Pricing StrategySep 12, 2023
In this article, James Wood from m3ter breaks down the ins and outs of pricing committees for SaaS businesses, covering what they are, why they matter, who's involved, when they come into play, and how they work.
“Committee” is a bit of a loaded term, and not always a popular one. You might be picturing endless circular conversations, action points that aren’t acted upon and bored executives doom-scrolling to avoid getting involved. For something as important and cross-functional as pricing and packaging, however, it’s a hugely valuable exercise that gives the topic the limelight that is often sadly lacking in most companies. Taking the example of David Caughman, Director of Pricing and Monetization at Docker
In this article, I’ll cover the what, why, who, when and how of pricing committees for SaaS businesses.
An effective pricing committee brings together key cross-functional stakeholders for consistent pricing conversations, where the group can have a common grounding of decision-making data based on live deals, pipeline, competitors and the overall market. The pricing committee should be a standing meeting at a regular frequency (more on that later) and fills the gaps between pricing and packaging transformation projects.
Pretty much every department has some interest in pricing, which is why a cross-functional committee is so crucial to bring those voices together. Throwing the executives together to discuss pricing once per year isn’t enough: You need different stakeholders, higher frequency, better planning and less reactivity. Waiting until an issue rises to the executive level – when you lose a bunch of deals or have a bad quarter – is too late to make real-time changes.
Being proactive with a committee makes these pricing discussions more tactical and less focused on high-level strategy, which isn’t what this level of meeting is for. It’s not enough to keep tabs on the data; you need to build a deep understanding of what’s going on internally and externally, which builds operational muscle and enables proactive, data-driven decision making – a surprisingly rare occurrence in the pricing world.
The recommended parties to include in a pricing committee changes slightly by depending on the company stage. For any company, maxing out at 12-15 people on the committee is probably best; however, it is good to ensure this group is cross-functional to allow for a number of varied perspectives.
Here are some best practices by company stage:
Especially for early stage businesses, the whole founding team should be included (and the CEO, if not a founder) as well as the heads of or leads from Finance, RevOps, Marketing, Sales and Product.
You’ll also want to include people who are involved in pricing day-to-day, not only the CRO but also a few frontline sales managers – people who are on the ground and can report what’s happening in real time.
Finally, whoever is responsible for pricing should be in the room. If this isn’t product marketing, they should be added as well, along with whoever is the resource for data analysis, dashboards, etc.
Even in later stage companies, the pricing stakeholders are likely the same; however, it gets noticeably harder to get an entire executive team in the room, so it’s common for some to delegate the pricing committee down a level. A summary update can then be sent to every executive after each committee meeting, and perhaps a pricing owner joins the standing executive team meeting quarterly to provide a live update.
At most, a pricing committee could meet once per month. In an earlier stage company, it should be feasible to dedicate one hour per month for pricing across the included functions. But as mentioned above, as you scale up, the balance may shift and be delegated to levels below the executive team to enable these meetings to stay consistent. You might still meet at the same frequency, but the meeting should be more of an update by the pricing team rather than looking at a dashboard and discussing.
Have a distributed team? I still recommend finding time for a standing committee meeting, as you might miss important points when relying on async. You can definitely take advantage of other async tools – e.g. a pricing Slack channel – for ongoing updates or discussions.
During a pricing transformation, you may want to hit pause on the pricing committee and replace it with more intensive workshops and other necessary meetings to align teams. If you do keep the pricing committee going, those meetings can just run through pricing performance and keeping things ticking in the interim, while pricing transformation meetings are kept separate.
Because pricing committees meet at a set frequency – and become more update-focused the more you scale – the actual meeting agenda can be somewhat standardized. Below is a template for a pricing committee meeting agenda that you can use and edit as needed:
As with any business grouping or initiative, there are challenges that can get in the way of a pricing committee reaching its potential. One of the biggest barriers to success is not making the right choices: about what the right structure is, who should be in the room and how to best align them. The pricing committee is a functional platform to propel the business and the pricing forward, but it’s also a stakeholder management exercise. It’s crucial to ensure you have the right platform that will give voices to the right personalities.
This will look different between companies as it depends on who you have filling each position. For example:
Operating at least a month or more ahead can ensure that there are no surprises. The last thing you want is to have already put work into certain ideas, only for them to lose impetus because a key stakeholder wasn’t up to date.
Finally, the pricing committee must always remain data-driven. This is not meant to be a talking exercise with individual anecdotes – you need external market context and data to back up (and explain) whatever your sales team is seeing in the field.
The best pricing decision making shouldn’t be driven by the conversation within the room and whoever’s voice is loudest; it should come down to the data you look at after to explain what was discussed.
There is endless advice out there on SaaS pricing: What to do, what not to do, which models are best, how to achieve the highest NRR. m3ter has plenty of articles explaining the different SaaS pricing strategies – especially usage-based pricing – as well as how to implement them to boost revenue.
But long-term success in pricing requires a tactical team to keep an ear to the ground, make real-time adjustments and guide the company in the right direction. A pricing committee – one that includes the right stakeholders, meeting in the right format and making data-driven decisions – can ensure your pricing stays on track.
If you're looking to revisit or overhaul your pricing, check out our guide on how to align teams within your committee.
James is an experienced SaaS and technology pricing and packaging expert, who has worked with over 400 companies as an advisor, consultant and operator. Previously at Insight Partners, he founded and grew the pricing and packaging operations team and worked with founders and executives across the portfolio on their challenges. This was also where he first met the m3ter team! James learned his trade at Simon-Kucher, where he spent 7 years on monetization and growth projects for some of the world’s biggest brands in tech and beyond, and also led Segment’s pricing and packaging journey from Series A before their $3.2bn acquisition by Twilio.
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