Pricing and Packaging

The short answer is: think really hard about your buyer.  Usage-based pricing makes a huge amount of sense for small teams who want to experiment.  Hence why you see startups moving fast with dev on AWS or engineers coding on Twilio.  What do most UBP products have in common? The thing you're counting is easy to understand and scales with value. That's why you see so many CIOs loving UBP (remember that advice about the buyer?!).  Counting data, integration points, servers, storage, compute, etc. is pretty easy for those teams. You know who it's super tough for? A VP of Sales....

Someone is theoretically in charge of the product roadmap (Head of Product, CEO).  They're your best friend. Use them! I find that a bi-monthly sync on state of the roadmap is helpful.  The agenda I would ordinarily run is: 1. What's shipping in the next month 2. How is that impacting the product vision for the next 12-18 months 3. Are these tablestakes or differentiated feature ships 

If you're lowering your price, you might have bigger problem than how to communicate the change. This sounds like a more fundamental product strategy, positioning, and segmentation question than it is about pricing. In general, communicating price changes (higher or lower) and determining eligibility isn't the job of the pricing function. It's pricing's job to make a recommendation that supports the company's strategy and helps hit financial targets. Ultimately, it will be up to customer-facing teams to execute against the change. As part of our monetization strategy, we developed a set o...

I like to start from a place of trust: give customers a credit for the difference. Think about how much more likely you are to come back to a restaurant who made a mistake on the order and gave you a free item to make up for it.  You're playing a customer-lifetime-value game, not a maximize-one-time-revenue game. 

It certainly can! Usability is a big reason why some companies win a bake-off vs. a competitor.  The winner gets to say: "Yeah their product is cheaper, but our design/UI/experience makes users adopt and come in naturally" "That way you're not buying shelfware" Premium products need to be premium at every level of the buyer/user's experience. 

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 recommendin...

Great question with the most votes. In my experience, Product Marketing owns a large percentage of the market analysis, pricing and packaging effort. At VMware, Product Marketing works hand in hand with Product Management, executive staff, finance and sales to carve out pricing for new and incremental offerings. We split pricing related responsibilities in the following way. Product Marketing: Customer & market intelligence i.e. customer segmentation, addressable market, competitve insights and analyst research  Pricing & packaging i.e. product price points, bundling, tiering and disco...

The answer really varies by company - I have seen instances of Product Marketing, Product Management, Finance, Biz Ops, and Sales Strategy teams own pricing. In an ideal world, the team that's both tasked with understand your products/market/customers and works closely w/ Sales is the best place to lead pricing initiatives. In most instances, I'd argue that this is Product Marketing. Product Management are important stakeholders in the process (along with teams like Sales and Finance) but since they are not as GTM focused as PMM in most cases I don't think they are in the best position t...

Pricing & Packaging is owned by Product Marketing at Drift. It's also been like that at my past companies (Enernoc, athenahealth and Toast). With that said, it's a highly collaboraive role - including partnership with sales, product, finance, operations and customer success. And of course, your executive leadership team. Product Marketing owns the function - we are the driver of the pricing & packaging process, hold the pricing committees accountable, hold the meetings & follow-up, and partner with sales enablement to train the sales and cs teams on any pricing and packaging process. ...

Both - pricing is a team effort. PMM and PM should be in lock-step when building, executing, and optimizing a pricing strategy. Some considerations on critical phases of pricing strategy development: *  Competitive differentiation: Both teams should proactively build a comprehensive understanding of the competitive landscape (e.g., how competitors price, what pricing/packaging models they offer, what makes their offering different or valuable, etc.) and form a joint POV on what makes the most sense for their product. *  Customer research: Equally as important is conductin...

If there are lots of products, typically you want someone minding the entire purchasing POV.  That means pricing is typically owned by Product Marketing.  Product tends to own pricing very early in a company's maturity or when PMs are particularly business minded on new markets vs. building in an established category.

At Intercom we believe in value-based pricing, which means we price primarily, but not exclusively, according to the perceived value of our proudct to our target buyers. Competition is an important input, but unless you are selling a fully commoditized product for which many identical alternatives exist (ie. toothpaste), it shouldn't be the primary driver of your pricing. I could hold up two identical black rectangles labeled "smartphone" and put $999 on one and $599 on the other, then ask you "which one is an iPhone?" and I guarantee you'd know. They have the same features. They're probabl...

