SaaS Scaling Secrets
The SaaS Scaling Secrets podcast reveals the strategies and insights behind scaling B2B SaaS companies to new heights. Dan Balcauski, founder of Product Tranquility, leads conversations with successful SaaS CEOs, exploring their challenges, triumphs, and the secrets that propelled their businesses to the next level.
SaaS Scaling Secrets
The Benefits of Side Hustle Scaling with Richie Khandelwal, CEO of PriceLabs
In this episode of SaaS Scaling Secrets, Dan Balcauski interviews Richie Khandelwal, co-founder of PriceLabs, a revenue management platform for vacation rental owners. Richie shares his unique journey of building PriceLabs into a global operation while working demanding full-time roles at Bain and scaling MindTickle. They discuss the origins of PriceLabs, managing a side hustle turned full-time business, and the importance of prioritizing tasks and customer-centric solutions. Richie also explores the challenges and strategies of pricing both in hospitality and SaaS software, emphasizing the need for explainability in algorithms and balancing trust and accountability in team management. Lastly, Richie advises CEOs to resist the urge to be the smartest in the room and focus on hard work to achieve B2B scaling success.
01:12 Meet Richie Kahndelwal of PriceLabs
01:42 The Journey of Building PriceLabs
02:24 Balancing Full-Time Roles and a Side Hustle
07:36 The Decision to Go All-In on PriceLabs
13:04 Management and Leadership Insights
18:57 Balancing Trust and Accountability in Business
21:01 Building a Remote Trust-Based Culture
21:27 Defining and Maintaining Company Values
24:34 Challenges of Pricing in SaaS vs. Hospitality
27:34 Psychology of Pricing Automation
28:47 Explaining Pricing Models to Customers
31:06 Balancing Algorithms and Customer Psychology
33:45 Common Misconceptions in Pricing
35:53 Advice for Scaling B2B Companies
Guest Links
It's a problem that started from my own home trying to rent an extra spare bedroom. And through that I realized that there is no good way to price homes. I feel like a lot of investors are guilty of this pushing founders and businesses into wrong direction of even before it's like the baby hasn't started to take steps, but you're asking them to run. if we are not failing, we are not trying hard enough,. And so how do you create that environment where people feel comfortable taking risks? Trust means I can question you, and I expect you to have the right answer, but you don't have to ask me before you go do something.
Dan Balcauski:Welcome to SaaS Scaling Secrets, the podcast that brings you the inside stories and leaders of the best scale up. B2B SaaS companies. I'm your host, Dan Balcauski, founder of Product Tranquility. Today I'm excited to welcome Kahndelwal and co-founder of PriceLabs a revenue management platform for vacation rental owners. Richie has built price laps into a global operation, managing over 400,000 units across 95 countries, and he built his entire business as a side hustle for six years while simultaneously scaling MindTickle from 40 to 400 employees. Richie, great to have you on SaaS Scaling Secrets.
richie-khandelwal:Hey Dan. Thank you so much for having me. Excited to speak to a fellow Kellogg alum
Dan Balcauski:I am very excited for that as well. Good to have you on the program. Just to start us out with Richie. For listeners who aren't familiar with PriceLabs can you give us a quick elevator pitch? What do you do and who do you serve?
richie-khandelwal:for sure. PriceLabs is a revenue management and dynamic pricing platform for the hospitality industry. We are particularly focused on short term rentals and independent hotels, and when I say dynamic pricing, basically we are the folks who's adjusting your prices When you're looking up to book a home or a hotel, and maybe you go two days later and the price have changed, it might be our algorithms changing those prices.
