4 Game-Changing Pricing Tips From Fortune 500 Strategists
Oh Hello, Pricing Experts
When Pardot was acquired by Salesforce, we were fortunate to get the chance to work with some of the top pricing strategists in software!
We had a pretty solid pricing base:
3 pricing tiers, following the model of Good, Better, Best
Our revenue grew as customers were more successful
Customers easily understood our pricing
But when you have a chance to learn from the best, you do it!
And when you have a chance to share these learnings on the O’Daily, you do it!
Here are the top 4 lessons I learned from the world’s best software pricing strategists.
4 Game-Changing Pricing Tips From Top Strategists
1. Include feature differentiation.
The top mind-blowing lesson I learned from the pricing ninjas at Salesforce is this:
PUT THINGS PEOPLE WANT INTO HIGHER TIERS!! 🤯🤯🤯
Sounds obvious, right? Lord knows, we’re used to it in other areas.
Spotify’s paid version has 12 features I don’t care about. But I really, really, really like to download songs to my phone. Here’s $13/mo, you cagey Spotify pricing ninjas.
It’s brilliant. It’s annoying. It’s highly effective.
In Pardot Pricing v.1, we differentiated mostly on usage. If you sent a lot of emails or needed lots of forms, you’d be on the Enterprise Plan.
In Pardot Pricing v.Ninja, we included desirable, advanced functionality in higher tiers. So even if you didn’t send a high volume of emails, if you wanted specialized email testing, you’d move to a higher plan.
BOOM. More feature value at each pricing tier. Makes sense, right? You may even be asking, “Why didn’t those silly Pardashians do this earlier?”
Here’s the thing: you can’t do this on Day One. You literally don’t have enough features yet 😂
You also don’t know what people value most. Keep pricing simple while you focus on customer growth and adoption. Once you have good traction and a robust feature set, it’s time for this Jedi pricing move!
Startup Tip: As your company and the market matures, keep an eye out for ways to evolve your pricing that encourages meaningful differentiation between tiers. People understand and expect to pay more for additional value and advanced functionality.
2. Move customers off of legacy pricing.
As a scrappy, customer-focused startup, we honored all legacy pricing and packaging. We loved offering this and customers appreciated it.
It was also a huge mess behind the scenes!
What made it complicated:
Keeping up with a database of all pricing package details and related upgrade options ever offered.
Tracking 10-12 different pricing packages within the CRM and the app.
Onboarding new team members to this complex process. We had a new hire every few weeks!
Confusing for clients since “their” pricing wasn’t on the website.
Salesforce showed us a simpler way:
Move everyone to a modern day plan.
Give an appropriate blanket discount to honor previous pricing.
Instead of being on the $500 package from 2009, a customer would be on the 2015 package with a 50% discount. All of the customer service feels, none of the time-intensive administration or frustration.
Another way that also works:
Customer can stay on their legacy plan.
If they upgrade, they move to current plans and current pricing.
Startup Tip: How can you keep pricing and packaging as simple as possible on the backend? Do you have any legacy plans that can convert to newer plans?
3. Skip the small stuff.
As part of the pricing revamp, we retired very small upgrade options.
We started these in the early days when upgrades of any size were exciting and worth it.
We were finally large enough that it didn’t make sense to do really small upgrades, especially since it was handled manually by a busy team. But we had done $50 upgrades for so long, we didn’t realize we had outgrown it!
The Salesforce pricing ninjas pointed out that customers could upgrade to the next tier or work within the limits.
It was a huge time savings that let teams focus on more strategic conversations and initiatives.
Startup Tip: Are there any pricing practices that you’ve outgrown or aren’t worth the effort?
4. Increase prices.
If pricing gurus don’t raise prices, are they even pricing gurus??!!?? 🤔
When something increases the value of your offering – like the largest SaaS company in the world backing you – your price should go up!
Before Salesforce, we were usually 80-90% the cost of our larger competitors. After Salesforce, we were a large competitor. Our updated pricing reflected this.
Startup Tip: Be aware of market conditions, product development, or other factors that warrant a price increase. Regular price increases are an important part of company growth and value confirmation.
At Pardot, we learned from Salesforce, an enterprise software company 20 years ahead of us. It was a gift that accelerated our growth much faster than if we had learned it on our own.
Now, you have the cheat codes too! All the pricing knowledge of a F500 acquisition and top pricing strategy team in only 4 bullet points. 😉
Next week, we’ll dive into the pricing research and analysis that happened behind the scenes. The insights will be helpful now and lay a strong foundation for future optimization.
Savvy pricing is an important tool for growth. Small tweaks can make a big impact! 🚀
What pricing strategies have you learned from more experienced companies or teams? Any pricing changes that seemed obvious in hindsight?