Hands down the value you deliver. In an ideal world, you figure out the willingness-to-pay (WTP) for your product in the market, and set your price close to the WTP line (and above your costs). WTP is usually figured out through research, both qual conversations with customers, partners, and key stakeholders like Sales and then quanty surveys out in the market (targeting your buyers) to get the actual price points. There are several research firms out there who can run this kind of work for you (or larger companies have teams that do this in-house). You should ofcourse be aware of the...

It’s always really tempting to look for “answers” among what competitors are doing. I think you should absolutely keep competitive moves in mind, but I would urge you to start from a place from the value you deliver and only rely on competition if you don’t think you can articulate the value well enough. To understand why, here are some of the pitfalls of relying too heavily on competitive moves: * Information asymmetry: You might think they’re basing a choice on sound information, but there’s a decent chance they’re not. * Strategy: Relying too heavily on competitors ends up de fa...

It would be best if you considered both options when determining a pricing strategy for a product - based on my experience, the answer typically lies between both options. You want to articulate what value you deliver to your customers and ensure your price is competitive. Typically, when you base your pricing on competitive alternatives, customers can easily compare options across the marketplace and understand how you position vs. competitors. Marketing efforts usually anchor messaging that helps differentiate your offering through unique or better features vs. your key competitors (e....

Basically, you do both.  Working for premium product companies, you tend to optimize for customer value learnings.  And then obviously recognize the reality of a competitive environment.  Something that surprises a lot of people is that you can shift your price up dramatically by presenting it in new ways.  Let's say your competitor sells lemonade for $5. You sell for $6 (it's "hand-squeezed" so you get the premium).  If you ask customers what they think lemonade should cost, most will say $5-$6 because that's what the anchor is.  But assume it's a hot day and you've got i...

It depends on the competitive dynamics in your market. Are you the market leader or a new emerging alternative? What are the important buying factors in your market and with your buyers? Is price a primary buying consideration (hint: it often is not unless you make it that way)? It's always important to understand how direct competitors and/or alternatives are tackling pricing. You need to determine what your differentiated value is and how you want your brand represented in your market.  Are you the premium, high quality fully featured solution? Do your customers and the market see you ...

A truly successful pricing and packaging exercise can't be completed in a vacuum which means competitive positioning must be included in the discussion. The main reason is that you don't want to create EXACTLY the same pricing and packaging approach as your competitors but you also need to be aware of how customers are already being asked to buy. In addition, the competitive positioning will help to determine if the product has already moved to a commodity or is still being priced and packaged in a value-driven approach. This last piece is particularly important because if your product / or...

Your pricing inherently reflects the value of your products, and since competitive comparisons will inevitably come up in deals, you have to translate all your competitive research and market understanding into a compelling set of content and enablement for your Sales team so they can sell the "value"/better position your priducts throughout the life of your deal. If this happens primarily when pricing is being discussed, I'd argue that it's a much harder to successfully navigate.

Positioning (which by definition is competitive positioning since it carves out a place in the market where you are the clear winner) is your strategy. It defines who you're for and how you'll win.  As a result, not only pricing and packaging but your marketing strategy, product roadmap, partnership strategy, etc are designed to deliver on that position.

The truth is most pricing problems aren't pricing problems. In fact, they are rarely pricing problems. They are just the causal impact of poorly understood and/or communicated positioning of a product leading to a lack of conviction and a whole host of downstream issues. Pricing cannot be set without the Positioning being clearly thought through.pricing is intimately connected to Positioning.  Knowing the positioning will help you answer the following questions: 1. Is your product a 'tool/widget,' or is it a 'platform'? 2. Is it a vitamin or a painkiller? 3. How is it uniquely differ...

Pricing and packaging are positioning. They're the most concrete way you are defining the value and TCO of your solution relative to the pain a customer is feeling. But it's important to remember that they're only one tool in your toolbox.  Pricing relative to competition can signal a premium product in a commoditized market. Or it can indicate a value-driven sale as a disruptor. Certainly free or freemium is the most aggressive disruptor approach (though not always the most successful).  Packaging is a layer deeper and is a great way to demonstrate that you understand how your custom...

They go hand in hand. You need to keep a pulse on your competitors pricing & packaging so that you can adjust or create promos/spiffs to support your sales team when needed. That said, you don't buld your pricing & packaging process based on the competition. You should undersand the market - conjoin anaylsis, willingness to pay, price elasticity, value metrics your buyers assign your product and capabilities that are seen as table stakes versus a broad or niche value driver. You should use this market data (buyers, customers, competitors etc) and your short term business goals to determi...

