"How much should we charge?" It's a question that keeps many product marketers up at night.
But what if I told you that pricing competitively is about much more than just picking a number?
As someone who's built product marketing teams from scratch at Chili Piper, Uberflip, and Klue, I've learned that pricing is a powerful tool for growth – when used strategically.
In this article, I'll share my hard-earned insights on:
- Balancing value and strategy in pricing.
- Implementing a transparent, no-discount policy.
- Tackling complex pricing scenarios.
- Making your pricing easy for customers to understand.
- Considering the competitive landscape in your pricing decisions.
By the end of this piece, you'll have a new perspective on pricing that could revolutionize your approach.
Let’s get into it.
Pricing as a growth lever: Balancing value and strategy
One key lesson I've learned is that pricing is a powerful growth lever , especially in venture-backed startups with aggressive growth targets. But it's crucial to approach pricing changes thoughtfully. Here are three tips to help you do that:
- Understand the rationale: Before implementing a price increase, make sure you understand the reasoning behind it. How will you explain this to customers? What's the value proposition that supports this change?
- Don’t increase prices without increasing value: You can’t just raise prices to boost your average contract value (ACV). Customers expect more when they're asked to pay more, so you should justify any price hike with added features, improved functionality, or enhanced user experience.
- Communicate changes clearly: When increasing prices, especially for existing customers, you need to be prepared for customer churn. It's easier to justify the price increase if you can point to specific improvements: "We've added so much in the last six months, and now we're adjusting our pricing to reflect that."
Chili Piper's no-discount pricing strategy: simplicity and transparency
At Chili Piper, we implemented a unique pricing strategy that reflected the company’s commitment to “buyer enablement” – making it as easy as possible for prospects to experience and buy the product, without having to wait around for a demo. Here are two key elements of this strategy:
- Transparent pricing: We always displayed our pricing on the website. There was no attempt to hide costs or make them difficult to find.
- No discounts: We believed our product was worth what we charged. Our stance was that we offered a fair price for a good product, eliminating the need for discounts and making things fairer for customers.
This strategy had a ton of great benefits:
- Simplicity: By removing discounts, we simplified the sales process for both customers and our sales team. This made the buying process more straightforward and stopped it from devolving into a complex negotiation.
- Predictable revenue: Without end-of-month or end-of-quarter discounts, deals came in steadily throughout the period. This created a more predictable revenue stream.
- Focus on product value: By removing discounts from the equation, we kept the focus on the product's value rather than its cost.
This approach may not work for every company, but for Chili Piper, it aligned perfectly with our values of transparency and simplicity in the buying process. It forced us to ensure our product's value justified its price , and it simplified our entire sales and marketing approach.
Challenges with the strategy
However, it’s not all sunshine and lollipops. Implementing a no-discount policy, especially when dealing with enterprise clients, can present significant challenges.
We often had to walk away from deals, which wasn't easy. Procurement teams would push hard for discounts, and that led to some pretty tough conversations. However, we stood firm on our policy, maintaining that giving discounts would be unfair to other customers. Ultimately, by being transparent, consistent, and willing to stand our ground, we made it work.
How the competitive landscape influences pricing
The competition plays a role in pricing analysis – always. As a product marketer, I've found that anyone who claims competition doesn't affect their pricing isn’t telling the whole truth. The reality is that we price our products relative to the market, taking into account both direct competitors and alternatives.
Market expectations heavily influence pricing decisions. When people look for a product within a certain category, they come with preconceived notions about pricing models and ranges. These expectations are shaped by the overall market, not just specific competitors. As a result, we often find ourselves deciding between two approaches:
- Aligning with typical models (e.g., usage-based or user-based pricing)
- Deliberately differentiating ourselves with a unique pricing structure
The ROI was so clear that it was easy for potential customers to make a business case for choosing us, even if we weren't the cheapest option.
At Chili Piper, we experienced firsthand how transparent pricing can impact competitive dynamics. Our no-discount policy and public pricing made it easier for competitors to undercut us. They knew exactly what price to beat, which presented challenges.
However, Chili Piper's experience also demonstrates that price isn't everything. Our product's strong differentiation and clear ROI often outweighed small price differences.
We could confidently say, "When you plug in Chili Piper, your conversion rates are going to go up." The ROI was so clear that it was easy for potential customers to make a business case for choosing us, even if we weren't the cheapest option.
Remember, pricing isn't just about the numbers – it's about how you position your product in the market and communicate its value. By focusing on these aspects, you can create a pricing strategy that withstands competitive pressures and resonates with your target customers.
