AMA: Observe.AI VP Product & Customer Marketing, Hila Segal on Pricing and Packaging

Going upmarket is a company-wide initiative that goes well beyond just pricing. Your product needs to be optimized to support the next tier of buyers (for example more scale, APIs, supported languages, admin capabilities etc.). Your GTM engine needs to be recalibrated for selling up-market - from creating demand to qualifying pipeline and navigating enterprise deals for close. Your support and customer success playbooks must also be upgraded and developed for the new buying segment with more white-glove services, maturity, and value-creation models. You get the point, pivoting to go upmarket is a big deal for any company. Now as for pricing, are you looking at land and expand models - start with one business unit and grow into others, are you selling upmarket via channel partners or direct, are you selling a different product with a higher price tag or same product but more seats, APIs calls, data volume of whatever your monetization unit is? The answers to these questions should guide you if you need to completely change your pricing, or create an enterprise tier within your existing model.

First, you need to scope the feature. Is this a highly differentiated, high-value feature or a check-the-box feature? Also very important to understand your cost structure and how much it will cost you to serve customers - is there an added cost from 3rd party SW systems, storage, compute, etc. that you need to recover to maintain target margins. Next, you have to think about packaging - do you have a tiered pricing model and this feature will be added into an upper tier to drive more value, or do you have an a-la-carte model and this feature becomes an add-on capability. Really important throughout this process to stay attuned to your customers, how they buy, their budgeting cycles, and most importantly how they perceive your product and the new feature in terms of value creation.

I’ve worked in orgs where product marketing owned pricing and in others where it was owned by product management. Both models work and it really depends on the DNA of the org - product-led or sales-led. In any situation or setup, product marketing plays a critical role in: 1. Defining and quantifying the business problem and pain points 2. Building the marketecture and the packaging that goes with it - what we sell and how it all works together. Especially in situations where you have more than one product. 3. Capturing the voice of the customer including why, when, and how they buy and the value they expect to get including the definition of the ICP 4. Monitoring the competitive landscape 5. Driving alignment between product, sales, and customer success - all key stakeholders in any pricing process So 1-5 above can be used to build the case

1. Deeply understand the business of your company - who buys, why they buy, how your product delivers value (not just the top level cost savings, lower risk, more topline but what are the driver metrics that are impacted by your product). 2. Learn the monetization models of your competitors or similar type companies to you 3. Educate yourself on pricing & packaging models, learn from other companies in your industry or best-in-class Saas 4. Attend webinars, courses or other PMM communities that talk about pricing and lean on peers 5. Consider bringing an outside consultant if you’re trying to drive a major pivot in your pricing model and structure

Start by articulating internally why you want to increase price - do you have new functionality that is delivering additional value, are you bleeding margins, have your competitors changed their pricing - what’s driving the change? Changing prices needs to be aligned with your pricing power and your buyer’s willingness to pay. What do you offer and how much do they put against the value they think they can get from it. It’s also important to make sure you’re enabling your sales team about the business value narrative of your company/product, giving sellers confidence in how they talk about pricing to drive less discounting and shorten cycles.

Product marketing by definition sits at the intersection of product management, sales, and customers. So we’re naturally in the best position to drive a lot of conversations that need buy-in from a x-functional group of stakeholders. In my experience - sales, CS, finance, and product management should be involved in pricing conversations each bringing their unique point of view to the discussion. It will of course vary from one org to the other but generally: Product represent the capabilities and business pains they solve. Finance the cost and margin considerations. Sales are at the frontline of any pricing conversations. Customer success represent existing customers and the ability to deliver on promised value. And product marketing brings in ICP understanding, overall positioning, and competitive differentiation, buyer research etc.

Even if PMM does not “own” pricing they should be part of the conversation and early stages of explorations for pricing changes. Here’s what PMM brings to the conversation: * Defining and quantifying the business problem and pain points * Building the marketecture and the packaging that goes with it - what we sell and how it all works together. Especially in situations where you have more than one product. * Capturing the voice of the customer including why, when and how they buy and the value they expect to get including the definition of the ICP * Monitoring the competitive landscape * Driving alignment between product, sales and customer success - all key stakeholders in any pricing process So no matter what the set up in your org, make sure you insert yourself into the conversation early.

Do not try to justify or explain why you charge the way you charge but better to engage in a conversation and prompt the prospect to share with you their reasoning. Start with some silence and then explore the pricing objection. This will give you a better understanding of the specific concerns behind the sticker shock so you can more easily address them. You also want to probe into the conditions required in order to get a deal done so you can adapt terms or walk away. Here’s a great article with some more tips.