How do you think about pricing when going from a single product to a multi-product platform?

Assuming you have a clear strategy, it always comes down to understanding your ideal, target customers. When going from a single product to multiple, you need to figure out who it's for, what drives value, and how you plan to charge. We have a set of richly detailed buyer personas at Intercom that connects segmentation, value drivers, product needs, and willingness-to-pay. To develop packages, you start with a hypothesis: create hypothetical packages, price points, and buying motions (self-serve vs sales) and then pull in cross-functional team (designers, researchers, analysts, and sales people) to evaluate different P&P concepts.

Check out my response to the "Pricing/Re-pricing launch" answer as well!

Single product pricing is (relatively) straightforward. When you go to multiple products, or multiple SKUs of the same product (e.g. a Standard Edition vs. Premium vs. Enterprise), the complexity explodes across multiple fronts - Ops/quoting, your website/customer comms, sales enablement, and rep conversations w/ customers. 

Perhaps the most important part to figure out when you go multi-product is the GTM model - for example, will you lead with one product and the others will be upsells over time? Which product will you pitch to which type of customer? Defining this clearly upfront will avoid a lot of complications down the road. 

This is a good question. Multiple products, sold successfully together can take a company from good to great. You now have multiple revenue streams and a chance to increase the total spend your customers make with you. Leading to high growth rates and NDR (net dollar retention) rates. 

From a pricing standpoint, it is important to think about these products both individually and together. 

What do I mean by that?

All products will have to be priced on their own merits, based on the buyers and use cases they work for. At the same time: 

1. The pricing metric should be consistent/similar across products: If one product is sold based on MAU (monthly active users) and the another is sold based on say a price per transaction, and yet both these products are part of a platform that solves one bigger problem, then this price metric discrepancy is likely to add friction and confusion in your sales cycles. It can work for a while but eventually a streamlining of pricing metrics has to be done. Read Hubspot's journey in this regard: https://medium.com/swlh/marketing-contacts-pricing-lessons-38eef8301e95

2. You should design for easy cross-sells: The pricing model (packages, price points, etc.) you choose for new business and the broader market may not be what will work for existing customers. They may want easier ways to try/start using your other products, and in some cases they may have a greater ability to pay you. Therefore it might be wise to think about whether you need specific cross-sell packaging and pricing. 

I would encourage you to make sure you’re putting the customer first whenever you encounter this.

In my experience, it’s really tempting to bolt on the next product with slightly different pricing that solves for that particular new product but doesn’t account for the existing one. Then you can end up with a bit of a frankenstein experience that makes it hard for customers to evaluate what’s right for them, having downstream effects on conversion.

So make sure that whenever you’re going from one product to multiple, it’s hyper clear to the customer how they are either different or work together. You can achieve this clarity through design exercises, prototyping, customer research — or even bouncing it off different people at your company who aren’t thinking about the same problem day in and day out for fresh eyes.

For starters, going multi-product is hard! Like, really hard!

And it's typically for reasons outside of pricing and packaging:

1. sellers need to communicate a bigger narrative (think the Customer 360 platform vs Sales Cloud at Salesforce)
2. the product needs to have natural cross-sell points that seed reasons for a customer to expand
3. support, success, and implementation will all need to level-up their knowledge to provide killer experiences

But let's say you get past that. On the P&P side, here's a way to start breaking down the problem:

1. map out the ideal buying journey across the top 3-5 most common entry points (i.e. what's the preferred buying order...appetizer, entree 1, entree 2, then dessert? vs. the whole buffet?) - research, interview, collect data!
2. find out where you have a sustained competitive advantage and can exploit bundles where you capture another vendor's market by subsidizing it's value in your product (i.e. give away free chips & salsa when you dine in for a burrito to edge out the spectacularly-delicious-only-chips-and-salsa business down the street) 
3. incentivize going all-in on multiple products (use discounts, MS Dynamics 365 is a great example)
4. if you're the premium player...capture the value you create (i.e. price high) to reinvest those proceeds back into R&D to expand your product advantageif you can
5. and lastly...make the buying structures as simple as reasonably possible (i.e. buy 1 get 10% off, buy 2 get 20% off, buy 3 get 35% off)

One lesson I've learned is that you need to over-index on purchasing behavior research.

Here's a mistake I made once I encourage you to not have to make: 

don't try to incentivize multi-product purchases between two different department buyers (e.g. CFO vs. CRO) when you're 

a) not at that level of power with the sales team

b) the buying cycles happen on different cycles  

c) you can't go to a different purchase champion (e.g. CIO). 

Deep buyer interviews will help surface these challenges so that you can come up with both the hypotheses and fact-bases that help you deliver the winning pricing strategy. 

1. This is one of the hardest types of pricing work that I’ve done. The biggest things to me were:
1. Understand how interconnected these products should be: Do you expect these products to be used together frequently? Are they coexisting with one another and can be used on their own or is the best customer experience to use together.
2. Align on attach goals: Understand how important it is for your customers to use all of your products together. Are the company’s goals more focused on getting new customers/revenue no matter what products are used, or is there a desire to see the attach rate of using multiple products?
2. Based on the above, you’ll be able to decide to focus on pricing that gives incentives to use the products together if your goal is attach and usage, or price each product competitively to let folks decide which products they do and do not want to use without heavy upsell to multi-product.