The Scarred Pricing Coordinator Club
How to leverage your pricing committee (so things actually get done)
Happy Thursday!
And to my 176 new subscribers, welcome to the underground 🤝. Thank you all for hanging out with me every other week while I unpack my thoughts on various SaaS & subscription pricing topics.
I received the following question on LinkedIn last week from a pricing director I’ve worked with a few times over the years:
“What is the best process to get a pricing initiative approved from multiple C-level executives? I've struggled with this everywhere I've been. Might be a me problem though.”
It got me reminiscing on a few painful partnerships of old where our pricing recommendations ended up collecting dust on a shelf. And how there should be a secret society of folks who underwent the brave journey of enacting real change within their org, did almost everything right, but failed to implement a successful pricing change because of lessons yet to be learned. If this secret society existed, we might call it something like the Scarred Pricing Coordinator Club. Maybe I’m overreacting.
Regardless, in the hope that no one else joins the club, I’d like to impart some wisdom. Before I do so, here’s what else is brewing on the pricing underground:
Out of 32 pricing conversations since April 20th, I was asked about…
Buyer personas ⇒ 3 times
Value metrics ⇒ 8 times
Usage-based pricing ⇒ 2 times
Hybrid pricing ⇒ 3 times
Perpetual to SaaS ⇒ 3 times*
Packaging ⇒ 8 times
Product bundling ⇒ 5 times**
Launching a new product ⇒ 3 times
*The influx of perpetual to SaaS migration questions feels cyclical to me. Though each one of these scenarios is unique, it seems this is the time of year many enterprise companies start to evaluate moving legacy products to the cloud ahead of FY24-25. General fears tend to revolve around the cannibalization of existing contracts, customer migration, and tech stack.
**Similar deal with product bundling. As the SaaS ecosystem matures, more and more companies are finding difficulties merging products together in a cohesive strategy to increase contract value and retention. This is one of those things that falls into the category of “easy to screw up but tremendous upside if done right”. May use my next newsletter to explore bundling but for those looking to read up on best practices in the meantime, I’d check this out.
Today we’re going to talk about how to leverage pricing committees so things actually get done.
To answer the above question, I have good news and… less good news.
The good news: It’s not a you problem (at least I don’t think).
The less good news: a lot of companies run up against this challenge and there’s rarely one silver bullet. Imagine working for months on conjoint analyses, customer interviews, etc. only to find out your CEO isn’t comfortable with the rollout. It’s not fun!
To circumvent this, forming and leaning on your pricing committee is necessary to undergo a pricing change.
Rather than sharing an exhaustive list of the steps you ought to follow to form a proper committee, I’m going to highlight a few tips to maximize your leverage:
1. Be the point guard (or designate a strong one).
Getting folks to join the committee isn’t generally the tricky part. Turns out, a lot of your colleagues have opinions on pricing and would be happy to voice them.
What’s harder is electing and designating a strong pricing coordinator to moderate these discussions and action the team’s hypotheses.
In the words of Stephon Marbury: “The great point guards make everyone else better”.
He also famously said, “I’m the best point guard in the NBA,” which was a hilarious miscalculation, but that’s not the point. The point is, having a strong pricing coordinator can be the difference between having your team rally behind a successful pricing rollout and having a lot of hard work collect dust on a shelf.
If you’re reading this newsletter, there’s a decent chance you’re the person driving pricing/packaging at your company. And if you’ve been doing this for a while you’ve likely learned how to run A/B tests, manage panels, why certain quantitative methodologies work better than others, and that everyone seems to disagree when it comes to pricing.
Well, maybe not everyone. But it feels that way sometimes.
Further, pricing is a unique beast because, in some capacity, it falls on the plates of each major department: Marketing, Product, Sales, Finance, etc.
So it is crucial that somebody drive monetization strategically across these converging venn diagrams of interest.
This brings us to point #2.
2. Seek alignment on the “right” outcomes.
Most folks think about revenue uplift when it comes to pricing (e.g. “If we increase prices X % how will ARPU change?”). ARPU is one of the most powerful metrics in a subscription business, but it isn’t the only outcome we should focus on when it comes to pricing.