Dan Balcauski:Well, I, as a fellow pricing nerd, am super excited to dive into that world with you, and hopefully we get some time to touch on that later in our conversation. I wanna start early on. So you had this fascinating six year period where you were running PriceLabs while simultaneously working at Bain, and then Skyling Mind scaling MindTickle. It's not a typical founder journey. Could you, I guess, walk me through how you managed to build a global business on the side while having such demanding full-time roles?
richie-khandelwal:For sure. For sure. So, firstly because we are Kellogg alums, right? PriceLabs started when I was at Kellogg. So, if you imagine last semester or if you remember our last semester, right? It's a ton of time and so I had a ton of time in the last semester, plus I had a delayed joining date at Bain. I wanna say I was starting in October or November, right? And Kellogg wraps up, I wanna say maybe in May. And so see, I also had like four months to really spend on this problem statement with no distractions, right? Post that, I think just like one of the themes that hopefully comes through as we talk about this, right? One of the things that I've always believed in is. want to prioritize a few things that you want to do really well. And then that may mean you may not do some other things really well. And so, so I think I was at Bain or at Mindle that's where I picked and prioritized my time to saying this is like the few years of my life where I'd operate with limited distractions and just get into it. On both sides of like, whether it was my core work or or PriceLabs different on both sides. Happy to get into it, if that's of interest. Then
Dan Balcauski:Yeah. Well, I guess, first of all, did was this a open secret that you were hustling on nights and weekends building, building a company while you were working or were you trying to keep this off the radar?
richie-khandelwal:Yeah. Yeah. So, at Bain not as much. Also we were not we didn't think of just to go a little bit back into the history of PriceLabs right? We didn't think of building this as a business in itself, right? It's a problem that started from my own home trying to rent an extra spare bedroom. And through that I realized that there is no good way to price homes. And so that's kind of how we started on this problem statement. And we built something and we put it out with a free to use tool, right? Where people could just use it for free. and so, it was only very late into my bane time when we actually started to think about monetizing this, right? Otherwise, it was a free not true open source, but free to use software that we had put out that people could use. And so, but at MindTickle it was an open secret. At cle, So I was in the six year journey for two years. I was at Bain at four for four years, or four, four and a half years I was at cle. And at Bain you can imagine that it's a lot more intense work. Time is scarce, right? So that just meant it was later in the evenings or weekends, right? And thankfully in consulting, the weekends are sacrosanct, right? You're not generally your weekends are not getting touched, right? And and so, so at Bain it was mostly those weekends, right? And some some weekday nights. And mind it was little bit more the reverse, right? In a startup, you can imagine weekends are not as sacrosanct, right? But but you have relatively more control on your hours.
Dan Balcauski:Well, I guess most people struggle to find time for side projects, even with regular jobs. And you were doing this while working at some of the, most intense places I can imagine. Both Bain and a scaling startup. I guess what was your mental framework or philosophy that made it sustainable for you?
richie-khandelwal:yeah. I think one, it's a pro, it was a problem statement that I really enjoyed working on, right? It's often you hear you should not work on things that you enjoy because then they, then they don't feel like, your enjoyment becomes work. But it was just a problem statement that I really enjoyed working on. And so that, that gave a little bit of that drive, right? But outside of that I think for me the way I operate is still the time I'm solving a problem that I am enjoying. I'm going to work on it. Don't. Feel overwhelmed, right? So I was able to com compartmentalize because of that. And also like again said, right there, there were some choices that I made to simply saying, Hey I am I'm like, these are the two things that I'm going to prioritize. I'm going to deprioritize a few other aspects of my life. So in the first. Let's say pre Kellogg, I was traveling a lot. I was backpacking, I was going through various countries, backpacking, living in hostels, and doing all of that, but post Kellogg for that five or six period, year period, bunch of those things went on hold and and like the core work became the highest priority, if that Yeah.
Dan Balcauski:no, it makes perfect sense.
richie-khandelwal:there were also times where I would just say to my co-founders, Hey, for the next. Month to month, I need to spend maybe more than 24 hours a day at my work because something's going on. And I had good partners to saying they understood. Okay. That means we'd have like limited attention that Richie can bring in for that time. And so, so yeah, I mean, prioritizing and stepping back where where you need to.
