AMA: PayFit Former Global Director, Product Marketing, Yannick Kpodar on Pricing for Growth and Profitability

A few key learnings: 1. Involve your cross-functional partners as early as possible. The worst thing you can do is come up with a new strategy, but Sales or Account Managers don't believe it. They will usually end up not selling it or using it as a discounting lever. 2. Make sure you can make the changes in the product. If you are thinking of adding or changing new features into different plans but your product team can't technically move things from one plan to another or create add-ons. You're in trouble. 3. Make sure billing can support your new pricing and packing strategy. If billing can't do upfront payments or bill with add-ons because they don't have the right tool, your plan won't work. 4. Aim for both growth and profitability. You can change your pricing and packing plan to get volume, but you're in trouble if you're costs outway the customer lifetime value. Similarily, you can create a strategy that enables you to be profitable but not get a ton of volume. You want both growth (volume in new sales) and profitability (each sale increases profitability) to make it work. 5. Get-buyin from cross-functional leadership by showing what's in it for them. (Product to increase adoption and customer satisfaction. Sales to increase sales conversions, etc.) 6. Take your time. Rome wasn't built in a day. You won't change your pricing in a day, either. Depending on your industry, product, and legal due dilligence, it could take 3 weeks, 3 months, or a year.

* Step 1: Get access to biz ops data to understand business performance (clients per pricing plan, discounting per pricing plan, size of the company per pricing plan) * Step 2: Analyze the business opportunity to build a business case for a new product or pricing launch. * Step 3: Speak to sales to understand why we win or lose deals. Speak to Customer Success to understand what customers are requesting and why. * Step 4: Align with Product on what to build based on business and customer goals. * Step 5: Build a mock product and validate it with potential customers, along with the willingness to pay. * Step 6: Build MVP and launch (create messaging, packaging, train sales, etc.) * Step 7: Monitor performance and make adjustments when needed. In general, you'll need to understand how much it costs you to operate the business, how much a customer's lifetime value is, and the total addressable market before launching a new product or feature. Pricing and packaging is a core part of this new feature release. You won't always get it right. The most important thing is to stay close to customers and the numbers to see the trends and make adjustments along the way This presentation could be useful :)

This is a tough one. Each market will need to have a tailored approach but don't make it more complicated than it needs to be. At PayFit, we have similar pricing and packaging structure across all our countries, but the actual numbers will differ based on local dynamics. We also include some service add-ons specific to each market when needed. However, the overall target market (SMB) and product (payroll + talent management) will be the same. It's also easier for monitoring business performance. If you have too many different pricing plans across countries, it will be a hassle to understand your data. Focus on a specific type of audience with similar problems, create the offering to meet their needs, adjust pricing for the local market, and keep the packaging structure as close as possible.

In-house will usually be a great learning experience. You can run this project if you operate as a unit and work with your cross-functional partners. Consultants can add a ton of value, but they come at a steep cost. We decided that we could do it on our own, and we were right :) But I recommend talking to as many pricing folks in your industry or other industries to learn from them. Some mistakes are avoidable. The only consulting firm we spoke with was Simon Kucher. Have a look at these slides. It can already help steer you in the right direction. Don't hesitate to reach out to me if you need it.

Pre-launch: You won't always know if you have the right pricing from the beginning. You're always going to have some elements that need to be validated. Your best bet is to always speak to sales, speak to customer success, and speak to customers before making a call. You should also have a look at the competitive landscape to see what's working. Post-launch: You'll have to pay close attention to conversion rates from traffic to demo, demo to a customer, customer to upsell. Are we converting more traffic from our demo request page? Are we converting more leads into demos? Are we closing more deals? These will be good indications of your performance. Also, host a monthly win/loss meeting with your sales team for qualitative feedback. If you don't have a Sales team, literally reach out to customers who didn't buy and ask them why. You'll learn a lot. This presentation here could be useful :)

Get them involved as quickly as possible. I run a monthly win/loss meeting with my Sales team to understand why we win and why we lose. Based on this information, there's usually tons of info to guide you in improving your pricing and packaging. Are you seeing more deals won from a specific vertical, buyer persona, or package? It might be an excellent time to be optimizing for that pricing, feature, or vertical. Opinions get you in trouble but data tells the story. Focus on the data. Look at MRR, look at customer per pricing plan, look at competitors, look at NPS feedback, and make a call. Here's what we did for our pricing revamp project: 1. We got the numbers from our back office (MRR, discounting by the size of the company, pricing plans, etc.) 2. We analyzed the data and made some hypotheses. 3. We challenged it with sales teams to understand the numbers and get their feedback. 4. We made a recommendation on a new pricing plan and interviewed product, sales, marketing, and customer success. 5. We came with a final plan and signed off on it. This presentation here can be useful :)

The most challenging piece here is that you're flying with little internal data. You're operating based on assumptions. You can create pretty business plans with ideas of traffic, lead, and demo conversions but you're only in the game once you get your first sale. From there you can learn more intimately of why they bought, how they made their decision, who was part of it, and what needs they are looking to meet. My advice here is to always build an MVP, test, validate your hypothesis before you code or create the product. Create a mock, get some feedback, make changes, gauge intent to buy etc. Invest minimally until you can see that you're getting traction, and then scale as quickly as you can. As Reid Hoffman said, if you're not embarrassed by you're first product, you launched to late.

Customer willingness to pay is crucial. You can create a product, but if it's not seen as a must-have for your customer, they won't purchase. Focus on building a product that meets a real need, which is core to a business' toolbox. An easy way of prioritizing new feature development is to ask your customers. We have a customer/user community where we ask them to prioritize certain features and ask them why before we develop them. If you build a product and your customer doesn't purchase, you know you skipped the Voice of Customer phase. Everything we build is because it will either increase sales, increase adoption, or increase customer satisfaction. Know the metric you want to impact before you build.

There are multiple turning points when you should think about reviewing or changing pricing; * You're losing too many deals to the competition * Constant feedback from your Sales team that pricing and packaging needs a revamp * You're expanding your product portfolio * You're entering a new market * You recently got acquired * Too many customers are churning (although it could be for other reasons) * Reached an MRR or Customer acquisition milestone In sum, lots of different events could create an excellent opportunity to review pricing. The most important piece of advice for any product marketer is to stay close to the numbers as often as possible. We run a monthly/win-loss meeting with biz-ops, sales ops, growth, and Sales to determine why we win deals, why we lose them, and what we need to do to optimize. We run a monthly intelligence report to understand our customer demographic and pricing split. For example, how many customers are on your basic, standard, pro plan? Do you have 50% on your basic plan? It could be something there to improve your pricing and packaging strategy. Do you have over 50% on your premium plan? It could be an opportunity to create an upsell path to a new plan. The only way to have a voice and to be seen as a trusted partner to your cross-functional leads is to have access to the data and to be able to tell a story with the numbers you see. You have a unique view of product marketing, and you can use it to your advantage.

You'll see different scenarios in different companies based on industry, size, skills, or company history. At PayFit, Product Marketing owns the topic, but we work very closely with product and biz ops. Product Marketing owns the project, but it's typically a cross-functional decision in the end. Finance, Product, Biz Ops, and Sales generally are substantial stakeholders in the process. Product marketing will review current sales performance, customer repartition by pricing plans, discount, etc. You'll then review the data and challenge it with cross-functional partners before recommending a change. If it's a new product you're launching, Product Marketing is typically involved (1) opportunity sizing, (2) validating customer pain, (3) and recommending the MVP. Product is also there hand-in-hand interviewing potential clients, building the MVP, and monitoring business impact based on the new launch.