Focusing on a central metric may not be painting the full and/or necessary picture for your executives when it comes time to make a change. At worst, it will stall your ability to execute (trust me, we’ve seen this happen many times).
To avoid this, here’s what I would do:
Before running any study, define your success metric(s).
Zoom out and consider what meaningful business outcome will ensue if your success metric is or is not achieved.
Present point #1 and point #2 to your pricing committee and listen to their feedback.
Which one of these is a more powerful internal pitch?
“I believe if we adjust our packages and prices, ARPU will increase by 20%.”
“I believe if we adjust our packages and prices, we’ll decrease CAC shoring up more budget for marketing, increase product-led adoption shoring up more capacity for our sales team to chase whales, and increase profitability such that our margins become more attractive and our enterprise value increases over time. And our ARPU will increase 20%.”
I’m embellishing here but you get the point. Aligning on the right outcomes internally is a necessary step toward making changes.
3. Set a timeline with critical milestones.
Once you’ve set up your committee and aligned on a shared outcome, you’ve officially moved from strategic to tactical planning! I’m cringing at that sentence too, bear with me.
Pricing projects take time. They involve data collection, analysis, internal fights to the death debates, customer communications, tech stack adjustments, etc, etc…
So do yourself (and your team) a favor, and clearly articulate each critical step of the process. While timelines will vary from org to org, it’ll probably look something like this:
First, set your kickoff meeting in which all core stakeholders are present. This is usually anywhere from 30 - 90 min and should be used to align on the game plan for the subsequent weeks/months.
Next, begin your research phase. In an ideal world, this should involve internal interviews and external qualitative & quantitative analysis.
After your research phase, once you’ve collected enough data to be dangerous, walk through the findings with your team. Remember to, again, focus on outcomes — it’s quite possible the term “analysis paralysis” was coined by a grumpy exec listening to a pricing presentation. Avoid this where you can. Instead, focus on how the data you’ve collected either validates or invalidates your initial hypothesis & what your recommendations are for the business.
Next, give the team some time to digest and set another meeting to cover any outstanding objections.
Once objections are handled, set some time to chat with multi-departmental influencers one-off throughout the org (e.g. tenured sales reps, various executives, board members, etc) to strengthen your action plan.
Finally, after a well-run data collection process, a strong internal business case, and a drum roll, await your decision maker’s thumbs up or down.
Should your DM give a thumbs up, take a brief moment to celebrate the fact that you’ve just gotten approval to do a lot more work 🙂
This brings us to point #4 (which, in retrospect, probably should have been point #1).
4. Ensure the org is ready for a change.
If you’ve ever undergone a pricing change and found yourself saying “I had no idea that was going to break,” congratulations, you’ve met the criteria to join the Scarred Pricing Coordinator Club.
And if you haven’t yet had this experience, some words of wisdom: a lot of things can break. But they don’t have to.
I’d highly recommend auditing your org’s readiness for a pricing change by documenting the following:
We’ve pressure tested this list with our team & other pricing experts (shoutout to the
community!) and, while not exhaustive, it pretty well encapsulates what can go wrong.Honorable mention: Designate one decision-maker.
Pricing takes an army but if we all relied on consensus to make changes, we’d still be on the Zoom duking it out. There are moments in our lives when we need somebody to play ‘bad cop’ for us. Oddly enough, making pricing changes is one of them.
Depending on stage, your DM should typically be a C-Level executive, often CEO or CMO, though it will vary.
If you are a strong pricing coordinator, align your committee on the right outcomes, set a clear timeline with critical milestones, and ensure the org is truly ready for a change, you just might have a fighter’s chance at having the decision-maker in your pocket.
For some, reading this article will have unearthed painful memories. If that’s the case, I’m sorry that you’ve been unfortunate enough to have joined the SPCC. Here’s to hoping we can save one more soul from joining the club.
See you in 2 weeks!
-Evan
Great job Evan. Well written and informative.
Great piece - Love the idea of setting a specific timeline with milestones, makes it more tangible!