blue Ocean Strategy?
- Dan Balcauski:
- I have. I know what it is. I've not read the book,
- Brendan Jarvis:
- What you're talking about there sort of making me recall that book. And in essence, that book talks about obviously not fishing where everyone else is fishing, which is what you've touched on there with not paying too much attention to your competition. It encourages people to look at their industry and the way in which they currently deliver value and work out what the common health commonly held beliefs across the industry and what the industry invests in the most and what it invests in the least. And then it challenges you to reconfigure that value to try and I suppose create a blue ocean a sort of clear space to find facial find value. But that was making me think about this challenge that organizations have in actually exploring their customers problems to the degree that they're able to detach themselves from their assumptions that they hold onto sort of tightly so that they can be mindful of and aware of those other areas that may help leapfrog that product or that business ahead of its competitors. And I was talking to a former group product manager of Intercom, Robbie Allen on the show a few months back, and he also is a big fan of jobs to be done. And his perspective was that it's also important to look at the jobs that customers are doing outside of the product experience you currently have on the table. Why is it so difficult for companies and people that are working and leading product to determine what really matters for their customers? What value is in their minds?
- Dan Balcauski:
- This is a really challenging problem and it's one of the reasons why I really like the work that Clayton Christensen and Antonio Wick have put forward in jobs to be done. The problem is that success is in the mind of the customer and the metrics that they use to determine success, but customers are not prone to use that language when they describe problems. So customers are, we, I often say experts in their problem, not in potential solutions, but the way that they describe their problems is in terms of current solutions. And so when you're talking to customers, and this is where the art of product management and user research comes into it where folks say, oh, I need this button that says X or or one of the old product management interview questions. I need the pink button. I need the pink button. Like, well, why do you need the pink button? Well, because X, Y, Z, and the goal is to drive the customer to the higher order problems that they're really trying to solve and help them to make trade-offs of other solutions that they have available or have tried to use so that you can derive out of those conversations, the metrics that the customers are using to measure their outcomes. But it really is sort of this art form of being able to drive them past their initial language of describing their problem in terms of the existing solution and moving 'em to a higher order conversation.
- Brendan Jarvis:
- So this is in the context of an interview, a one-on-one interview,
- Dan Balcauski:
- Correct? Correct. This is the kind of information is very difficult to get out. I'm a big believer in balancing both qualitative and quantitative insight. I've partnerships with Mix Panel and Amplitude. I love those types of products. But when you're really trying to drive at the why do customers buy, you really need to have these conversations in depth with customers. You can use analytics after the fact to validate that you've changed behavior or that customers are satisfied with the solution that you've provided. But to get at the original why you really need to have these one-on-one conversations.
- Brendan Jarvis:
- It also sounded like you were suggesting that in those conversations that customers won't always know or become explicitly forthcoming with the reasons behind why they make these decisions or where they see value.
- Dan Balcauski:
- A hundred percent. I mean there's the off stated problem as well of stated versus revealed preference, like what someone says they want versus what their behavior actually shows. Leave that on the table for now. Cause I feel like those discussions often someone takes it to, its in the far reaching conclusion of, well, we can't ask anybody about anything because everyone's going to lie. And I just don't feel like that's a good place to end up. I feel that you can get valuable information from folks. Bob Messa, who is also one of the founders of Jobs to Be Done Theory, I believe he partnered with Clayton Christensen and he gives an absolute masterclass on interviewing for jobs to be done. And one of his techniques is asking them to walk through their purchase process. So you could do this with an existing customer, for example. And the way he frames it is as if you're filming like a mini documentary.
- What was the timeline? Who was there? What happened? Who said what? Did this happen first or that happened first? Very similar. The best analogy I can give is when you interview someone for a job, you ask them about their past behavior when they ran into a similar situation. Cause it's way too easy for people to opine about what they would do in an imaginary situation when past behavior is much more predictive of future behavior. And so that's the process you're trying to lead your customer through to reveal how they were thinking in that moment to really get at some of these core underlying drivers.