Dan Balcauski:Yeah. Well, you mentioned making not making your passion your job unless you get jaded on it. I at one point probably a secret. I haven't revealed this podcast for, at one point I considered becoming a dance instructor but made that decision against it for exactly that reason. Also, we'll have to share backpacking tips at some point. I've I've, I haven't I maybe I accelerated post Kellogg in that part of my life. Versus you well. After I, I guess after six years of running PriceLabs part-time, I guess something shifted around 2020. You just had to go all in. What was that inflection point? What finally convinced you to make PriceLabs your full focus?
richie-khandelwal:Yeah, it was, so it's not always one thing, right? It was a mix of three things for me. Both PriceLabs and MindTickle were scaling
Dan Balcauski:I.
richie-khandelwal:well and both required dedicated attention. Myle, of course, was a lot larger. Had had gone from 40 to 400 people while I was there for four years. Was leading finance operations. All things go to market from some perspective, right? Secondly, in the PriceLabs market, some of our competitors had started to raise money or do some more, right? And so it was a little bit like enemy of the gates kind of a situation, right? And third, I was getting married. So again, like I said you can only do few things really well, and so for me it was like I have to drop one of my two passions, PriceLabs and mind tick one of those two to make sure I have time for my married life as well. So, so that's the trifecta of reasons, right? That, that led to saying, let's just go all in on one side.
Dan Balcauski:Very important. Those family considerations come in. I'm sure. Yeah. The so it sounds like it was a, there's market consolidation or maybe not consolidation but definitely some traction in terms of who you're up against family situation. And then also the maybe maturity of the, your existing sort of, full-time job at mine cycle. So, I guess, yeah, both sides of it so those blended factors, I guess, I, I. Spent more time on this because I think, you probably have an interesting perspective because I, I don't, I don't hear of a lot of, founders that, spend such an extended time doing a product as a side hustle and then end up with a, a company as successful as PriceLabs is today. I guess looking back, is there anything, from running that as a si running PriceLabs as a side hustle that taught you about building business you might not have learned otherwise? If you'd gone maybe a traditional full-time founder route from day one.
richie-khandelwal:Yeah. I think, one, it's really hard to look back at success and really pick out points that work well. But what I can do is in my head, contrast and compare to saying I know some people who have gone head first into building a startup saying they're going to build a startup and some really smart people that I know and where they haven't delivered. So I like with that framework, I can say what worked for PriceLabs the very number one thing that I would say is and it's just obvious, so we won't spend time on it, but you should be solving for customers, right? Whatever end audience that you're trying to solve for that success will follow, right? Don't preempt success, right? Solve for the problem statement that you're solving for, right? And I think that's a, that's an advice that's been given a thousand times. So I won't elaborate on that too much. The one common thing that I see that often I see people struggle with is the day they start thinking about seriously building a company, right at that moment, they start thinking about, how do I make this into a hundred million dollar company, right? Or whatever, X million dollar company, right? And my thought or advice would be, you want to start with. In a place that has good enough time, right? Big enough time for your dreams to to come true, right? But you start building the business with thinking, how do I make a million dollars from this business? Or and then when you get to that million dollars you don't immediately jump to, how do I make this into a hundred million dollars business? You jump to how do you make this into a$10 million business? And then from a$10 million maybe, whatever the next mile milestone is, right? 25 50. Think that way rather than rather than from day one thinking a hundred million dollars, right? Because that sometimes can push you into making decisions that may not be right for the stage. And, I'd say this openly, but I feel like a lot of investors are guilty of this pushing founders and businesses into wrong direction of even before it's like the baby hasn't started to take steps, but you're asking them to run. Or not Sprint in a sprint in like Olympics a hundred meter race. Yeah.
Dan Balcauski:It sounds like there was some amount of. And that created some natural sort of breathing room for you to really sort of get maturity on your view of the market and the product, et cetera. That wasn't as pressing as like, oh my God, if we don't get a paycheck, I'm gonna be eating ramen for the next 10 years. Or I need to meet some investor hurdle criteria and therefore maybe need to do some unnatural things. And because this was a side thing, it allowed you guys a little bit of space to, to approach that more pragmatically.
richie-khandelwal:Be conscious into two ways, right? One again, going back to your solving for customers, right? And number two I would also say, which is sorry, a ortho gonna point to what we are talking about, but I would also say we had limited time and money right, that we could spend on this, right? So And that frugality, I believe allowed us to prioritize for right things, right? When you have abundance, it leads to waste. Right? And so, like just we were able to prioritize, Hey, I have three hours today, or two hours today, or half an hour today. What is the one thing that I really need to get done absolutely need to get done. And so, so it really helped us prioritize in a very frugal way or. I only have x many dollars. Where do I spend this dollar? Which is the most right place to spend this dollar at? And so, so it really helped us in those two places we had limited time and limited money.
