AMA: Atlassian Head of Product Marketing, Ben Rawnsley-Johnson on Pricing and Packaging

For new products especially, pricing and packaging should inform, and be informed by the broader GTM strategy (it's why I'm so bullish about the role PMMs play in contributing to P&P decisions). For example: * Our GTM strategy answers "Who is the market, persona?" * how do they prefer to buy? (PLG vs. direct sales), * How long is the deal cycle? * How senior is the economic buyer? * and how formalized is the procurement process? * Does the customer need implementation services, integrations or infrastructure effort to realize value? * The answers to these questions help you determine the minimum viable, and likely deal sizes required to sustainably generate margin using these channels. The more boundary conditions like this you can apply to your pricing strategy, the faster you will arrive at a high-confidence hypothesis you can test in the market. Another example: * The GTM strategy will outline the likely TAM/SAM/SOM, but for Pricing and packaging, you need to be crystal clear on the FIRST segment. * Honestly, unless you work at Amazon, if you're launching a new product alongside existing product lines, the reality is that your beachhead market will almost entirely comprise existing customers. This means you're going to align to existing pricing and packaging principles that you've already trained your customers on - e.g. if your company always offers a free tier, holding back high-value features in up-sell editions, you should apply that same approach here to reduce the impediment to buy.

Companies, particularly those that take a portfolio of products or solutions to market need to establish pricing and packaging principles. These foundational values and practices of what we do, or don't do, and why? help us to move faster, eliminate anecdotal opinions, and set teams up for a predictable approach to pricing and packaging decisions. Getting there can be easier than it sounds: 1. Be explicit about the values that should inform your P&P decisions. For example, at Atlassian, one of our values is "Don't fuck the customer". Unsurprisingly, that value comes up a lot in pricing discussions, and it means we tend to gravitate towards greater transparency in commercials, and more predictable pricing models, such as price-per-user vs. more adventurous (and complex) value-based pricing on unconventional metrics. 2. Identify the trade-offs. Being clear on the trade-offs and implications of your pricing and packaging will help your teams to move the slider accordingly in the iterations and tests towards a high-confidence pricing and packaging decision. Some examples include: 1. Customer Value vs. Revenue: * Trade-off: Setting a lower price to attract more customers might decrease short-term revenue but potentially increase market share. * Consideration: Find the right balance between customer value and revenue generation to ensure sustainable growth. 2. Complexity vs. Simplicity: * Trade-off: Offering numerous pricing tiers and options can cater to diverse customer needs but may complicate decision-making. * Consideration: Strive for simplicity while still meeting customer demands. Too many choices can lead to confusion and indecision. 3. Competitive Position vs. Profit Margin: * Trade-off: Pricing too aggressively to undercut competitors may impact profit margins, while pricing too high might discourage potential customers. * Consideration: Align your pricing strategy with your value proposition. Be aware of how your pricing compares to competitors and whether you can justify higher prices through added value. 4. Customer Segmentation vs. Universality: * Trade-off: Creating specialized pricing plans for different customer segments can cater to specific needs but may require additional resources to manage. * Consideration: Segment your customer base as needed but avoid overly complex pricing structures unless it's essential for your business model. 5. Discounting vs. Perceived Value: * Trade-off: Offering discounts can attract price-sensitive customers, but it may also diminish the perceived value of your product. * Consideration: Use discounts strategically, such as during promotional periods or for specific customer segments, while maintaining the perceived value of your product. 6. Free Features vs. Premium Features: * Trade-off: Offering too many features for free may limit revenue potential, while withholding essential features behind a paywall can deter users. * Consideration: Balance your free and premium offerings to provide value and encourage users to upgrade for additional benefits. 7. Short-Term Gain vs. Long-Term Loyalty: * Trade-off: Focusing on short-term profits by raising prices may lead to customer churn, while maintaining lower prices can foster long-term loyalty. * Consideration: Consider the long-term impact of pricing decisions on customer retention and lifetime value. Sometimes, investing in customer loyalty pays off in the end. 8. Innovation vs. Stability: * Trade-off: Frequent changes in pricing and packaging may disrupt existing customer relationships, but staying stagnant can hinder growth. * Consideration: Innovate and adapt your pricing strategy, but communicate changes transparently and provide ample time for customers to adjust. 9. Profit vs. Market Share: * Trade-off: Focusing on maximizing profit may limit market share growth, while aggressively pursuing market share may impact profitability. * Consideration: Determine your strategic priorities – whether it's rapid market expansion or profitability – and align your pricing strategy accordingly. 10. Customer Acquisition vs. Customer Retention: * Trade-off: Focusing solely on acquiring new customers can neglect existing loyal ones, while over-prioritizing retention may limit growth. * Consideration: Strike a balance between customer acquisition and retention efforts. Ensure that pricing and packaging decisions support both aspects of your business. 3. Establish scalable governance. Being clear on the R&R around pricing will help deliver a consistent outcome. Who is the Driver? Approver? Contributor? And who needs to be Informed? Is there a pricing council that makes the final yes/no? And who should have a voice on that board? What happens in the case of a disagreement? Is there a deadline? or can teams be sent back to re-work proposals? what kind of evidence is needed to support hypotheses? Expressing answers to these questions in the form of a governance structure will take much of the complexity out of the process. Ultimately, pricing and packaging decisions should align with your overall business goals, market positioning, and customer-centric approach. Regularly assess the impact of these trade-offs and adjust your strategy as needed to optimize your pricing model for sustainable growth and profitability.