- Brendan Jarvis:
- So this is one of the question, it's not even a question actually. You kind of can leave it open for your customer or your user to pick up on. But often a technique to lead into that is Tell me about the last time that you used X or did Y, is this the kind of way that you can lead into those conversations?
- Dan Balcauski:
- Yes. And what you'll, I'll be even more specific about it, which is trying to establish the timeline that led up to a purchase decision. So trying to really understand the struggle. So the theory some level says there's no such thing as an impulse purchase. Maybe there is, maybe there isn't. But let's not take that at first value. Someone says, oh, I bought this thing, I just bought it on a whim. We had this problem. Probably not. There was awareness of the problem months prior. Often that resulted in some continued agitation to the point where finally I just, okay, today's the day I just do it right. But when you initially talk to customers, they will not reveal that whole process because they're not necessarily consciously aware or aware of its importance to the interviewer. But it's incredibly important to you as the product manager and the product designer to pull that out of them because this is a problem. Customers try to be helpful in these interviews, but they really don't know what will be helpful. And so that's where you as the skilled interview, have to get past the surface level and dig deeper.
- Brendan Jarvis:
- So when you've gotten past that surface level and you think you've found something in there that is of, let's call it latent value, so it's value that the product is not currently capturing and it's given you this hypothesis that you want to then go and prove. How do you work out whether or not that latent value is something that customers are willing to pay for or pay extra for? And if you can determine that, how do you figure out how much their willingness to pay is?
- Dan Balcauski:
- These are excellent questions. So getting pricing information is a tricky business. So there are a couple of techniques I would recommend off the bat. So the first tactic is have a pricing conversation. I am perpetually surprised at the number of user researchers and product managers that won't even touch on willingness to pay at all. Even if you ask the question wrong it's much better than what people like because the conversation that inevitably results is we've done a bunch of research, customers definitely want this thing, but it's a very different question to be, do you want it at this price? It's a very different question. And people will access a different part of their brain when they go when you ask them that question. And so even if you throw out a number and you're saying, we'll use an example, I'm building feature X. Okay, let's figure out what the value is.
- Great. I've established that we have a sense of what it looks like and maybe I've demoed a screenshot, Hey Mr. Customer, Mrs. Customer, I'm looking at releasing this. We love your feedback by the way, we're going to add the have this as an add-on module for an additional $10 a user. Do you think that'd be something you guys would purchase for your account? Put a number out there, get a reaction. Don't ask them what would you pay for? That's generally a bad way to go. There are a couple of questions you can ask around that area, but if you throw out a number, you'll get a reaction first. It is like, oh, I thought this was going to be included. I don't know, we'd have to think about it. Maybe your number's too high, but you can also ask what do we call likelihood to buy questions?
- So in the research world, the standard Likert scale, so on a one to five scale, one is I would never buy this in a million years. Five is if you have it today, I will give you my firstborn child one to five, how likely are you to buy? So not only getting a dollar level or trying to get a dollar level reaction, but also how likely are you to purchase at a particular price? And because that will reveal other certain information because some people will be like, well, I can see how it'd be important, but with all the other projects that we have going on, I really don't see us leveraging that this year. That would be probably, so I think your pricing is correct. And so would you have identified there as also urgency to have this right, which means that person, you can't put that in, you have to account for that in your business model, in your forecasting.
- It's like, oh, we're going to run into a bunch of people who really do value this, but they're not ready yet. They have all these other problems that they need to get through first. One of the things you can ask I think it was a Dutch economist named with the last name Van Westendorp, who has a pricing technique. And if you're in a qualitative discussion, the full van Westendorp is a little annoying to ask in interviews, but you can simplify it to two questions, which is at what price is, would this be so expensive that it wouldn't be worth it? And at what price would this be so low that you would question our ability to actually deliver the product or its value? So those can be helpful ranging questions because folks tend to think about pricing in general ranges not exactly in price points. And if you ask the what would you pay just flat out, you don't know what end of the spectrum they're answering that question to you on. So at least those two can help elicit a set of ranges. And again, over time, over multiple conversations, you can accumulate those numbers and it helps you get a sense of, okay, here generally is where we think folks place the value on it in terms of an actual number.
- Brendan Jarvis:
- So let's talk about that because you mentioned earlier on that you're a fan of both the quantitative and the qualitative aspects of use of research. How many conversations, generally speaking, would you need to have on a one-to-one basis on a qualitative basis with people where you're asking them about pricing but also maybe getting them to give you some self-reported data on their perception of value? How many of those would you need to run before you are then ready to take that into a quantitative method? And what quantitative method would that be? Every
- Dan Balcauski:
- Research question hinges on what is the value of the information that you're actually trying to get and what decision is that going to drive a single customer conversation? Where I ask the right questions can dramatically reduce uncertainty about a problem. In general, what you'll find as a sort of mathematical principle of research is that the uncertainty that is reduced in the first 30 data points, to get the same amount of uncertainty reduction, you need to then talk or sample four times as many more samples. So just the amount of uncertainty you can reduce in, for example, 30 conversations or a sample of 30 or 30 people from a survey, then the numbers start to get very large. So it really depends upon what level of either statistical significance that we need in order to, is this a mission critical? We have to know within 0.001% what the value of this is or not.
- Brendan Jarvis:
- Yeah, we're going to bet the rest of the six months of the engineering team's efforts on this feature, how certain do we need to be that it's actually of value and that the value it is of is significant enough to warrant the investment.
- Dan Balcauski:
- Well, and when I say uncertainty is the business case built on, okay, we don't know what people will pay, but as long as it's over $10, it makes sense. If it's 10 to a hundred, that's as good as 10 to a thousand. I just need to make sure it's not under 10. And so that's my decision point. And so if every person I talk to is I would pay $50, I'd pay $6, I'd pay $9. Well, I've talked to 10 people and all of them are way above our range where this is not a no-go. So now we can proceed. And so you may do a level of that analysis at the beginning of a project. I'm constantly surprised at how teams, again, we do all this customer research to understand customer problems, but then no one's actually building the business case that should proceed millions of dollars of engineering investment to figure out do we even have a range of what people are going to pay. I wrote a blog post about this because you have no idea the number of rooms I've been in where I get called in and they're like, we're going to release this product in a month, what should we charge for it? And I was like, you've already spent tens of millions of dollars developing it. Someone have already asked that question
- Brendan Jarvis:
- Sorry to be that guy. But yeah, I mean it makes a whole lot of sense. And what we're talking about here, if we think about one of the hot topics in design at the moment, and this does, I mean design bleeds into product management and product management bleeds into design. I often find it and UX research I include in that mix. And that's why this show aims to reach out to all of those people because we have such complimentary involvement with one another. If we think about this driver for non analytical people within organizations to have more influence, and by that I usually mean designers, product managers are a little bit of an exception there. This is really a question in user research, whether it's a designer or a specific researcher that's doing this kind of work that if they are probing into this, particularly when it comes to new product development or new feature development for their product managers, that could add a lot of value to that conversation for the product manager but also for the business. Now, is this something that as designers and non-business minded people that we can do and add value in relatively easily and start to really help the business to develop things that matter to customers?
- Dan Balcauski:
- I think so. And I think the primary problem right now is not the techniques. The techniques are relatively simple to learn. When I talk to user researchers, and obviously this is a broad generalization, so this is not going to be a hundred percent correct, but there's some mindset around even diving into the business aspect or the business outcomes that is unseemly or we're no way to get good information, which to me just doesn't make any sense. It'd be the same as if we can't get design feedback from a prototype, we have to have to ship a product. And it's like, no, we can't. Like it's not a real thing. So we really can't get real feedback. And most of these designers would laugh me outta the room if I said that, but when I talk about asking a pricing or willingness to pay question and they're like, oh, well you can't get any useful information off that. So it's not the techniques. It's definitely a mindset and I think that's really the thing that can overcome. And I think it would add tremendous value if folks adopted that mindset.
