AMA: Amplitude Director, Product Marketing, Nate Franklin on Pricing and Packaging

I've found that running a price / packaging revamp in-house versus with a consultant depends on three factors: 1. Assigning a DRI to lead the project and having a clear decision matrix 2. Ability to run a pricing study & impact analysis 3. Scope of risk of the change / ability to run pricing as a test Ultimately, this is a judgement call - but clearly if you are not feeling confident in any of the above - you should take a hard look at whether or not it is right time to do this project. Here's my breakdown / thinking across these three factors: Assigning a DRI & Clear Decision Matrix This is the most important factor of any pricing / packaging update. This decision CANNOT be done by a committee - it will not work. Believe me, I have tried it. You can have an advisory or steering committee -- but there has to be a clear owner and clear decision matrix. Decision matrix (depending on company size) PMM Proposal --> CRO + CPO --> CFO --> CEO. A reason to go with an outside consultant would be to assist the DRI with getting the work done (research, analysis, proposal and project mgmt). Either way, you still need a DRI (should be PMM!) and a decision matrix. Ability to run a pricing study & impact analysis This is about assessing you and your organization's ability to do the proper analysis and research to run a pricing / packaging project. Do you have experience with pricing & packaging in the past? Do you have an analyst who can help model out best case and worst case scenarios with potential options? If one or both of those is a no, then unless have a relatively risk-free way to test a new pricing / packaging strategy, you should find outside help (or hire someone!). Scope of risk / ability to run a test The size of the change you are considering and your ability to test that out in a "safe" can help you decide if you need to look outside for help. If you're making a smaller change (say on an add-on product) or if you able to siphon off a percentage of customers to test on then running it internally makes a lot of sense. If you are concerned about your organizations experience, analytic skills and you are look at a major, going outside will help you de-risk the project. Even if you end up going with a plan you had been thinking about all along.

Let me preface my response and say that B2C is not the bulk of my experience, but here's how I would approach it. You have to talk to customers. I would start by trying to understand what customers alternatives are to your product and how much time, energy and of course $$ it costs them. That's a good way to think about a starting place. Then running a pricing survey and ultimately a price test is the way to go. Depending on your product, having multiple levels will make sense - but you probably don't want to start there. That's something you grow into to capture customers at different willingness to pay. Regardless -- I highly recommend following Reforge's pricing strategy -- this is honestly the first place I'd go. https://www.reforge.com/previews/product/pricing-strategy

Let's just agree that no likes paying more for the same thing and no one likes having things taken from them. So your job is 1) to not let them see it that way, 2) decide a method for grandfathering customers in and/or 3) be willing to take a bit of PR hit. Regardless of what you choose, you need to give customers time to adjust - the larger the change, the more time they need. For #1 -- Ideally you can do this after a major launch / release which introduces new uses cases to your product. That helps align the view that new value = new $$. Of course, that's often not possible. The best way I have found is to be honest with your customers. If you're committed to building the best product, best service and best experience for your customers, it's going to cost money. So tell them about your vision, tell them about what you're building next and tell them that the new pricing is to make sure you can continue meet their needs better than any other product out there. Keep it short, keep it simple and don't try to oversell it. Customers aren't going to be psyched about it, but they can be understanding if you are straightforward with them. For #2 -- Grandfathering customers into old pricing can be a slippery slope - so ideally this is a last resort. The problem with grandfathering, aside for the lack of revenue growth for certain customers, is the overhead of managing a group of customers on a non-standard plan. When you choose to grandfather customers, the best way to do it is to lock in their feature-set and block them from future improvements. Basically say - we're going to let you stay at your current rate, but you won't benefit from any new developments we make. This is another reason why timing a pricing increase after a launch can work well - most people want to have the latest and greatest. For #3 -- this is going to be a judgement call. Sometimes grandfathering in just doesn't make sense. Either it's too complex to manage or too costly. In these cases you need to do scenario planning to understand the types of customers who are likely to be upset and come up with a communication strategy for them. Acknowledge their frustration, lay out options for them, but ultimately make it clear that the status quo is changing. For these customers, you have to accept that they will likely leave your product if they can find an alternative - so make you have know how big of a hit this might be. Across all of these - make sure you have a well thought through communication plan for everyone in your company to follow. One wrong statement by someone in your organization can undermine the whole transition - so make sure everyone is aligned and equipped with the right talk tracks.

Competitive Pricing Intelligence is tricky because that information is often confidential so you cannot just go ask a customer or a partner for it. However, it's natural to come across it and there are some ways I've found to go find it. 1. Talk to your sellers. Customers (existing and prospective) will often share pricing of alternatives in regular conversation as they negotiate a deal -- you may not always get specifics, but if you get enough ballpark estimates you can get a pretty good sense of where you competitor is coming in. 2. Forums and review sites are your friend. Sometimes google can find pricing for you, but I have had better luck searching within review sites (G2, TrustRadius, etc.) or small business / startup forums. This won't get you enterprise pricing -- you'll have to rely on #1 for that.

3 or 1. Please don't do more. Getting customers to spend money on your product is hard, don't make it harder by giving them too many options. Three is easy, standard, and just makes sense -- small, medium, large. One puts a line in the sand and you can capture more price sensitive customers with special offers / discounts.