How product marketing can initiate pricing and packaging conversations cross-functionally? Who all should be involved in a council to discuss and sign off?
There are several different triggers that could spark this converstion - the launch of a new product/feature that is monetizable, competitive movement in the market, the decision to pursue a new adjacent market, an acquisition of a company, major changes in a key business metric, etc.
In any way, if you see an opportunity to re-investigate your current pricing and packaging, I'd suggest that you anchor it in one of these changes - this is a great way to frame the opportunity and help other stakeholders get on board.
Since pricing touches almost all parts of a business, I usually recommend a fairly diverse stakeholder group including reps from Product, Marketing, Sales, Finance, Customer Success and Operations. Since there are so many stakeholders, I'd also recommend that you be clear on responsibilities and accountabilities up front.
Product marketing by definition sits at the intersection of product management, sales, and customers. So we’re naturally in the best position to drive a lot of conversations that need buy-in from a x-functional group of stakeholders. In my experience - sales, CS, finance, and product management should be involved in pricing conversations each bringing their unique point of view to the discussion. It will of course vary from one org to the other but generally: Product represent the capabilities and business pains they solve. Finance the cost and margin considerations. Sales are at the frontline of any pricing conversations. Customer success represent existing customers and the ability to deliver on promised value. And product marketing brings in ICP understanding, overall positioning, and competitive differentiation, buyer research etc.
In my experience, a pricing committee is the most important team you can have for pricing and packaging. Maybe if your company is super small, you can get away without one. But really, once you start having a decent number of customers and deals, you should have a formal process in place and a cross-functional team to review and approve pricing and packaging. Like I've said in some of the previous answers, cross-functional teams including sales are super important. Here's who I've seen as critical to a pricing committee or council and some of their roles:
- Product Marketing - proposes pricing and packaging changes, partners with Product Management (sometimes Product Management sends a representive to meetings), consults with Sales and Sales Management, approves pricing changes, conducts pricing enablement
- Customer Experience - often proposes services/support pricing and packaging changes, approves product pricing changes, assesses impact on existing customers, consults with Sales and Sales Management, conducts services/suport pricing enablement
- Sales Management - consulted about pricing changes prior to pricing committee submission, assesses impact on existing customers and prospects, nominates sellers for price testing and/or pricing tiger team
- Sales/Revenue Operations - assesses impact to CPQ, Deal Desk, sales compensation and forecasting, approves pricing changes, implements changes in CPQ
- Finance - assesses audit, margin, and financial impacts, assesses impact to billing and collections flow, approves pricing changes or pulls in CFO and FP&A when needed, implements changes in finance systems
- Legal - assesses contractual, legal and privacy impacts, approves pricing changes
There may be others included ad-hoc, but those are the critical teams involved in a pricing committee.
As product marketers, our expertise goes beyond just understanding the product and its features; it extends to understanding the market, customers, and their perception of value. To become more involved in pricing and packaging decisions, flex your marketing super-powers and earn a seat at the table:
1. Customer-Centric Approach: Leverage your deep customer insights to advocate for pricing that aligns with the perceived value of your product. Highlight how different pricing and packaging options resonate with various customer segments.
2. Competitive Analysis: Stay on top of the competitive landscape. Share PoVs on how your competitor's price and package similar products and identify opportunities for differentiation or market disruption.
3. Value Proposition Articulation: Clearly articulate the value your product brings to customers. Work closely with product managers to understand how new features or enhancements impact this value proposition, and importantly, a differentiated value proposition that supports a pricing hypothesis.
4. Collaboration with Sales: Collaborate with the sales team to gather feedback from the front lines. They have valuable insights into customer objections, pricing concerns, and competitive pressures, its your job to make that available to the pricing team.
5. Data-Driven Insights: Use data and analytics to measure the impact of pricing changes on customer acquisition, churn, and revenue. Present data-backed recommendations to support your pricing proposals.
Now, let's talk about the ideal pricing council: An effective pricing council represents various functions within the organization and fosters collaborative decision-making. Here's how it can be structured:
1. Product Marketing: Product marketers play a central role in understanding customer needs, competitive dynamics, and value propositions. They bring market insights and customer feedback to the table.
2. Product Management: Product managers provide a deep understanding of the product's capabilities and its development roadmap. They offer insights into how new features can impact pricing.
3. Sales and Sales Operations: The sales team contributes frontline insights into customer objections, competitive pressures, and market trends. Its likely a sales leader who signs up for the committed number, so they'll help stress-test assumptions about the market, and likely timelines for penetration and adoption.
4. Finance: The finance department brings financial modeling and analysis capabilities to evaluate the impact of pricing decisions on revenue, profitability, and margins.
5. Legal and Compliance: Legal and compliance teams ensure that pricing strategies adhere to regulations and contractual agreements.
An ideal pricing council should foster cross-functional collaboration, data-driven decision-making, and a deep understanding of market and customer dynamics to arrive at well-informed and effective pricing and packaging strategies.
A pricing committee is a really important vehicle for the cross-functional collaboration that's needed to set good pricing strategy. However, they often wind up being unproductive and highly dysfunctional. My advice:
- Nominate a strong moderator who can be a neutral “referee” and keep the stakeholders committed. This is not the person who is doing all of the legwork.
- Cross-functional representation should include Sales, Marketing, Legal, Finance, Customer Success/ Account Management, Services, and Support. Bring in people from different layers of the organization, not just leaders.
- Start pricing projects as a team, not when the research phase is already over.
- Manage meeting times tightly
- Define a decision making process. The U.N. Security Council serves as a good model for this. Everyone should have a say, but not everyone has veto power.
- Maintain ongoing dialogue, not just when there is a change that needs to happen
- Always do post-mortems after major decisions
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