Dan Balcauski:Yes. Well, this is the old necessity, the mother of invention, but those constraints also breed creativity, and I'm not sure there's probably multiple of those business cliches that are applicable there. Look like you've got this really interesting background. I, IT. Kellogg, MBA Bain Consulting, that's a lot of high achieving type A environments. As you've built and scaled PriceLabs which, any startup has constraints as we were just talking about. If you fill that with a bunch of Kellogg MBAs you, it'd be hard to make unit economics work with that kind of fixed cost. I guess. How has your approach to managing people evolved from those early experiences, I guess, have you had to modify your how you think about leading different types of teams?
richie-khandelwal:Absolutely. Absolutely. And I learned a ton on this from mind. CEO, Krishna I learned a ton. But like, just for context, right? In consulting, everyone that you're working with is so smart, so driven, right? They already have a goal in mind, they're going to get there, right? And so, so it's fantastic. But also while in consulting, all of us are working on problem statements that are ambiguous. The career path is straightforward, right? So, if you do X, you're going to get y. If you do Z, you're going to get whatever, right?
Dan Balcauski:Yeah.
richie-khandelwal:that is not the case at all. Firstly, I can't not necessarily can't, but most people won't be able to hire the same level of talent across the board, right? Who's driven will get things done, right? You have a mix of talent that you bring in, right? And on top of that. also don't just have problems that are unstructured, but the payouts, the couriers, everything is unstructured, right? Unlike unstructured and ambiguous, unlike a consulting role where the problems are ambiguous, but the career paths are straightforward, right? And so that requires really balanced approach to leadership where you're truly figuring out every single day, how can I create a work environment? brings out the best in my talent. And that may mean things. That may mean for some people you want to push them harder, right? And for some people you may want to give them good constructive feedback so that they can develop better, right? people you may need to give assurance, and you have to find the right mix what you're comfortable with, right? But it doesn't operate very similar to how consulting operates. The so Krishna always like he did a fantastic job at this in terms of building culture, right? He really brought everyone together in building the right workplace such that you were proud of the workplace, you're proud of where you were working. so you were driven to achieve more, right? Whether that was the problem statement that you were solving, whether that was the people that you were working with. And so you were proud of the place that you were at, and that is what gave you the drive. And one other tip that I would give you is on this one of my favorite books is drive which
Dan Balcauski:it dead pink?
richie-khandelwal:by Daniel Pink. Yes.
Dan Balcauski:Yeah.
richie-khandelwal:Really talks about how you think about management. In these environments, right? A lot of our management is around structured environments. So, you're thinking a Ford factory, right? And how do you produce more cars? And then a lot of our management principles come from that environment, right? But this book driver was also a big eyeopener for me to think about. How do you think about some of the practices that we install? In a regular corporate environment and they may not work in as unstructured environment.
Dan Balcauski:how would you I guess are the ways that you would. Think about contrasting maybe the management, like, so say you were a, manager at Bain versus, the manager of team at PriceLabs I guess, or any scaling startup, I guess. Are there, is there a difference in sort of management philosophy that you think is applicable? I guess are there ways that you think about creating that environment where people do their best work? That may be a nuance that you wouldn't expect if you're only in one.
richie-khandelwal:Yeah. It varies. It varies, right? Example rarely a consulting environment would I encourage people to take risks, right? You're not, you're rarely, you're saying, oh, go take a risk. If you fail, it's okay. You don't, you can't afford to fail. In a consulting environment, at least with Right? Versus here you have to feel extremely comfortable with failures, right? Because if we are not failing, we are not trying hard enough,
Dan Balcauski:Yeah.
richie-khandelwal:right? And so, so how do you create that environment where people feel comfortable taking risks? People feel okay with failures, right? But then next day they come back and still feel like, okay, I'm in a place where my efforts are rewarded and not the outcomes just.