Challenging pricing scenarios
In my experience, there are three common pricing scenarios that can be particularly tricky:
- Adding new products or features: This can change your pricing model. For example, at Uberflip, we added a new product called "sales streams" which required us to shift from a straightforward, usage-based model to one that included user-based pricing. This added complexity to our pricing, and we needed to do a lot of sales enablement.
- Pricing new, innovative products: When you're dealing with cutting-edge technology like AI , there often isn't a clear precedent for pricing. We struggled with this at Uberflip when launching our AI product. We tried to price it as a percentage increase and that did not go well – people weren’t sure of the product's value.
- Unbundling products: Breaking a simple, all-in-one pricing model into separate components (like platform fees and user licenses for different features) can create complexity. While it might make sense internally, it can be confusing for customers and complicate the sales process.
In all these scenarios, the key is to balance the need for revenue growth and how customers perceive the value of your product.
Remember, pricing isn't just about numbers – it's about communicating value to your customers and positioning your product effectively in the market.
Don't be afraid to test different approaches and iterate based on market feedback. Especially in startups, sometimes the best strategy is to make a decision, get it out there, and be prepared to adjust as you learn.
How to simplify complex pricing
There's a crucial difference between raw complexity in your pricing model and buyers finding it confusing. You can have a pricing model with multiple variables, but explain it in a way that's easy for customers to understand. Here are a couple of ways to do that:
- Put your pricing on your website: In a product-led organization , your pricing page often replaces the role of a sales rep in explaining costs and options. Therefore, it needs to be clear, informative, and persuasive. At Chili Piper, we were big advocates for this approach. It helps qualify leads (if they can’t afford your product, they’re not going to book a demo) and set expectations.
- Use interactive tools: Calculators can be helpful, but make sure they're more than just fancy sliders. The best tools highlight your key differentiators and help users find the right plan for their needs. Atlassian and HubSpot do this brilliantly.
- Use social proof: One cool tactic I've seen is including logos of the companies that use each pricing tier. This not only builds trust but also helps potential customers identify which tier might be right for them based on company size or type.
- Take a consultative approach: If you’re in a sales-led organization , instead of overwhelming prospects with all the pricing options upfront, have your sales reps take a consultative approach. They can listen to the customer's needs, provide a tailored quote, and then break down the pricing only if the customer requests more detail.
Remember, the goal isn't to hide the complexity of your pricing, but to present it in a way that's easily digestible for your potential customers.
Handy pricing resources
When it comes to pricing, there are several valuable resources I always recommend:
- Price Intelligently (now part of Paddle): Their blog content has consistently been excellent, offering great insights on pricing.
- Tamara Grominsky : One of my co-captains on the "Ready for Launch" podcast, Tamara runs Product Marketing Alliance’s Pricing Certified course . I've learned a lot from her, so it's definitely worth checking out if you want to do a deep dive into pricing.
- For those who prefer to stay updated through social media, I recommend following Karan Sood and John Kotowski on LinkedIn. Both of them regularly post about interesting pricing strategies and tests that they see companies implementing.
- Lastly, if you'd like to discuss pricing further, feel free to connect with me on LinkedIn . I'm quite active there and always enjoy a good conversation about product marketing.
Remember, pricing is a crucial growth lever, but getting it right requires continuous learning and adaptation. These resources can help you stay informed about the latest trends and strategies in pricing, enabling you to make more informed decisions for your products.
Key takeaways
As we've seen, pricing is far more than just slapping a number on your product. It's a strategic tool that can drive growth, communicate value, and position you effectively in the market. Whether you're a startup or an established company, these lessons can help you navigate the complex world of pricing.
Let's recap the key points to remember:
📈 Pricing is a powerful growth lever – use it wisely and strategically.
🔍 Transparency in pricing can simplify your sales process and build trust with customers.
💪 Don't be afraid to stand firm on your pricing if it reflects your product's true value.
🧩 When adding new features or products, carefully consider how it impacts your pricing model.
🚀 For innovative products, be prepared to educate customers on the value to justify the price.
🧠 Simplify complex pricing for your customers, even if it's complicated behind the scenes.
💻 Put your pricing on your website – it helps qualify leads and sets clear expectations.
🏆 Differentiate on value, not just price, when facing competitive pressure.
🧪 Be willing to test and iterate your pricing strategy based on market feedback.
📚 Stay informed about pricing trends and strategies – it's an ever-evolving field.
Remember, the goal is to create a pricing strategy that not only drives revenue but also reflects your product's value and resonates with your target customers.
Happy pricing!
Watch the full conversation
Get all of Jason's insights from his episode of the Pricing to Win podcast:
