Pricing and packaging demands both strategic insight and practical execution. This post, based on a conversation with Marcos Rivera, founder and CEO of Pricing I/O, highlights valuable lessons and frameworks for mastering this critical aspect of business growth. Drawing from roles spanning financial analyst to product leader and private equity professional, we explore his advice and frameworks for product and engineering leaders to take pricing and packaging head on.
Find your why - Successful pricing and packaging changes are driven by motive, not impulse.
Science informs art - Blend qualitative and quantitative data, along with cross-functional collaboration.
Master the exchange rate - Pricing and packaging is all about psychology. They can change perception of value materially.
There is an element of intentionality that should wrap any investment in pricing and packaging. In other words, companies should “price on purpose”, rather than impulsively change price points or revise packaging.
To price on purpose, companies should think about three questions
Where is my growth coming from?
First, understand your own business. Isolate what parts of your business are growing, and which are struggling – this might come in the form of cohorts, channels, or other dimensions. Some degree of data maturity is required in order to properly highlight that information
Who do I want to win?
Based on your understanding of the business, you might begin to have clarity on where you want to win, which can be in the form of more market share or an entirely new market opportunity.
What experience or offer do I want to give my customers and prospects?
Pricing and packaging is a core part of the customer experience, so thinking deeply about what experience you want to give your customers and prospects is important in executing successful initiatives.
We all are familiar with common advice that seeks to balance art and science. Pricing and packaging is no different, but given how intimately tied it is with human psychology, it arguably leans a discipline that is an art.
That doesn’t mean, however, that it should not be informed by objective data. In fact, successfully creating a discipline around it at companies starts with a discipline around data.
In B2B SaaS, there are two types of data to create a bit of control over: First, there’s customer data, which includes all the data about what your customers are doing in your product. Second, there’s financial data, which includes the data about how much your customers are paying you, for how long, and how that has shifted over time.
Together, they form an objective picture of what your customers value about your product, how sticky they are, and where you might have opportunities to improve.
Data is foundational, but moving forward monetization initiatives needs structure and strategic leadership – this is where the art comes in.
The most successful companies that use pricing and packaging as a lever form a committee of 6-8 individuals from across the organization. They’re intentional about not having too much bloat in that committee, but also ensuring that it represents a cross-functional view of the organization.
That committee is tasked with balancing customer demands, strategic demands, board demands, etc. and using those to inform both incremental and major monetization initiatives.
Within B2B SaaS company committees it’s often most intuitive to align pricing and packaging with your product roadmap, an there are often three types of product value to weigh:
Maintenance / bug fixes - this supports your core price.
Incremental improvements or extensions to features (e.g. layering AI into it) - this allows you to increase price or push customers to upgrade.
Net-new value - this is the most complex to consider, but often allows you to enter new markets or capture new opportunities.
You found your why, you built your foundation with data and process. Now what? Remember you’re selling to humans that have predictable psychologies, and not robots.
Pricing and packaging are inter-linked forms of value. Packaging is the value customers get, and pricing is what customers pay for that value – together they form a sort of “exchange rate”. When that exchange rate is out of balance, you’ll feel it in sales friction. When it’s in balance, things are a lot easier and customers are a lot happier.
It’s often a mistake to change pricing without at least slightly modifying packaging – otherwise you risk the perception that customers are paying more for the same thing. The exchange rate, or at least the perception of it, will be out of balance. In almost all cases, you should change them together.
The exception, however, is with manipulating packaging by itself. Adding more features or removing them is a good way to manipulate the “exchange rate” naturally without introducing new friction.
For instance, adding a new feature to a tier gives your customers (and prospects) more for the same price, a relatively less expensive package. Alternatively, taking something away gives them less for that same price, a relatively more expensive package.
Being purposeful about pricing and packaging can not only result in material growth, it can also improve customer experience meaningfully.
Companies should consider several things to get there:
Always start with why you’re doing what you’re doing, and what you want it to feel like.
Invest in data and create structure that incentivizes the right conversations around monetization.
Remember you’re selling to humans, and pricing and packaging is all about perceived value.
