Mark Assini is a Product Marketing Manager at Jobber and the Product Marketing Alliance’s Product Marketing Life podcast host. Mark and I chatted about the crucial role of Product Marketers in driving SaaS pricing.
We also covered:
- The importance of creating a pricing committee
- How Product Marketing Managers should tap into customers’ outcomes to create real value
- How Product Marketers should approach pricing and packaging
You can listen to the full episode at the link below. Or, keep reading for a recap of our chat.
The Case for a SaaS Pricing Committee
Each executive stakeholder will have a different take on pricing depending on their functional role. Given how pricing affects other business functions, you often end up with a multitude of opinions from multiple stakeholders.
A more profound truth exacerbates this situation. While we expect business executives to be rational actors, each person will come to the conversation with a unique background and a different relationship with money. Let’s be honest – it doesn’t matter where you came from. Your relationship with money is likely dysfunctional. How do we expect that the relationship to the company’s or customers’ money will suddenly become rational when we group all of these people into a business?
This common situation is why it’s essential to have an internal pricing process that maps out the rules and identifies the pricing decision-makers. This point is especially crucial as your company scales. An excellent way to achieve this is by setting up a pricing committee.
Now, don’t roll your eyes. “Great Dan, a committee, the exact opposite way to get anything done in a business.” I get it; I do. However, pricing committees allow SaaS companies to understand better who the pricing owners are and what the strategy entails and set up a transparent, rational internal process to guide decision-making. It’s always better to decide how you will make decisions when cool, reasonable minds prevail before a specific decision is on the table, and emotional fires start burning.
Product Marketing is best positioned to guide these committees and move the internal pricing strategy forward.
As companies grow in their pricing journey, the best approach is to create a pricing committee.Dan Balcauski
Should Product Marketers Drive SaaS Pricing?
When it comes to a SaaS company, Product Marketers should own the internal pricing strategy and guide the pricing committee, as they can approach the pricing problem through a strategic marketing lens.
They have an in-depth understanding of the company’s strategy, capabilities, the product, and deep knowledge of other competitive players. PMMs know where the company is best suited to target a particular market segment and win. They understand positioning and pricing is a function of a company’s positioning.
Product Marketing Managers typically own positioning. This responsibility gives marketers the authority to advise CEOs on how they need to price their products, given their position in the market.
Product Marketing should have decision-making authority on pricing.Dan Balcauski
Transitioning Pricing Ownership to Product Marketing
In the early stages of a SaaS start-up, the founders or the CEO own pricing. Yet, once they have established the initial pricing and packaging, the company’s leadership is keen to leave it as it is so as not to disrupt something that seems to be working well.
But as SaaS companies scale and set out to acquire a new product and target a new market segment, leaders realize they need to optimize their pricing.
However, CEOs have a million things on their plate, and their ability to undertake a rigorous analysis of how they should change pricing is limited. With no clear ownership and no internal pricing processes, pricing gets ignored.
At this stage, leadership teams should give Product Marketers decision-making authority to set up a pricing committee which will allow them to drive the pricing process forward. Product Marketers undertake competitive analyses, have conversations with customers and prospects, and are suited to building business cases for pricing and packaging changes.
A typical scenario where Product Marketing can drive the pricing conversation is when companies plan to release a significant new product capability. At this point, it’s fair to ask whether this new update should be monetized separately rather than as a new product feature.
That’s not to say that a company should increase its price with every product release or make changes to all its packaging. But it should open an opportunity to have a conversation around pricing.
Most companies haven’t adopted the mindset of changing the price of a product when the value of it changes.Dan Balcauski
Understanding Your Customers’ Outcomes
Most SaaS executives think that what you charge will determine your success when, in fact, who and how you charge determines your success. Understanding who you serve, how you’re creating value for your customers, and then aligning your overall packaging to the value is the most important thing when it comes to price setting.
Ultimately, all conversations around price come down to value. Most companies, however, are blissfully unaware of why customers value their products. The closer Product Marketers get to how your customer derives value from your product, the easier it will be for you to set up the optimal pricing and packaging approach.
Companies spend a lot of time and money on “Voice of the Customer” research to understand their customers, but this process is often fraught with ambiguity. If you use customer input as your primary input to your product innovation process but haven’t defined which inputs you need, you most likely won’t produce a successful output.
The key is to get solid definitions of what you are looking for when talking to customers, which should ultimately come down to their outcomes. By default, customers tend to give feedback in the following ways:
- Solutions. Which tangible features do customers want to see in your product?
- Design specifications. Should this button be a particular color?
- Customer needs. General descriptions of the overall quality of the product: Is your product reliable? Effective? Robust?
- Customer benefit statements. Do customers want your product to be faster, better, or cheaper?
- Opportunities: Set of circumstances customers think could be improved.
Customers are not engineers or designers. That’s not their role. It’s our job as product marketers to understand what they’re ultimately trying to achieve.Dan Balcauski
The bottom line is that you need to dig deep, listen, and understand your customers’ desired outcomes, instead. This perspective will allow your Product Managers, designers, and engineers to innovate. This process is how companies create real value.
Should we Publish our SaaS Pricing and Packaging?
One area where SaaS leaders get stuck is if they should publicize their pricing and packaging. Solid metrics are hard to come by, but from what I’ve seen, about 50-75% of SaaS companies opt for public pricing and packaging. However, there are other ways to share this information with your prospects.
There are three core models companies should consider when it comes to publicizing pricing and packaging:
- Public: opting to publicly share your pricing and packaging works best if you have a standardized packaging that’s easy for customers to understand. This situation often happens in large horizontal markets with standardized competition and homogenous willingness to pay. This approach is valuable if you’re trying to minimize the time sales reps spend on unqualified prospects, especially important in a volume-and-velocity sales model.
- Private: some companies prefer not to display their pricing and packaging online. This approach is best with an enterprise sales motion with complex packaging (e.g., you have a 45-page price list), which requires a salesperson to walk through. This approach is also relevant if you have a small addressable market or high differences in willingness to pay between your customer segments.
- Hybrid: this model is suitable for businesses with precise offers or bundles, which customers can quickly grasp and pick which one works best for them. However, you may have significant differences in willingness to pay among customers or a small addressable market. In this scenario, companies often opt to publicize the different packaging but not necessarily the prices.
Each of the models for publicizing pricing and packaging is best suited for different situations. There’s not a one size fits all.Dan Balcauski
Pricing affects every senior stakeholder of a company, from Sales to Finance and Customer Success. With a multitude of (often heated) opinions, it’s difficult for just one function to dictate the terms of pricing to others.
As companies grow in their pricing journey, they should create a pricing committee, and Product Marketing should lead these pricing committees to drive the pricing strategy forward.
Product marketers should engage with customers and prospects to understand how they derive value from the product when approaching pricing. By understanding how they’re creating value for their customers, Product Marketers will develop optimal pricing and packaging approach.