Dan Balcauski:one of the things that was going on in the back of my head as you were talking in terms of taking risk is that, one major distinction between, a management consultant industry that maybe is serving Fortune 500 clients versus, a startup is like, the startup has this. Much bigger existential risk of like, if we don't move fast enough, either someone's gonna come and eat our lunch or we're gonna run out of money. And so this, yeah, this ability to take risks is needed because if you're not finding the. Maybe unspoken path, like you can't just go against sort of, or just do what everyone else is doing, expecting that you're just gonna be faster. It requires some amount of taking a different path, and that needs to be sort of inculcated in how the employees are thinking about their own careers and jobs.
richie-khandelwal:Exactly. Exactly right. And it all goes back to them feeling that they can trust you. Them feeling that they are again, like their efforts are what are, what is valued more than just the output. And so, so are you creating that environment? Where you're able to, you're able to reward people and and communicate to them that their efforts and efforts really matter. To do that I'd cut that last line out as I said the
Dan Balcauski:oh.
richie-khandelwal:Yeah.
Dan Balcauski:well, so you mentioned, this trust. Being sort of foundational in this trust-based approach. But I guess, also, I mean that all being said, obviously you have a business to run. You have these existential risks, so you still have to maintain and hit bus, hit goals to keep the business moving. I guess. How do you think about, balancing those two in terms of like, okay, yes, I trust you, but that also gonna keep you accountable. How do you think about that?
richie-khandelwal:Yeah. Yeah. I think, so you like, comes from being open, right? Open about, Hey, this is where we want to go, right? And you want to get buy in from everyone to saying and especially at an earlier stage, right? If you're 50 people or if you're larger than with your leadership team or L one team, right? But you want to get a buyin from them to saying. we agree to this, right? If not let's sit for a couple of hours, let's hash it out. Where do we disagree? What do we think the risks are? Whatever, right? But you get, get to an agreement, right? Once you get to an agreement then you don't have to shy away from questioning or being direct and stern where needed, right? Doesn't mean that you don't question right? Trust means I, I can question you, right? And I expect you to have the right answer, but you don't have to ask me before you go do something. As an individual say you're a marketing leader, you, I trust you to make the right choices, and you're going to make, go make the right choices, right? But as a business leader, I can come to you and. Ask you questions about why did you do this? Why not this et cetera, right? And so, so, so, I'm not sure if the duality of that makes sense but in practice both have to happen, right? But it starts from that openness, why we are doing something and being very clear about that.
Dan Balcauski:No, it makes perfect sense. So there's a you open your this openness encourages, a lot of communication, even potentially uncomfortable communication. But then it still allows it trust is an ongoing, evolving thing within that dynamic. Are you distributed with your, in terms of your personnel and offices? I know you're serving customers in 95 countries, I guess, do you, are you do you have broad range of offices or are you guys remote.
richie-khandelwal:So we are remote, right? Which is, which adds a layer of complexity to all of this, right?
Dan Balcauski:Yeah.
richie-khandelwal:we
Dan Balcauski:Well that was gonna be my, that was gonna be my follow up. So is your I guess what have you learned about, enabling that trust-based culture, I guess as you are spread across remote sites?