- Brendan Jarvis:
- Actually, Ryan Rumsey is someone that I've spoken to a little bit on this topic who runs second wave dive and he's actually based out of Austin where you are. And hi, his whole business is focused around helping designers to have those business conversations and become design leaders within their organizations. And he wrote a great little lead book actually, which is about the terms and the language and all the other things that go around having that conversation with the company. And he was touching on the notion that as designers, there's almost this revulsion to the profit making motive of the enterprises that we work with. And that's not a blanket kind of feeling that's felt there, but more generally speaking and maybe toning it down on little, there is often this uncomfortable air ear that sits around money and that is like if we talked about culture when we first started our western culture very much about making money, but it's still very much shunned upon to talk about that money, particularly in our personal circles. Have you observed, and this is a really leading question, so not a great research one, but have you observed this kind of discomfort in people that aren't really that business minded in talking about money? And is this potentially something that's feeding into that lack of putting this into our research process?
- Dan Balcauski:
- Funny you ask because my current thesis, I haven't tested this from a pure been published in Nature Sociology magazine, but we all have somewhat unhealthy relationships to money. I think every single one of us, I don't care who you are, has something in your background that has that formulated for better or worse. And so we take all these individuals and then we put them in a business and then somehow we expect that business run by these people to all have a rational opinion about money. It just doesn't work. You've just taken all the minds that all have their own qualms about it. What I would say is there's a very well-respected pricing consultant founded a consulting firm called Simon Kutcher Partners name's Herman Simon. And the way he talks about profit is pricing for profitability is not, it should not be looked down upon it's profit is really the cost of the future.
- If you really want to be around to serve your customers, to solve problems for people in the long term, your business has to be profitable. And whatever you feel about uk, well, we should have some limits on that or we shouldn't be too aggressive, but you need to have that as part of the on otherwise don't we all go find other jobs because that venture goes out of business. And so I think that's probably the healthiest way to look at it is if you wanna be, whether we can tie this all the way back to meditation retreats. If I'm going to help others, I have to take care of my own mindset first because I have to be in a place where everyone else is maybe not in that level yet. And so now I need to be supportive of that environment. Similar, if you're a business helping customers with problems, we need to have taken care of ourselves so we can continue to serve others.
- Brendan Jarvis:
- Such an important point. And actually could, if you follow that train of thought, take a lot of weight off your shoulders. Not saying as a designer or a researcher, not suggesting that you should ignore some of the negative sort of externalities that can be created through businesses that protect their profit or might be monopoly or in a duopoly situation where whether it's actually not delivering value to the customer that is actually sustaining their success. But I think that's a really interesting reframe and it's certainly something that could help to shift some of the status quo or the inertia that people feel around having that money conversation when it comes to their products. Now, thinking about the other people that matter when it comes to products are not just the teams that are creating them, the customers that are paying for them. And we touched on this idea earlier that jobs to be done as one of the ways that we can uncover latent value or value that we're not currently realizing. But you mentioned the status quo and the status quo is something that people are often, even though there might be some discomfort, they're often quite comfortable to stay with what they have rather than make any big change. How can product teams disrupt or at least uncover the opportunity to disrupt the status quo and help their customers to make a change that's going to solve a problem that their product can help them with?
- Dan Balcauski:
- This is a really great question and a hard question. So I think there's two perspectives. One is, have you identified a problem that people care to solve is step one, which is separate from we've now solved that problem. How do I convince others that they also need to move? Because you don't wanna go to step two if you really haven't identified the problem that nobody cares about it. Okay. Yeah, it's the problem, but I don't care. So the first scenario you've got, there's a couple of questions or ways you think about approaching that as you're having these customer interviews. So the way I think about it as customers will, again, they're trying to be helpful. They're trying to give you information about, oh, this could be better and this could be better and this could be better. And again, your job is to believe them, but dig, [laugh], trust, but verify.
- And one of the ways that we verify that is pushing on them when they mention a particular problem, and we usually go in with hypothesis. We've got our radar set up for like, oh, they mentioned something that's on our list that that's something I wanna dig on. Asking them what they've done recently to fix that problem, to try to sort out what is just an annoyance or a flyer versus something that, oh my God, we've had a string of people working on it. We've tried to build this custom thing three times and it keeps breaking and we've invested all this money on internal IT support versus yeah, I tell my boss about it and then they decide it's not a priority. Those are two very different sets of situations once you've uncovered that secondary layer. But I think the secondary case that I mentioned, which is okay, now we've identified one of these problems and we've built something to solve it.
