6 Pricing Tips for B2B Software

Pricing might be the most contentious go-to-market topic within a B2B software company. And, if it’s not contentious, you might be doing something wrong.

If customers love your pricing, you’re probably leaving money on the table.

If salespeople love your pricing, it might be too flexible, or too simplistic.

If product managers love your pricing — well, that probably will never happen!

I’ve heard that at some startups, the CEO basically needs to own pricing herself, because it is such a lighting rod of an issue between sales and product or marketing teams.

Which brings up the issue, who should own pricing? Product? Marketing? Ops? You’ll find all of the above out there.

Pricing breaks down into two main buckets, pricing operations and pricing strategy. These can be handled out of one centralized pricing team, or they might be broken up, with the Ops team handling Pricing Ops and Product or Marketing handling Pricing Strategy.

If you have a Marketing team that owns Product Marketing, and plays the roll of spearheading overall go-to-market of products, then you might want Marketing to handle pricing. Otherwise, if your Product team has an “outbound PM” charter to it and handles GTM strategy, then Pricing might sit under product.

Pricing is all about value capture. One way or another, you have to have a strategy on how you plan to capture the value from the market of the product you’re building. At the center of that plan, is how you plan to position your product in the market, and what GTM goals you want to drive (e.g. adoption, upsell, cross-sell, new business).

Enough about org structure. Let’s talk about pricing itself.

Years ago, pricing was something you worked on for months and months, for a software launch that happened once every three years. In this world, you did comprehensive, expensive pricing studies, diving into minute details of the pricing model. As with most things back then, iteration was hard or expensive.

In the world of modern software products, pricing and packaging is a living thing. Products continuously evolve with continuous delivery of new features.

Here are my top 6 things to consider for managing pricing in the modern world:

1. Build your operational capability to handle a pricing model that will evolve. Think about business systems, in-product implementation and sales tools and training in a way that allow for this evolution.
2. Consider how high of a touch you are comfortable with in the sales process. If you have a very high touch sales process, then you can design a pricing model that provides flexibility and many options. You will still need to train your sales team to guide customers through purchase. If you primarily sell through low touch, you need to optimize for both simplicity and full transparency.
3. Maintain a pricing roadmap. Think of pricing as if it were a product. What enhancements are you considering? What new features or products are being released that will impact pricing? Keep track of these and plan out several quarters.
4. Go the extra mile when you implement changes. Pricing is a critical part of the sales process. Pull out all the stops. Send an alert to the sales team. Create an FAQ. Walk through the changes live. Make sure sales management understands the change. Get all the implementation right through all your documentation and business systems, so the resources are there from Day 1. And, be ready on your pricing Slack channel or email thread to handle any questions.
5. Be pragmatic. For major new products, it’s important to do research studies on willingness to pay. Balance this with insight on the value you believe customers see in the product, based on the patterns you see in your business. No research firm will know your business better than you. 3rd party research helps you get external validation, but it can have lots of blind spots and the data is always subject to being skewed due to a ton of reasons.
6. Iterate. You’re never going to get pricing exactly right. The question is whether have you gotten it right enough. Have a pulse on what customers are saying, what the metrics tell you, and what your sales team says. Run experiments to see if you have pricing power. Introduce other small changes to find what captures more or less value, and do more of the things that seem to work. And, don’t be afraid to kill off a SKU every now and then to pare back an overgrown pricing model.

If you’re not totally happy with your pricing, don’t worry, few organizations really are. The main thing is that you continuously work to align your pricing to the perceived value of your products, as that equation changes over time. Be flexible, iterate, and keep your ears to the ground.