3 Strategies To Analyze Your Pricing Effectiveness
When Pardot was acquired by Salesforce, we worked with Salesforce’s pricing strategy department to update our packages.
These folks knew their shit!
We were doing pretty well considering pricing wasn’t our day job. We had a strong foundation and we evolved our packages based on learnings and market shifts.
But nothing beats learning from experts.
Apparently when you get an MBA in pricing strategy and then do pricing strategy all day every day for multiple products, you know a thing or two.
The final product was great, of course. But seeing their process was eye-opening too.
Here’s how the pricing gurus at the world’s largest SaaS company conduct pricing research. (And how you can apply these techniques at your startup today!)
3 Research Steps of the Pricing Pros
1. Analyze customer usage.
We gave the pricing strategy team a huge download of data:
What components and features were allowed in each package
What components customers were actually using (and how much)
How many of each type of user
Price for that usage (we had a mix of legacy pricing plans)
They did fancy spreadsheet things to learn:
What things did customers use the most
What things did customers not use
When did people most often hit their usage limits
Possible “breakpoints” for future packaging
Sounds obvious in hindsight but with a small team of generalists (early stage startups don’t hire pricing strategists 😂), we were usually putting out fires or working off of good instincts.
Startup Tip: Thinking about a pricing revamp? Take a look at current customer usage data to spot trends and insights. Keep it lightweight or partner with a local MBA class that looks for “real” business projects to work on.
Bonus: Analyzing customer usage data can also provide roadmap guidance. What should you invest in? What should you end-of-life because no one uses? What could be a good path to upsells?
2. Talk to customers. Talk to sales and customer success.
In addition to the data, the pricing strategy team gathered anecdotal info on:
What customers valued in the sales process
What customers valued when they used the product
This was particularly important because at this point, we didn’t have much feature differentiation between packages. We had 3 pricing tiers (mostly) based on usage amounts.
We needed info on what features could incentivize an upgrade.
Startup Tip: Gather info from the front lines especially if there are gaps in data. Pricing models include qualitative and quantitative input. Listen for what functionality is most valuable, not just “how much” something is being used.
3. Look at competitor offerings.
Stalking, I mean, researching competitors is an area where we aligned with the top pricing strategists 😁
The sales team knew competitor pricing inside and out, including what features or pricing could put a deal at risk.
We had recorded lost deal data for years to track which competitors we lost to and why. (Shout out Derek Grant, VP Sales & SaaS scaling pro!)
The pricing gurus collected this info, looked at it holistically, and used it to determine a competitive updated offering.
Startup Tip: Add two “Lost Deal” fields to your CRM - “Reason for Loss” and “Vendor Selected.” Same for customer attrition. It’s a light lift but invaluable data.
Skip the MBA and F500 acquisition. The O’Daily is here to cherry pick the low hanging pricing strategy fruit for you. 😉
These are relatively simple tactics that can provide big value today and long term.
Curious about the output of this research? Here’s the learnings from the final product.
What other research has honed your pricing strategy? Have you borrowed any big company strategies and applied them to your startup pricing?