- I think especially Bob Messa talks about this in terms of jobs to be done, really understanding that there are different emotional forces that are keeping people in place. An attachment to the status quo is one of them, right? There's training internal business processes, just, oh, I know where all the devils are in the situation. And then there's anxiety about the potential new thing that we bring in. If it's wrong, am I going to get blamed? How am I going to use this thing? Does it do everything that we need? Is a sales guy telling me everything upfront? How long do we get this thing in place? What do we do? In the meantime? All the buying committee procurement process, I'm going to have to go through all those are anxiety inducing that keep you rooted in your current solution. And again, depending upon your audience, you're going to have different concerns about addressing ones or the other.
- But at least it gives, that framework gives us a lens of where we potentially can apply leverage in those conversations. We can bring data to bear, we can address and bring up the concerns. There's a certain power to just addressing the elephant in the room of, oh, I'm sure you have some anxiety about the time of implementation. And just being very upfront that will help move people forward. Like, oh, okay, they really do understand me and we can move this forward. So definitely important. And depending upon if you're a design or versus the sales versus marketing, you're going to have a different lens on how to work with those different emotional struggles the customers are going
- Brendan Jarvis:
- Through. And I often hear UX researchers and particular frame up their purpose or the value that they contribute to their organizations as this ability to help the organization decide what to do, but also to de-risk those decisions. And what you are talking about here, Dan, is really, it sounds like, to me anyway, it's this ability to de-risk the decision for future investment. And it's also a perspective of, or a lens that the researchers can bring to bear that can prove useful much to a much wider context than just the UX or the design team. You mentioned sales and marketing and executives. This can help inform the conversations that they're having at various levels of customer organizations, which are often in B2B SaaS, which is your space. I get the sensors much more complex than a pure B2C consumer play.
- Dan Balcauski:
- Yeah, well, if you're one of these researchers having these in-depth interviews and uncovering these struggles, there's huge amounts of value for surfacing that to your go-to-market teams so that they can use that on the front lines, and not in a manipulative way, but in a way that helps people make progress in their lives.
- Brendan Jarvis:
- Hugely important. We've talked about pricing and listening to people using jobs to be done to try and uncover their problems. And the job of a product manager is often one that is full of stress and pressure, as we've talked about earlier on. What is the number one priority in your mind of a product manager? What should that be? Where should they be focusing most of their time and effort?
- Dan Balcauski:
- It should be obvious from the conversation, but I'm going to say, go talk to your customers. If you're not talking to your customers, go do that now. Really, there's very little excuse.
- Brendan Jarvis:
- Press pause on the podcast, put it down, go and talk to a
- Dan Balcauski:
- Customer. Go and talk to a customer. I mean, it just, it's saved me. I don't give this lately, it's saved me so much time. I mean, there's been so many situations as a product manager or product leader where you're just getting pulled in so many different directions and there's all these things that can happen, and I've just found time and time again, having a couple of customer conversations just makes everything clear. It's like, oh, all those other things aren't really problems. These are the things we need to go solve because this is what, at the end of the day, this is how solving problems creates value. People give us money to solve their problems and create value. This is how we grow as a business. It just follows from there. And we just get too wrapped up in all this internal noise, our own internal team KPIs and deliverables. And at the end of the day, that provides a whole level of clarity
- Brendan Jarvis:
- And it's not enough to just solve a problem. It also has to involve understanding and uncovering what the right price or what the value is that that problem represents to customers. And being able to, from your organization's point of view, capture a fair share. And I use fair loosely here cuz that's obviously determined on a case by case basis, but a fair share for that value that you're creating. Dan, often I hear product managers, researchers, designers, and it probably, this applies to anyone working in any job, quite frankly, in any industry, complaining about the sort of lack of available time that they have to work on what they perceive to be what truly matters. Now, customer discovery, doing it regularly, these are fairly well understood and well known needs or areas of focus that people should be investing time and energy into, but often they can't for whatever reason, whether it's lack of time or resource. In your experience, how much of a role does a company's culture or potentially its operating structure, its org chart influence the ability of the product teams to actually connect with customers on a regular basis?
