How to Structure and Run a Pricing Project
After wearing many SaaS hats, from my early engineering days to my product positions and former role as Head of Business Strategy, Operations, and Monetization at Atlassian, I’ve learned a lot about pricing. My lessons have spanned the obvious (every employee has an opinion about pricing) to the paradoxical (it’s actually easier to price a portfolio of products rather than one product because you have more levers from which to gain insight). Yet the most important wisdom I’ve gleaned is that, since monetization strategy is so central, cross-functional and reflective of company value, pricing strategists must build on an established pricing vision, highly structure every pricing improvement project and leverage a clear decision-making framework throughout these projects.
Ensure Monetization Strategy Sits Within the Most Appropriate Function
Different functions within an organization can own the monetization strategy: product, marketing, go-to-market and bizops. In order to maximize their monetization strategy, companies should situate it within the most aligned business function. For example, product led growth companies that acquire customers quickly and directly through freemium models might consider reporting their monetization group into their product teams to maximize revenue generation. Companies that pursue more indirect, traditional acquisition methods, on the other hand, might benefit from residing monetization under marketing. At Atlassian, we sat monetization under the bizops function, since constantly improving pricing perfectly aligned with our specific objectives: to build strong businesses around Atlassian’s increasing product offerings and to help make better decisions faster as the company scales.
What Exactly is BizOps?
Business operations helps rapidly scaling companies move faster. BizOps leads are project managers who work within and alongside a company’s established structure to flesh out a broader vision and execute strategic, cross-functional projects to further grow the company internally and externally.
BizOps, like any function, operates differently across companies. Yet all BizOps teams generally function across a four-layered pyramid of activities, spending the most time at the base (KPI’s) and a smaller but vital amount of energy at the top (long-term strategy):
- Monitoring and maximizing KPI’s across the funnel (acquisition, activation, revenue, retention, referrals)
- Executing strategic projects to improve these KPI’s and pricing at large (the focus of this article)
- Creating an annual plan that allocates resources to accomplish some of the operational improvements designated in the longer-term strategy (below)
- Setting a long-term, 3-5 year strategy that is bold but attainable, ensuring that individual projects are aligned and efficiently maximizing how a company services its target markets
Build on an Established, Broader Monetization Strategy
Before a company starts a specific pricing improvement project, they need to have already established a broader monetization vision that is backed by significant, previous research and supported from the executive team. A company must have significantly analyzed how their pricing impacts their bottom line and more importantly how it reflects their company value; it should already have instituted basic tenets such as if they have open or closed pricing and whether they are product-led or sales-focused.
How to Structure a Pricing Project
Pricing projects are a series of individual, agile analyses that enable monetization functions to continuously evaluate and optimize their pricing after a broader monetization strategy has been established and as their product, customer needs and competitive landscape evolve. Pricing projects determine the best price points, optimize those price points by adding secondary meters as the product team adds more features and functionalities, segment packages and allot features within packages, among other activities.
Given the endless factors to consider to improve pricing and the highly cross-functional nature of monetization, which touches product, engineering, marketing, sales, customer experience and finance and operations, pricing managers must intricately research and structure their projects.
At Atlassian, we were extremely rooted in customer feedback and data; we were always taking a pulse from our customer-facing teams, monitoring hotspots and areas of improvement across our KPI’s. We never approach pricing projects haphazardly and always structure ours into distinct and equally important phases:
- Hypothesis Generation. Using historical data and input from our customer-facing teams, we regularly list and prioritize areas of pricing improvement.
- Design Workshop. For high-priority, specific pricing improvements, we host a cross-functional whiteboarding session to brainstorm implementation methods, aligning on the top ideas to test.
- Hypothesis Validation. We use various firsthand market research such as customer interviews, focus groups, surveys and A/B tests to validate our proposed pricing improvement method.
- Final Analysis. We assemble the data from our validation process into a broader economic analysis of the pricing improvement and how it will bolster our customer satisfaction, KPI’s, revenue generation and overall profitability.
- Recommendations. With our final analysis, we confidently make our ultimate recommendations to the company about when and how to improve pricing.
Leverage the DACI Decision-Making Framework
Running monetization strategy requires exponential, data-driven decision-making throughout every function and level of a company. Since these myriad, complex choices involve multiple variables and stakeholders, we’ve honed a framework that structures and speeds up each decision-making process. This “DACI” framework essentially designates all constituents into four hierarchical roles:
- Driver. Usually a BizOps lead, the driver is the exclusive and objective decision-maker
- Approvers. Carrying decision-making authority, the approvers are 1-3 sponsors who fund the pricing project and therefore have a strong incentive to realize its success
- Contributors. Often called “the brains” of a pricing project, contributors are the crucial, cross-functional subject matter experts who nurture analytical data and customer insights to construct all options, honing the pros and cons of each
- Informed. With their input welcomed but not prioritized, the informed are the employees who need to know that the decision will impact their workstreams
By enacting these clear decision-making rights and roles, DACI streamlines pricing projects, creating a cadence for capturing input and ensuring that different functions use the same data. In addition to designating roles and meeting regularly with approvers and contributors, the driver can further simplify a project by collaborating with all stakeholders through a shared document (Confluence, Google Docs, etc.) that designates the problem, data and proposed solutions before making an ultimate decision.
A monetization strategy is the most intricate and nuanced work within a SaaS organization. It touches every department and most directly determines profitability, paving the way for a company to merely subsist or utterly thrive. Due to monetization’s complexity and utter importance, pricing managers must approach their work with unrelenting rigor, structuring every project into stages and instilling a proven framework around each decision within these projects. By instilling management and repeatable process, SaaS companies will unearth their value, better understand their customers, and deliver the most intuitive, simple and effective pricing possible.
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