So, How Often Should The Pricing Committee Be Meeting And Making Changes?
Once you have your pricing committee in place, they should be making minor changes to your pricing strategy every quarter and major changes to your pricing strategy every six months, regardless of the size of your organization. In reality, given organizational size, larger organizations may move a bit slower and smaller organizations a bit quicker, but this cadence is exceptionally important, because this is how quickly almost every vertical in SaaS is moving.
Every 3 months make small tweaks that don’t require major customer communication
At the end of every quarter you should be evaluating your pricing strategy’s performance based on goals you’ve set as an organization (improving LTV/CAC, increasing QoQ growth, etc.). You should also be analysing your main pricing metrics (value metric, price level, feature packaging, etc) by pulling or collecting necessary data.
The three month cadence allows you to constantly be re-evaluating where you stand in the market and how your customers are changing. Yet, even with wide data swings, you’ll likely not make major changes every three months, because customers would be placed into too volatile of a pricing environment. This is why we recommend making minor changes that mainly impact your upgrade and downgrade rates to keep your pricing momentum, but to not have to communicate to the whole of your customer base.
What are “minor” pricing changes? Here’s a good list:
- Reduction in amount of value metric given: Reducing the number of visits or quantity of the value metric you provide each tier allows you to spur upgrades, and more often than not, you’re giving away too much already
- Reducing your discounting thresholds: Getting rid of all discounts is a noble goal, but in enterprise software they have their merits. You should still be working to reduce these constantly though, especially if your organization is discount happy.
- Moving features from plan to plan or adding in new features: Never underestimate the power of features on upgrades. Moving API access or non-essential features one way or another can be gold for upgrades.
- Design and funnel changes: Don’t underestimate the impact of proper funnel management, pricing page design, and even shifting your SaaS marketing channels on your pricing’s bottom line.
- Value proposition alignment: One of the easiest things to change are pixels on a page or email when it comes to your messaging.
All of the above don’t require major announcements to your entire customer base. Most impact small subsets or even just prospects. This keeps you moving, and ultimately makes sure you’re not anemic in making necessary changes.
Make major changes every six months
Every six months you should be ready to make major changes to your pricing strategy. Major changes involve physically changing your prices up or down, adding or subtracting tiers, implementing harsher or more liberal free plans and free trial strategies, etc.
You may think this is too quick, and in some cases it is a bit of a rapid pace. Obviously think about your customer and run impact analyses before making major changes, but there are certainly ways to make major changes and circumvent any major pitfalls with customer communication.
For instance, HubSpot typically raises their prices in some manner every six months. This only impacts new customers though, because their existing customers are already in annual contracts. Interestingly enough, this cleans out their lead funnel pretty quickly, because they make an announcement that prices are going up to get prospects to move under the old pricing structure.
Overall though, regardless of your structure, you need to ensure you’re moving quickly. Here are the major changes to make every 6 months:
- Raising or lowering prices: If you’re collecting price sensitivity data constantly, you’ll know exactly where your prospects and customers sit on the pricing spectrum. Take advantage of this data, but making sure your pricing is aligned to maximize revenue and conversion.
- Expanding or contracting tiers: Here’s the time to add major tiers or get rid of tiers that have become “plan islands”. You’ll notice that people sometimes just need an opportunity to upgrade with the right features.
- Major acquisition changes with free or free-trials: Freemium and free-trials are an exceptionally important concept in SaaS to get right in numerous forms. They take a ton of work though.
- Any major value metric changes: If you’re eliminating per user pricing (as you should) or changing up your value metric, you need to make sure you handle the communication properly.