richie-khandelwal:Yeah. Yeah. I think one of the things which I think we instinctively knew and most people also instinctively know, is that you want to define some level of culture very early on of who either the founding team is or. Your initial maybe 10, 15, 20, 30 employees are right. And take that, codify it, and you want to interview against that very strictly. And a lot of people start that way, but then quickly get diluted because they're not able to fill the roles fast enough, et cetera. And so, so I think that's one thing that we have done fairly well is what I feel that even though and to your question by the way, going back. I think today we have members in multiple countries. We have, India is a big hub for us. Philippines is has a team us. We have multiple states in Europe, a few different countries. Spain is a big hub for us, but even within Spain, you're now expecting, like, there are people from all countries in Spain, right? We also have Portugal, Netherlands then we have a couple of people in latam. So everyone's coming from a very different upbringing or cultural values from their society, But we, when we interview, we are really looking for, and we are communicating back as well to saying, Hey, these are our values, right? If you believe you don't fit into this you should know this at day one, that these are our values. And if you believe you don't fit into this, then you may not not be the right fit. And like if I our values are customer centricity, and I don't think so. There is a, there's an org out there that doesn't say customer centricity, right? But our values are customer centricity. That with, you have to know the product really well. I don't care which team you're in, you have to know the product really well. And what that means is when you join, even though we are a startup. We spent three weeks for you doing onboarding, whether you're hr, whether you're finance, sales, whatever. You're doing these three weeks onboarding because you have to know the product, you have to know our customers. You have to answer support tickets really well, right We have this like a happy workplace, which comes from you don't just say there is a problem, you raise your hand and say, I want to work on this problem. And it could be anything. You might be a product manager and you say, Hey, we have a compensation problem. Raise your hand and say, I want to work on the compensation problem and let's figure it out. We have autonomy because we are remote. And so no one's going to monitor you to do your work. And so we have autonomy and we have a trust thing in that right where we trust you to do your work. But you only get so many strikes, right? If you get strikes no one's going to set up a standup with you every day to get work done, right? You have to do it and you have to communicate. And if you get strikes, right? So, so some of these just help us. We make sure that we are strictly thinking about this when we are hiring someone. And and if it's a borderline, then our approach to it has been, if it's a bottom line, we'd probably do a second interview. If it doesn't work, then we say no to the candidate. They could be fantastic with their skill, but if they don't fit culturally, then it's not the right place.
Dan Balcauski:So being very intentional about the company's values and then being intentional about building that into the hiring process and screening against those that totally makes sense. I wanna shift gears a little bit and talk about the actual business you've built. There's an interesting dynamic here where you know, you're helping vacation rental owners optimize pricing, but you also have to figure out PriceLabs itself as a SaaS product. In your mind, how do these two pricing challenges differ? I guess what's it like being in the pricing business while having to solve your own pricing strategy?
richie-khandelwal:They are one, I think we are not optimized on our own pricing strategy, right? I don't think so. Any business feels that they are. But they're fundamentally different, right? Because when we price hospitality, we are, talking about data at terabytes of scale, right? And so Data coming in. We are evaluating those patterns. We are trying to make our artificial intelligence models to come up with what the pricing should be and take bets on that, right? And So many bets, right? We are taking thousands of bets every day, right? For a property and for across the world. We are taking millions of bets every day. As to if at this price does it get booked, right? and second in that market also the recurring customer usage is lower, right? So you can take a lot of bets right? You can say, Hey, today I'm trying to price this home at$200. Tomorrow I'll try to price it two 20 and day after tomorrow, I'll try to price it at one 90 and see what the elasticity of demand is right In, software pricing, you don't have that. Do you have customers that are recurring some of them that are also talking to each other? And and you have to gen, prove your ROIA lot more. Also, the ticket So it it changes that as well. So the way we think about our own pricing is driven from a balance of the ROI that we deliver. Customer perceives that ROI and a balance of how competitors are also doing this, right? And so Of those three fundamentally different, and probably we are doing it wrong but fundamentally different than how we think about pricing a hospitality business.
Dan Balcauski:Yeah, it's well, I bring it up because I remember, I don't know if you had the chance to take his class when he was there, but professor Eric Anderson I remember I took a whole class a whole quarter on pricing. And we learned all these really cool techniques. Of, which I'm sure are really applicable to the algorithmic pricing side of the business that you just mentioned. I like, we had cases where we were managing Chicagoland grocery stores and we were the brand manager for minute made orange juice. And depending upon if our competitors were on sale that week or whatever, we had all this. Register transaction data. And then I remember trying to apply those techniques when I was a, product leader in a SaaS company and realized like, actually none of this stuff works because of exactly all the problems that you just outlined. I was like, okay, this is actually quite different. Let me go deeper into the books and see if there's something here that I can use. But it's it is, it's fascinating because it, the, it's, although pricing maybe looks the same at a 30,000 foot view when you get down to those distinctions you mentioned of like, yes, high, highly transactional or is a recurring, or it could be quite different. I'm curious one of the fascinating challenges, you much face in, in building these. These algorithms is, you're asking property owners to essentially hand over one of their most important business decisions to software. How do you think about the psychology of pricing automation? I guess what have you learned about what makes someone comfortable, like letting an algorithm, set their prices?
