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Pricing is your biggest lever that you probably spend the least amount of time testing and optimizing. I totally understand why – pricing is difficult to change (even when you’re small and especially when you are large), and you have to deal with complex questions of involving existing customers and even prospects in your pipeline.
But having a pricing strategy that you manage like your product roadmap has outsized rewards. You can anticipate issues, build a plan, and enable Sales to be significantly more successful. Not only will Sales and Marketing be more successful in optimizing revenue, but Sales will also be able to accelerating closing deals and really simplify the buying process for your future customers.
Pricing is a topic that comes up a lot with companies that I advise, so I thought I’d dig back into the archives and share a great resource that I haven’t published in the past. It’s based off of the Heavybit Pricing Strategy Seminar that I attended, and it’s great reminder of the impact on what to do (and what not to do) đź’Ż.
If you don’t have time to read on, then I hope at least these key pricing lessons learned will help:
Ok, want to dig into the details on all of that? This isn’t a semi-useless blog bloat post like Hubspot’s pricing strategy, but real-world feedback on pricing and strategy.
So, the seminar was held as a series of talks and, below, I’ve gathered my notes highlighting the best and most useful pricing strategy pieces of wisdom. Hard won lessons ahead. 👇
Fred talked about the transition from early-stage growth company (series Seed / A) to more mature 10MM+ ARR (series B stage) company and how the metrics become pretty much the only thing that matters. And by metrics, that means your operational efficiency metrics — CAC, LTV, COGS.
You really need to understand and tune the efficiency of delivering your product (and generating revenue) if you are going to sustain growth. Not a huge surprise, but a good reminder to use data to influence pricing and strategic decisions moving forward.
Rainforest has continued to expand on their growth, but at the time of the talk here were the details:
About Rainforest QA
Some common models are:
Contracts define the predictability of your business. Content Camel is a monthly SaaS business, so we have to earn the business. Our competitors (like Highspot and others) only do annual deals with big direct sales forces.
Typical contract arrangements:
As a business evolves, it transitions from stage to stage. With each stage, the business transforms and operates based on different principles of growth. I generally talk about these as exploration -> expansion -> extraction, but here is a more detailed breakdown:
Business model: is your positive margin revenue model. You are going to fail if you don’t find a positive margin model!
Fred referenced the Jerry Chen Talk on units of value as a great resource âś….
Wait, that’s not all! Not even close.
Patrick from Profitwell spoke on approaches to growth and optimizing pricing as a huge lever that you probably aren’t spending enough time pulling. Mature businesses are just as guilty of this as young companies.
Some highlights:
It’s critical that you treat pricing just like product and run experiments. To test your assumptions. To prove or disprove what the team holds true and the understanding that forms the foundations of a ton of decisions that you are making every day.
So, develop quantified buyer personas that are data driven profiles of the customers you are targeting. Or the ones that you’re purposely ignoring! A couple of things go into these personas:
If you don’t already have a persona template, I’d recommend our fantastic buyer personas template.
To run discovery on price sensitivity for your personas, you are going to learn about willingness to pay.
Despite the fact that most teams skip this step, understanding the price sensitivity of your audience is one of the biggest gaps you can fill as you figure out pricing and packaging.
How do you start to understand what your prospects and customers are interested in paying?
Amit from Datadog spoke about packaging desicions make (correctly and incorrectly) as the companies started to really scale. There are some great insights here on building a pricing roadmap – a longer term view of where your pricing can head, so you can test now.
Let’s check out the highlights.
Here was the snapshot of Datadog at the time:
🔥 and still are.
Enterprise scale and growth is a bit different. This is the expansion phase vs the previous exploration phase where you were just figuring out the revenue mechanics. Oh, and if you’re wondering what economies of scope means, then it’s really just that building multiple products is more efficient (and profitable) than going deep, deeper, deepest into just one product. As you grow your audience, building additional products expands your ability to cross-sell and generate much more revenue per customer.
Datadog was investing heavily in product development. This naturally led to a lot of packaing (and pricing) decision. Here’s their thinking:
Amit highlighted some key takeaways from the experience at Datadog:
Christina (Interana, Splunk Zuora) has a fantastic perspective on putting pricing and packaging in place. Something that’s hard to do in practice, but always necessary.
What can we learn?
And if you’re thinking free / freemium plans, then definitely keep this in mind:
If you’ve come this far, your’re on the right path, and I hope it’s been helpful. 🙌
Final words:
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Content Camel is a sales enablement tool used for sales content management. High-growth sales teams use our system to quickly find and share the right content for each specific sales situation and measure content use and effectiveness.