Pricing is tough. My questions are 1. How do you know that you have the right price/package structure pre-launch. 2. And how do you know that the price/packaging is still the best post launch.

Question

Akshay Kerkar · Accepted Answer

Pricing is both tough and is not one-and-done - it has to be refreshed over time. While you can use research to figure out initial pricing for launch (see one of my other answers for details on figuring out willingness-to-pay (WTP)), you will need to reevaluate pricing over time to see how it needs to be updated - e.g. are you getting negative feedback from customers? Is Sales having a hard time maintaining your price and so has to resort to deep discounting consistently? Has your product significantly evolved to justify increasing prices due to additional value being delivered?

The bid advantage of B2B pricing (unlike B2C) is you don't have to get it "perfect" -- due to how the B2B sales process works and discounting, the rep usually finds the "right" price for the deal.

Christy Roach · Answer

1. Fully agree that pricing is tough. I’ll add my own point of view on top of that: pricing is tough and there is no “good” pricing. I have been lucky to work at 5 great B2B SaaS companies, and each of them have had frustrations with pricing, gone through pricing changes, and knew that there were aspects of their pricing model that customers didn’t like. As the folks that drive messaging around that pricing, this is super important to get internal clarity on. So often I hear folks say “can we just create some messaging around this?” and while the answer to that question is always, yes of course, there is no messaging that will fix every customer complaint on pricing.
 2. In terms of knowing if you’ve gone the “right” pricing pre and post launch, I’d say to think about the following:
     1. Pre-launch I’d focus on answering the questions of: Does this pricing and packaging make clear, intuitive sense for the customer? Does it address complaints or issues we know they’ve had in the past with our pricing? Overall, will this change significantly impact a portion of our customer base in a negative way and, if so, do we feel okay with that and have we thought through what we’ll provide to those customers to ease the pain? On top of that, make sure your partners in data and finance have done the modeling not only to show financially what the pricing will do for the company and how the changes to packaging will impact your customer base. Last, try to test your pricing and messaging with a select group of customers (maybe from your advisory board or your most loyal community members) to get a sense of how the change will land
     2. Post-launch: Be very clear about what feedback or customer complaint is expected as part of this change or what would be cause for concern. As a PMM, this has been my most useful exercise. When you define this up front, there’s less concern and panic when those complaints start rolling in since you prepped folks internally to be prepared for them and prepped responses to customers. From there, data should be your friend. You should have a strong data partner who is there to report on the impacts of the pricing and packaging change based on the success criteria you set out, and highlight trends or areas of concern that you want the group to keep an eye on. Additionally, especially in an Enterprise company, see how your customer-facing teams are feeling about the change. I firmly believe that sales morale is often a one way door, if they are super unhappy and feel unsuccessful with the pricing change, it’s usually a good sign you need to do something about it.

Jonathan Brandon · Answer

Pricing is tough, and it's also never done. That being said, making incremental changes too often without understanding the impact of the previous change is the achilles heel of monetization.

You will never "know" pre-launch that you have the right price. There are a lot of things you can do to increase the probability that you are in the ballpark though. Inputs are going to vary based on your industry and business model and selling motion, but will almost always include some kind of internal product analysis, primary customer and prospect research, in-market quantitative data (surveys, conjoint analysis, etc.) and financial modeling.

Your 2nd question is the more important one. As mentioned in the "launch/relaunch" question, this is all about having a rigorous test plan and really clear success metrics. As nice as that sounds, it's actually one of the hardest things to do, and must ladder up to your P&P strategy as well as your company strategy. You should have a north star, such as "Increase sales-led ARPA by 20%" or "Improve retention among X segment by 15%" and then a set of guardrail metrics that sit underneath. Those could include measures of conversion, discounting, volume, ACV, failed payments, product mix, etc, etc, etc.

Chris Mills · Answer

1). Pricing & packaging is a complex topic that typically involves coordination between many internal constiutents and teams including Sales, Customer Success, Product, Finance, Deal Desk, Marketing, etc. It's important to make sure that you have alignment between these teams as you embark on any pricing and packaging changes. A key is you need to align on what problem(s) you are solving for. Are you looking to increase demand or remove friction from the selling or buying process (perhaps lowering the price). Are you looking to price and monetize new products or features or fold in an acquired company into the solution portfolio (packaging or add-on products)? Are you looking to improve margins (raise price)? Are you looking to improve competitive win rates (differentiated packaging or tweaking pricing)?

Once you figure out what you are solving for it's important to solicit input and buy-in from your internal consituents and put together a few different pricing/packaging alternatives (one might be keeping it the way it is). Then review these alternatives with analysts, customers, prospects and advisors for their input/feedback. Make a recommendation and make sure you have exec support for the changes.

2) It's important that once you've made the pricing & packaging change that you monitor it's impact. At SalesLoft, we're tracking Average Revenue Per User (ARPU) across our different segments as well as the distribution of each of the packages in new, upgrade and renewal sales and average discounting rates for each package. We also track win rates, average sales cycle length and competitive win/loss to monitor whether we've helped reduce friction from the selling/buying process and differentiate from alternatives in the market.

Yannick Kpodar · Answer

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 :)

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