richie-khandelwal:Yeah. So, so strange, right? So when we started out in 20 14, 20 15, right? We built this best in class artificial intelligence black box model, right? That does things for you, right? GPT or And something comes back and you're like, wow, right? Something happened. But with that pricing model, we had no way to explain why we have come up with that price. Thing it was black box, right? It was even black box for us more often than not. Similar to how, again, I go back to charge GP, like it's really hard to explain why did it say that? It said it because you have a ton Algorithms working together in a black box model and speaking something out. and so
Dan Balcauski:And if you ask it, it will lie to you and give you
richie-khandelwal:Exactly
Dan Balcauski:that wasn't exactly the reason.
richie-khandelwal:and here's the thing about, about LLMs versus pricing models, right? LMS are allowed to hallucinate. We are not allowed to hallucinate, right? We can't hallucinate to saying, oh, your house was supposed to be a hundred dollars a night, but we priced it at$10 a night. We can't hallucinate, right? and so we we went back, we wrote everything right from building our AI models in a very explainable way, right? so, As you're thinking about a day's price, you should be able to see factors that impact that price And so, so, so, so as we've built over the years, you can see factors that are impacting prices. We have improved the explainability of it. You can also drill down and see charts and graphs of why that's happening, what's happening in market. That, that leads us to saying should potentially, you're expecting high demand in this market and you should be holding on price or you're expecting low demand on, in this market, you should be dropping your prices, right? And so, so you can look at all of that explainability as you go, as you drill and drill into the product, right? And then as people build comfort with that, then they start thrusting to saying, okay if I've looked at five different price points and understand the drill down, then I understand the remaining nine five should work well, right? And It's this the psychology thing that you talked about, right? While with a black box model, we could have potentially had a better pricing, but even we couldn't explain it. And we almost went to a very crazy backwards step of building a statistical model. So that it's explainable and it's highly In terms of we know what it's going to say.
Dan Balcauski:And so, I so explainability was key, I guess, was that I assume, was that driven directly by customer, sort of resistance to adopt the black box model?
richie-khandelwal:feedback, right? Customer feedback and customer questions. Customers asking us, Hey why is it priced this way? And us realizing, actually, we can't even answer why is it priced this way? And so being that, so the customer centricity value, right? At that point you can wiggle your way out of it just by saying whatever, but the real customer centricity is being honest there. Hey, actually, we also don't know why it is priced this way. Let us build something that we can explain to you. Why is it priced this way?
Dan Balcauski:I'm curious.'Cause we're both in this pricing world, but obviously approaching a very different angles. I say I stay all my entire time in the latter category versus the former. But, I'm curious, given your. Experience there. Like how much of like pricing success do you think is really about the quality of the algorithm versus understanding the customer's psychology or is it balance between the two?
richie-khandelwal:So, so, in in hospitality markets, right? You're dealing at scale. a lot about quality of algorithms, In and there is no recurring purchase there, right? Or at least you're not going to go stay at the same hotel every single night. You're not, you like, you won't remember it. You won't remember how much you paid for that hotel the next time you check in, right? Versus in software pricing. There is a lot of memory type to it, right? And so you have to approach it differently. And there are a lot of those things that you mentioned really come in, right? Where it's not just the the algorithm, right? But it is also the ICP, right? And having said that in a true revenue management sense, I think of breaking them down into. Your pricing, which is the algorithmic part of it, right? This is what the true ROI of something is, right? And then on top of it, I think of promotions and discounts, right? Promotions and discounts are tied to your personnel, ICP, If that makes sense. So let's say if I am operating in. In geo where ROI is similar, but people's behavior to buy is different, right? I take my price, I'd add on a discount layer to it or a promotion layer to it, right? And that would become my net price. But if you think of go back to like the like the four piece of marketing, right? One is pricing, one is promotion, right? The promotion is really what? You're doing it for the ICP in my head. And pricing is what you're doing for the algorithmic side, the ROI side et cetera, that you want to deliver?
