Pricing Roadmap: How to Be Strategic Instead of Reactive
Could this template help your company make more this year?
“I didn’t raise my prices for many years,” confided my hairdresser, “and now I’m paid half of what people with way less experience make. I’m afraid if I bring my prices up to market, the steep jump will offend and maybe cause me to lose clients.” She was in a real bind, the family breadwinner in a market with rapidly increasing product and rent costs. She wished she’d been making smaller price increases all these years. The issue was visceral.
“Her business is not all that different from fancy tech companies,” I thought.
Just a month before, I’d had my mind blown by a simple and practical suggestion by Tom Buiocchi, former CEO of ServiceChannel. “Why don’t more companies have pricing roadmaps?” he asked the crowd from the keynote stage of Venture Atlanta. He went on to detail how companies should more strategically plan ahead for price changes across a number of categories to keep growing their revenue, charging for value, and covering their increasing costs. If they weren’t being proactive, they were going to be reactive. Great point, I thought. We spend so much time on product roadmaps and financing plans at hypergrowth companies. Why are we so reactive about pricing projects instead of having a thoughtful, ongoing roadmap?
Why don’t smaller companies have pricing roadmaps?
Bigger companies, of course, have pricing roadmaps and big pricing teams. I’ve stalked some of the Salesforce pricing team [CRAIG SCHULL’s LINKEDIN] over the years, wanting to learn from their specialized expertise. But for smaller companies, there are four blockers:
Too much to do and too little time - hypergrowth companies are trying to build the rocket while they’re flying it. Pricing is often important but not urgent. While it can be a big revenue lever over time, it gets overshadowed by the lure of new customers and expansion sales - especially in sales-led go-to-market motions. Pricing often gets prioritized the month before a big new product launch or when finances are squeezed.
Lack of expertise - Pricing is a specialty that many smaller companies don’t have the money to employ. Product managers, product marketers, and finance folks may have participated in pricing projects before, but many lack the deep expertise, confidence, and conviction to own and drive a comprehensive pricing program.
Falls between the cracks - Pricing is one of the most cross-functional projects - generally involving product, marketing, finance, sales, services, and support. So many teams are affected, yet often, no one is assigned primary responsibility for solving the whole problem. Reactive pricing changes by different departments to different sub-issues can become very dysfunctional (think incremental price-raises by-product with disjointed discounting by sales). A true owner/driver of the project is needed and often will be accompanied by a “pricing council.” This group of representatives from different departments will debate, approve, and implement potential changes together, but a primary driver is very much needed.
Expensive, In Multiple Ways - Many smaller companies without in-house expertise engage pricing experts like Simon-Kucher to do big one-time pricing projects. But the high cost of time and resources prevents many companies from engaging with high-end firms on a permanent basis. Also, many companies have bad experiences with pricing projects — things never go just as you expect. There can be unintended consequences of losing customers (especially when pricing to go up-market to Enterprise, or changing to value-based pricing). Many companies I know have experienced significant revenue hits when pricing changes upset customers, triggered customers to research (and go to) competitors, or shifts to new pricing models didn’t make up the difference as predicted. Bad experiences can make leadership teams hesitant to keep working on pricing, with wounds still stinging.
But the Value Can be Substantial
Pricing is a complicated project for smaller companies to prioritize, staff, and run well on an ongoing basis. But neglecting it can be a big mistake. Pricing changes are a primary strategic lever to drive revenue:
New features are always being released - how can you capture the value and offset the growing product and engineering costs?
Competitors are always changing pricing - how can you anticipate and stay ahead?
Cross-selling can be a major revenue driver - but a strong discount for multiple products through suite packaging or bundling on first-sale can be critical.
Inflation is substantial - how can you offset the increases in headcount and business costs to drive profits?
Delaying pricing projects for years can create a jump (like my hairdressers) that unnecessarily drives customer turnover and dissatisfaction. With word-of-mouth marketing driving substantial sales, you can’t afford to have a big, negative experience - even if you’re desperate for the money.
Make a Plan - Tom’s Sample Roadmap
I was so in love with Tom’s suggestion of a pricing roadmap that I asked him to create a template for us, and he did!
I could opine on details of Tom’s template, but it’s fairly self-explanatory. It covers the most important categories:
New Products
Existing Products
Repackaging / Bundling
Competitors
Overall product line / portfolio assessments
It also covers the goals, trade-offs, and cadence that drive projects in each category. It’s an awesome start for any ambitious team.
The devil, of course, is in the details. Knowing what needs to be done alone doesn’t get it done. But the concept of maintaining, reviewing, and updating a pricing roadmap alongside the product roadmap seems like a fantastic idea. We all need to drive more revenue, customer satisfaction, and profitability over the long term - maybe this will help.
Thoughts?
Any advice for me on pricing? What consultants have you used? What have you seen work? What have you seen go wrong? Who do you follow to learn about pricing?
Carilu Dietrich is a former CMO, most notably the head of marketing that took Atlassian public. She currently advises CEOs and CMOs of high-growth tech companies. Carilu helps leaders operationalize the chaos of scale, see around corners, and improve marketing and company performance.
Craig —- is there a pricing networking group?