I think competitive is one aspect of overall pricing and packaging, but it shouldn't solely dictate how you price or package your product. There are exceptions of course, and if your competitor is the defacto market standard then aligning it more closely to competitors is likely necessary.  Overall, focus your pricing and packaging on your customer, target segments, and unique differentiation. Then ensure it's not wildly off from competitors. A tool like Klue or Crayon can also help you track when competitors make updates to their pricing page (if there is one public-facing), so you c...

Your pricing and packaging are components of your competitive positioning - the way you group features or the value metric you use to charge a SaaS fee helps frame your offering to your target audiences. For example, suppose your packages serve different audiences with differentiated needs. In that case, your competitive positioning requires packaging that clearly states the positioning, benefits, and features each audience desires from your product category. Pricing is equally essential to positioning your offering competitively, as your value metric and pricing tiers will help set your...

Really depends where you stack up in the competitive ranking.  Let's say there are three products: Mercedes, Toyota, Pontiac. The price reflects the package. That's why Mercedes are $50k and Toyotas are $25k.  Mercedes has premium leather and a host of other items "included in the price" to justify that price discrepancy.  When you're Mercedes, you double down on 1) the experience at every touch-point of being a customer (vs. at Toyota they're not giving you white-glove necessarily when you bring your car into the shop) 2) brand affinity or the luxury it communicates and 3) the ...

Price acts as a huge quality signal. One of my favorite studies on the subject is one done by Professor Dan Ariely. He had a hypothetical painkiller he called Veladone Rx. In reality, in this experiment, it was nothing more than a sugar pill. There was no actual active medication in it. But the participants didn’t know that. It was paired with literature that said “clinical studies show over 92% of patients report relief in 10 minutes.” In the first variant, people were told that the drug cost $2.50 per pill. In the second variant, people were told each pill only cost 10 cents. Both grou...

The price is traditionally based on two things: 1. How much value the thing is or has created 2. How much the provider splits that value capture with the customer Some strategies say minimize #2. That would be Google Ads (take a small slice of a huge pie). Other strategies say maximize #2. That would be Warner Bros. Studios (take a bigger slice for the risk of fronting cash on a blockbuster movie). I weirdly view those two levers as independent (you can measure #1 somewhat objectively within a range, #2 is more a strategy choice). 

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 a...

Aside from the triggers, I would say it is imperative to constantly review your pricing on a regular basis. Aside from one-off items mentioned above, I run an annual process (that in the future I want to be 2 per year) where I gether the pricing committee that I lead and we bring up suggestions of the key issues we think we need to be addressed with monetization strategy. Our process goes as follows: 1. I prepare an initial list of pain points and opportunities 2. I send the list to others to add theirs 3. We all detail the problem, if there is a hypothesis and the type of analysis ...

Pricing strategy will be closely tied to either a major product change, new market entry, onboarding a brand new sales team or persistent issues identified in deal win/loss analysis.  This is like any other major company strategy change. PMM can lead the discussion if they are involved in bringup the insights leading to the change in pricing -- i.e. win/loss, competitive analysis or being part of strategic analysis on TAM for a new product or market.  Once you earn a seat at the table, you might be asked to lead the project itself.  But its hard to do if one is stuck being reactive and i...

The best time to prepare a change in pricing strategy is when you have actionable data. Perhaps you would have guessed something more related to the product or portfolio lifecycle, like when another product is getting added into the mix. These moments can certainly make internal conversations a little smoother, but ultimately you’re going to want your case to be built on a strong foundation rather than anchoring yourself to internal processes. In that case, the question then becomes “What data?” You could use data from any of these sources to inform a business case for making a pricin...

The role of PMM in pricing strategy varies across companies. There is never an "ideal" time to make pricing changes. My core belief is that a pricing strategy should be an active discussion between product, marketing, and GTM teams that is never locked but optimized as opportunities arise (e.g., clarify value, messaging, competitive differentiation, etc.). In organizations where PMM leads pricing decision-making, you should: * Actively monitor your competitive landscape and understand how your pricing compares to competitors. * Capture feedback from all customer channels (e.g., cus...

