When is an ideal time to prepare a change in pricing strategy and how does a PMM lead/join in on this decision-making before being asked to strategize messaging for the price change itself.
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.
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 pricing change:
- Insights: You could run research, either qualitative or quantitative depending on what types of answers you’re looking for, to determine if customers would be open to another pricing approach or would even find it better. For instance, maybe they would actually appreciate a membership model because they find a la carte purchases frustrating.
- Behavioral data: Are you noticing any concerning trends in key metrics? Perhaps you’re finding you can’t get conversion rate up to the place you think it can get to, or maybe it’s been eroding over time. Maybe you’re noticing that you have a consistent retention problem after the first quarter of product usage. Identify where these gaps are, and you can make a case for how a different pricing approach could solve them.
- Market trends: Is there a corner you can see around? Is there a way it seems the world is going to change that you should get ahead of? A great example of this is the music industry. If you think back to the early 2000s, CD sales were waning and online music purchases were on the rise. Despite the success of online sales, though, people still had to buy individual songs (remember those iTunes songs for $0.99?) or whole albums. The problem is that it’s annoying to buy all those individual songs or expensive to buy whole albums with a bunch of songs you might not really want. Enter streaming products like Pandora and Spotify to solve that pain point. Take a look at your industry to see if there are unsolved pain points in the customer experience that could be solved by a different pricing model.
- Competitive moves: Though you shouldn’t make every decision based on what a competitor does, you may want to use it as an input here. If there’s a change happening in your competitive set, you need to think about how you’ll be perceived or be able to stand up to that change from an economic perspective. You should keep in mind things like market share: If you’re the market leader, you should keep a pulse on competitive changes but don’t have to jump on every competitive move. If you’re a follower, a move by the leader might quickly change the tone and you might have to react faster.
- Experiments: Of course, you can always make your own hyper-relevant data by running experiments before fully committing to a pricing strategy change. When I was at Lyft, we did years or testing and many rounds of various subscription models in a more quiet beta mode before we ultimately rolled out our broadscale membership product, Lyft Pink. This data is hard to beat because you’ll get the most direct sense of conversion, usage, retention, and the overall economics. The tradeoff is that it takes more buy in, resourcing, and coordination to run these kinds of experiments.
Ultimately, the heart of your question seems to be “Hey, how can I play an influential role and be seen as a leader on the team rather than just get handed stuff to execute?” And that’s the dream, right!? We want to be seen as indispensable thought partners.
If you show up with a data-backed pitch that solves a customer problem and/or unlocks a revenue opportunity, you’ll set yourself up well.
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., customer review sites, sales & customer success teams, interviews, and surveys) to understand if pricing is understood and perceptions on the price-to-value equation in customers' minds
- Monitor adoption and usage metrics to understand what features and capabilities your customer base value the most, as that can inform how you message or justify the value of a paid package to new audiences.
Based on the insights you capture across internal and external channels, you can lead discussions with your x-functional partners on what aspects are working and not working in your pricing strategy. You can prioritize what strategic shifts are needed to optimize your plans as a team.
Whereas for your organizations where pricing does not lie in PMM responsibilities, you can actively advocate having a seat at the table by collecting and synthesizing competitive and customer insights into pricing and sharing them proactively with your x-functional partners. Explain why this matters to pricing strategy to spark the right conversations in x-functional discussions and product planning meetings.
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 day, a pricing change is about a fundamental business strategy shift so PMM leadership is critical.
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.
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 in a content-creation, sales enablement mode - which many PMM teams tend to fall into if the Marketing team itself stays away from strategy.
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:
- I prepare an initial list of pain points and opportunities
- I send the list to others to add theirs
- We all detail the problem, if there is a hypothesis and the type of analysis that would need to be done to get to an answer
- We sit down for the first meeting and prioritize the opportunities based mainly on impact vs. effort
- We assign specific owners to each "initiative" that is prioritized and decide which we will address first and what we will do by the date of the next committee meeting.
- In each subsequent meeting we discuss, make decisions and define next steps / understand how to operationalize
Generally I try to start this at the beginning of H2 giving us the entire semester to dig through the various initiatives and operationalize either 1) at the time of solving if it's a quick win or 2) together with our planned annual pricing change in Q1.
The parallel process is our annual pricing increase where I work with our BizOps lead to model potential increases, considering various feedbacks and things happening in the market, with customers, etc. Generally we do this in Q4 along with our annual planning and implement in Q1.
At my company I am responsible for driving these pricing decisions, but I need to work with and get resources from other teams to run analyses.
If you're not in the process, you should insert yourself and you should start bringing valuable data and info to prove your worth ;)