I say it a lot, but I believe good pricing and packaging is informed by, and informs GTM strategy. Good pricing and packaging strategy isn't just a tactical decision; it's a critical component of your overall go-to-market strategy. Here's my perspective on why the two are intertwined: 1. Alignment with Customer Value: - Your pricing and packaging should reflect the value your product delivers to customers. When you understand your customers' needs and pain points, you can tailor your pricing strategy to align with their willingness to pay. This customer-centric approach informs your go-to-market messaging, helping you communicate how your product addresses their specific challenges. 2. Market Positioning: - Pricing and packaging choices influence how your product is perceived in the market. Whether you position your product as a premium offering, a budget-friendly solution, or something in between, it directly impacts your target audience and competitive landscape. Your go-to-market strategy must be consistent with this positioning to resonate with your ideal customers. 3. Revenue Goals and Business Model: - Your pricing and packaging directly impact revenue generation. Whether you prioritize maximizing revenue per customer, expanding market share, or achieving a balance between the two, your go-to-market strategy should align with your revenue goals. For example, a high-margin product may require a more targeted and personalized sales approach. 4. Sales and Marketing Tactics: - Pricing and packaging decisions influence your sales and marketing tactics. They determine which customer segments you target, the channels you use, and the messaging you employ. A well-informed pricing strategy helps your sales and marketing teams better understand the value proposition, enabling them to effectively communicate it in their campaigns and sales pitches. 5. Customer Acquisition and Retention: - Your pricing and packaging can impact both customer acquisition and retention. For instance, offering a free trial or a lower-priced entry-level plan can attract new customers, while providing additional value through upsells or add-ons can enhance customer retention. Your go-to-market strategy must encompass both aspects to create a holistic customer journey. 6. Competitive Edge: - In a competitive market, pricing and packaging can be a key differentiator. Being able to offer unique value at a competitive price point sets you apart. Your go-to-market strategy should leverage this differentiator to position your product effectively against competitors. 7. Iteration and Adaptation: - Pricing and packaging are not static; they require continuous evaluation and adjustment. As market dynamics change or your product evolves, your go-to-market strategy should be agile enough to accommodate pricing updates and communicate them effectively to your audience. In summary, a well-crafted pricing and packaging strategy informs your go-to-market strategy by aligning with customer value, market positioning, revenue goals, and sales and marketing tactics. It ensures that your product is effectively positioned in the market and resonates with your target audience, ultimately contributing to your business's success and growth.

As product marketers, our expertise goes beyond just understanding the product and its features; it extends to understanding the market, customers, and their perception of value. To become more involved in pricing and packaging decisions, flex your marketing super-powers and earn a seat at the table: 1. Customer-Centric Approach: Leverage your deep customer insights to advocate for pricing that aligns with the perceived value of your product. Highlight how different pricing and packaging options resonate with various customer segments. 2. Competitive Analysis: Stay on top of the competitive landscape. Share PoVs on how your competitor's price and package similar products and identify opportunities for differentiation or market disruption. 3. Value Proposition Articulation: Clearly articulate the value your product brings to customers. Work closely with product managers to understand how new features or enhancements impact this value proposition, and importantly, a differentiated value proposition that supports a pricing hypothesis. 4. Collaboration with Sales: Collaborate with the sales team to gather feedback from the front lines. They have valuable insights into customer objections, pricing concerns, and competitive pressures, its your job to make that available to the pricing team. 5. Data-Driven Insights: Use data and analytics to measure the impact of pricing changes on customer acquisition, churn, and revenue. Present data-backed recommendations to support your pricing proposals. Now, let's talk about the ideal pricing council: An effective pricing council represents various functions within the organization and fosters collaborative decision-making. Here's how it can be structured: 1. Product Marketing: Product marketers play a central role in understanding customer needs, competitive dynamics, and value propositions. They bring market insights and customer feedback to the table. 2. Product Management: Product managers provide a deep understanding of the product's capabilities and its development roadmap. They offer insights into how new features can impact pricing. 3. Sales and Sales Operations: The sales team contributes frontline insights into customer objections, competitive pressures, and market trends. Its likely a sales leader who signs up for the committed number, so they'll help stress-test assumptions about the market, and likely timelines for penetration and adoption. 4. Finance: The finance department brings financial modeling and analysis capabilities to evaluate the impact of pricing decisions on revenue, profitability, and margins. 5. Legal and Compliance: Legal and compliance teams ensure that pricing strategies adhere to regulations and contractual agreements. An ideal pricing council should foster cross-functional collaboration, data-driven decision-making, and a deep understanding of market and customer dynamics to arrive at well-informed and effective pricing and packaging strategies.

Driving upsell is all about real value. 1. Be real about your positioning, and test the underlying hypothesis for your up-sell play. Is there value? Are the features locked in enterprise editions meaningful? do they unlock speed/revenue/margin for the customer? If all of these are true, great! Its a problem of articulating and communicating that value. If not, you have some tough conversations with your product and sales teams to identify where you are falling short of customer expectations. 2. Have you made it feel real for buyers with case studies and references? Do you feature a spread of customers across industries and sizes? geography? and do those assets speak to real business outcomes? 3. For PLG, is it real outside of a sales motion? Do you have in-depth demos and product walk-throughs available online? ROI Calculators? Whitepapers and playbooks for adoption? 4. Is the value real for the economic buyer and procurement team in an enterprise? Are reps supported to influence at the most senior levels of leadership? Are executive-level presentations, and executive leaders from your company available to help get the deal over the line? (Think about your Product leadership who can inspire confidence in the roadmap, your Engineering leadership to inspire confidence in your security, data handling and reliability, and your CEO can help drive a peer-to-peer partnership for the long-term). By arming your teams with these resources, you'll empower them to effectively communicate the value proposition of your high-priced enterprise packages and differentiate them from lower-cost alternatives.