Short answer is as early as humanly possible.  Also probably don't launch in your Q4 (Q1 at your Sales Kick-Off is great if you can swing it!). The key is maximum mind share from the field and minimal distraction as deals are in flight.  PMM tends to lead (assuming that pricing and packaging is in the PMM org) the recommendation and execution.  My feeling has always been that the pricing and packaging is actually messaging, so it's hard to decouple. And importantly, the messaging content needs to flex to the pricing decision (not the other way around). At the end of the da...

At Gusto, we aspire to do this with absolute excellence -- with rapid A/B testing and optimization. Come join our team!! That being said, here are some observations (I polled folks on my team to contribute based on what they've seen in their careers as well). Bottom line, pricing projects are hard--and can be messy! Pricing is all about balancing tensions. You might have the most perfect spreadsheet pricing model in the world. It might even be the best deal for your customers. But if it’s too much work to understand, you’ll probably lose. Here’s some examples: Tension between grandfath...

We roll out new pricing and packaging in conjunction with our seasonal launch cadence. (See context in question below). There are 4 milestones in every seasonal launch: * Product Readiness * Cross-functional Readiness * Internal Enablement * External Promotion There are two parts that touch Pricing & Packaging. First, getting pricing and packaging ready is part of #2 Cross-Functional Readiness.  * This is when multiple groups come together to propose, align, and decide on a pricing/packaging strategy.  * The groups that are involved here are Product Management, Product Market...

I've answered some of this in previous questions, but here are some thoughts... 1) Understand your buyers needs, budgeting/buying process, problem you are solving for them (and/or their users) and the relative value of solving that problem 2) Look at competitive solutions or alternatives to solving the problem and look at how they are pricing/packaging their solution 3) What's the cost of not solving the problem 4) Form a hypothesis on the price for the new product 5) Talk to existing or potential customers (before you launch the product). Ask them what they would pay for it if it so...

* 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...

Usually, your existing customers are the most impacted by pricing and packaging changes – so you may need to focus on communicating any updates clearly to your users. If all the changes are positive (e.g. they get more for the same) your job is much easier. If there are negative impacts, you need to diligently segment all your cohorts and identify how each group will be impacted, and then create a comms strategy from there. A blog explaining the changes and customized emails to each group is how we have approached this before. 

I see Pricing and Packaging as both a science and an art. What do I mean by that? It’s a science in the sense that you have to run a lot of business simulations and crunch the numbers to do the revenue projections. That is the science aspect of it. Yet there's also an emotional aspect to your product price, which in my mind also makes it an art. And because of the art aspect of it, you have to do a lot of testing. You have to test your assumptions in terms of charge versus include. Test with your account executives, with your existing customers, even maybe with prospects, if you can (via ...

Pricing is both a science and art -- which means in many cases, it is hard to predict if you have hit the right price (high enough to capture maximum value but low enough that you can scale it to a broad customer base). Because of that, it can sometimes feel like pricing is based on the wind, but in reality, it is a careful process! Here’s a step-by-step that has worked for us: 1. Research - Dig into competitive pricing (how are similar products priced, what would the alternatives cost?) and identify pricing models that might work (consumption-based or per-license?). Make a reco...

The roll-out should happen at the same time you train your internal teams about the messaging & positioning, product value, use cases etc. But, the work with pricing & packaging has to start much early. Ideally you have some idea of the products and features that are going to be released a few months before and can bring it into your pricing & packaging process.  I would think about the features based on tier - Tier 1, 2 or 3, and use that to determine if it needs P&P support. Tier 3s likely don't. But something that warrants a Tier 2 or 1 launches typically will. The pricing & packaging...

Rolling out pricing and packaging for a new product launch requires a well-planned execution plan that informs multiple audiences as to "what you are selling," "how you deliver value," and "why you are better than alternatives" in your product launch. The plan should include critical phases for enabling internal audiences, educating customers and partners, and collecting feedback from internal and external sources to optimize the rollout process. Key audiences to consider in your planning: 1. Internal stakeholders 2. Existing customers and prospects 3. Channel partners 4. Marketp...

Let's assume that you've got the pricing set, the feature packaging defined, and the product technically built. What happens next? Enablement! My laundry list of things to do includes: * Work with the CPQ/Systems team to build out the commercial workflow of what a SKU looks like, how discount approvals and escalations flow, product special terms, and configuration policies * Build a training deck for different audiences (Sales, CSMs, Implementation, Support, Deal Desk) that describes what the product is, who typically will buyer, details on the ideal customer profile, t...