- Dan Balcauski:
- This can be a huge problem in especially very enterprise B2B SaaS companies or enterprise companies of any industry where there's a very closely held relationship between an account manager or a customer success manager and a customer. Where in these situations, oftentimes a product team will need permission to go talk to customers. I do not believe that that's ever the right answer. I think we can, we've been talking about emotions on behalf of customers. I think it's important to unwrap potentially what's going on in these situations. And it's hard to diagnose [laugh] a bunch of general populations, but you do have somebody's livelihood on the line if an account is screwed up. So I have respect for the account manager, the customer success manager, who is protective of, oh my God, if this product manager comes in and says something or deviates from the script that I've outlined in any sort of way, I'm not getting my bonus, I might get fired.
- But also I think what it reflects is a lack of trust. And I think that has to be built over time at the individual contributor level between their sales and product and design personnel. And it also has to be driven top down from the leadership. I've actually interviewed a companies before and I found out that that was the case, and I've told the head of product, I was like, I will never work here if that continues to be the culture, because I believe in the product team having access to the customers and look, there's absolutely rules to be followed and hey, please don't say anything about this, or someone has to attend on a call, but making sure that access is there is important.
- Brendan Jarvis:
- And it sounds like you need executive buy-in in order to make that happen. I actually, I asked Marty Kagan a similar question to this. I think I asked him, who should own the customer in an organization? And he very simply said, that's a very dangerous idea, echoing the sentiments that you've shared, Dan, I'm just mindful of time. We do need to bring the show down to a close. Some of what we've covered today was pretty intense as far as the business aspect of design and creating products and delivering value to customers. And I'm just mindful that we have a range of people listening, some which will be more savvy than others when it comes to the business side of things. For those people listening that are seeking to have more business conversations with their organizations and more impact through the work that they are doing, what questions about their products or their organizations should they be asking more of? And that could be of themselves, or it could be of their peers, or it could be things that they're researching, but what do you really wish that they would be asking more of?
- Dan Balcauski:
- What I would say is if you can understand the metrics that your customers use to drive success and then drive that conversation back inside the business to understand how are the metrics that we're tracking at the business financial level and product level, how do those map to how customers measure their success? And can we, because, and there's obviously the transactional data of did we sell new business, did we get customers to renew? Did we get customers to expand? And then you get into product analytics data, okay, how can we tie our sense of customer engagement to customers being successful? I think that's really one of the best things that folks can do is try to understand how their customers being successful correlates with those internal metrics.
- Brendan Jarvis:
- Great. What a great place to leave things. Dan, it's been really great having you on the show. Thank you for so generously sharing your stories and insights on product strategy and pricing and jobs to be done today with me.
- Dan Balcauski:
- I really appreciate the opportunity, Brendan. Thanks for having me.
- Brendan Jarvis:
- You're most welcome. Dan, if people want to find out more about you, about product tranquility, what's the best way for them to do
- Dan Balcauski:
- That? I blog regularly, regularly on my website. It's producttranquility.com, all one word, and you can find me on LinkedIn at Dan Balcauski. I'm happy to connect with folks.
- Brendan Jarvis:
- Perfect. Thanks Dan. And to everyone that's tuned in, it's been great having you here as well. Everything that we've covered will be in the show notes, including where you can find Dan and Product Tranquility and any resources that we've mentioned. I think there's a few talks in there that would be useful to link to. If you enjoyed the show and you want to hear more great conversations like this with world class leaders in UX, design and product management, don't forget to leave a review. Subscribe as well as tell someone if you think they would get value out of the show, pass it along. If you wanna reach out to me, you can also find me on LinkedIn, just find me under Brendan Jarvis, or you can find a link to my profile in the show notes on YouTube, or you can head on over to thespaceinbetween.co.nz. That's thespaceinbetween.co.nz. And until next time, keep being brave.