Dan Balcauski:There's a I guess one, one way you might separate those two as well is like there's a maybe sort of a core market-based algorithm. And then there's, transaction level additions that you may tack on.'cause even in the SaaS world, right? You may have the list price. Like, hey we have our good, better, best options. These are the price lists. But then there's some amount of discretionary discounting given to the sales team to negotiate with clients. Or there's potentially marketing may be running, oh, we're running a Black Friday promotion. That that layers on, modifications, depending upon timing, seasonality, or individual sort of customer demands, use cases.
richie-khandelwal:Absolutely. Absolutely. So you're thinking of those two as two distinct things, right? You want a very good core algorithm that comes up with what should be the right price for something, and then you're layering on the market factors, right? Which is your competition or discount or something else to saying what should be the final achieve price?
Dan Balcauski:This is a question I often get asked, but I'm gonna, I'm gonna flip it to you as it what's one thing about pricing that most people get wrong in your experience?
richie-khandelwal:If the value is not clearly established if not, value is not the right word, if the standards or benchmarks are not very. It's not very clearly established. The low cost product actually does not win. So in, in vacation rental world, let's, let me give that example, in a hotel, I know what a four star and five star means, and I if I see a cheap four star, I'm going to buy that because I know I'm going to get relatively the same service across all four stars, right? But in vacation rentals, have no measure of quality. To saying what is good, And so if I see a lower priced product I may not always buy that, because especially if it's like ridiculously discounted, right? I'm not saying if it's like 5% lower, but let's say if it's 50% lower, you have all the homes in Gatlinburg that are at$300 a night and you have one home at a hundred dollars a night, like I don't know. I don't know if I want to risk my experience on this a hundred dollars a night home. so sometimes going too far away from the pack can have detrimental consequences.
Dan Balcauski:So there's some, in the hotel example, there's some. Broad standardization that helps consumers make informed choices. And when you're moving to market that maybe choices are not as clearly defined or relevant or there's not a clear metric that you could use to, to compare so then, so what I heard there is that price then also has an additional weight of a quality indicator. And so you're saying if it's low price, it must be low quality because I don't have these other factors to help me weigh.
richie-khandelwal:measure this, right? I don't know how to measure this. So I'm just going to assume lower price means lower quality, especially because everything else is bunched up in one place, right? And so that, that can be sometimes counterintuitive as, starting a new business, right? And so again if you're doing that, you may want to go with a strategy saying, this is our list price, but because you are our first few clients or whatever, right? or
Dan Balcauski:I I absolutely love that Richie, I could talk to you all day, I want to be respectful of time. wrap us up, just to take us on something the audience could take away, I guess, if you had to. What advice would you give other CEOs trying to scale their B2B companies? If I gave you billboard and you could put anything on it for these other B2B SaaS CEOs trying to scale their companies, what would it say?
richie-khandelwal:Oh, for the CEOs. I'm not sure if this is gonna fly well, but resist the urge to be the smartest in the room
Dan Balcauski:I.
richie-khandelwal:try to be the most hardworking in the room
Dan Balcauski:Resist the urge to be the smartest in the room. Love this has been fantastic. If listeners wanna connect with you, learn more about Price Labs, how can they do that?
richie-khandelwal:You can find PriceLabs@pricelabs.com and if you want to connect me, find me
Dan Balcauski:Well, I will put links to, LinkedIn and price Select website in the show notes. Thank you so much, Richie. That wraps up this episode of Sask Scaling Secrets. Thank you, Richie for sharing his journey and insights. For our listeners, we found Richie's insights valuable. Please leave a review and share this episode with your network. It really helps the podcast grow.
