Making changes to your pricing can be daunting, but in this presentation Monika Saha from Zuora outlines the steps you need to take in order to operationalize a change in your pricing strategy. You'll discover a whole host of learnings from this presentation given at SaaSFest 2017.

1. Key Considerations
When Operationalizing Your Pricing Strategy
Monika Saha
GM/VP Finance Product Line

2. Topic
➢ Lessons, Observations & Suggestions
○ Designing growth journeys
○ Selecting pricing metrics
○ Maintaining a healthy pace of innovation
Agenda

3. Lessons, observations, suggestions
when designing pricing and packaging
01Designing “growth
journeys” 02Single vs. multiple value
metrics
03Maintaining a healthy
pace of innovation

4. Healthy upsell revenue is critical
% of bookings from upsells
Source: 2016 Pacific Crest SAAS survey
Cost of new business vs. upsell, expansion,
renewals

5. Challenge : Balancing acquisition vs. lifetime value
B2B
Pressure to meet
quotas
Higher bookings
numbers
Lower net dollar
retention
B2C
Race to acquire a
high volume of
subscribers
Higher subscriber
growth rates
Lower post-
promotion
retention

6. Identify The “Pricing Profiles” For Your Target Market
Questions to consider:
Do you want/expect customers to
go through natural “growth
journeys”?
Are there natural “tipping points”
that will drive customers from one
profile to another?
If customers stay on within a
single profile, what avenues do
you have to grow ARPU?

7. A packaging framework often emerges for each pricing profile
EDGE NEEDS
Identify new capabilities customers
may want as their needs begin to
extend beyond baseline needs of
their profile
Map this to
baseline
packages
Map this to
capability
driven growth
(tipping
points, cross/
up sells)
Map this to
consumption
driven growth
(add-ons)
COMMON NEEDS
Define the most common pricing
profiles and
the “baseline needs” of those profiles
ADOPTION SIGNALS
Identify signals that indicate higher
adoption of the same set of
capabilities over time
⇊
optimal packaging

8. When possible, design for 2 factors to drive upsells/expansion
Current
ARR/
MRR
Capability
driven
growth levers
Consumption
driven
growth
levers
New
ARR/
MRR
a.Capability-driven: The need for an
expanded set of product capabilities
(cross/upsell)
a.Consumption Driven: Higher use and
adoption of a base set of capabilities
that a customer has bought (add-on)

9. Suggestions for incentivizing the right outcome
! Identify the right attainment metric
○ ARR/MRR
○ TCV
○ Customer Lifetime Value
○ Compensating on one-time components vs recurring components
○ Compensating for renewals

10. Challenge : maintaining compelling “tipping points”
Benefit A
Benefit B
Benefit C
GOLD
PLAN
$150/user/yr
BRONZE
PLAN
$100/user/yr
Compelling
Tipping
Point
You might start here ….
Benefit A $10
Benefit B $5
Add-On
Creep
Weak
Tipping
Point
BRONZE
PLAN
$100/user/yr
GOLD
PLAN
$150/user/yr
Benefit A
Benefit B
Benefit C
But over time you could end up here ….

11. Suggestion: carefully consider the “value-optics” of add-ons
Benefit A
Benefit B
Benefit C
GOLD
PLAN
$150/user/yr
BRONZE
PLAN
$100/user/yr
(A + B) $50Tipping point
advantage
This solves for a need to offer add-ons A & B with the bronze plan, without eroding the
price-value tipping point of the Gold Plan

12. Lessons, observations, suggestions
when designing pricing and packaging
01Designing “growth
journeys” 02Single vs. multiple
value metrics
03Maintaining a healthy
pace of innovation

13. We are seeing an increasing number of value metrics
Source: 2016 Pacific Crest SAAS survey

14. We are seeing an increasing number of value metrics
Source: 2016 Pacific Crest SAAS survey

15. Challenge : selecting the right value metric
You might be leaving money on the table
Buyers will have a hard time aligning price to value
delivered
✕
✕
A single value metric is ideal, but sometimes not every product innovation will map to this
value metrics
Without the right value metric:

16. # Of Sales Quote Users$100M $10M
$1M
CFO : Transactions processed VP Sales : Users Creating Sales Quotes
Suggestion: one value metric per persona

17. Impact on operations
! Can you internally and externally measure progress towards capacity?
! Are your systems flexible enough to allow quick amendments to your
primary pricing metric?
! Does your pricing metric make the customer feel like they own the
relationship?

18. Impact on operations
! What do you do when customers exceed capacity?
○ Prevent customer from extending use
○ Charge the customer an overage
○ Allow the customer continue use, and upgrade them upon renewal
! Upgrading the customer:
○ small sales (e.g. 1-2 seats or incremental volume)
○ material upgrades (new 12 month term with increased volume)

19. Lessons, observations, suggestions
when designing pricing and packaging
01Designing “growth
journeys”
02Single vs. multiple value
metrics
03Maintaining a healthy
pace of innovation

20. Pricing Innovation Is Not Keeping Up With Product Innovation

21. Challenge : keeping up with a continuous innovation cycle
Lack of alignment on process and expected outcomes
Systems Challenges
✕
✕
Pricing/Packaging decisions have to be made at a faster, more frequent pace
These are the common challenges that hold companies back:

22. PRICING TEAMS REVENUE TEAMS
Often unaware of the revenue impacts their
decisions will have
Often unfairly seen as “blockers”
or “Dr. No”
In revenue, it is NOT easier to ask for forgiveness than permission. Chances are that revenue teams will
Have a solution for you that works for both sales/pricing and the company’s revenue recognition policies

23. Suggestion : Understand The Revenue Implications
Of Your Pricing/Discounting Practices
Ext Price SSP % Of Total Price Revenue Allocation
PRODUCT A $1,100 $1,200 $1,200/$2,160 = 56% $1,900 * 56% = $1,055
PRODUCT B $700 $800 $800/$2,160 = 37% $1,900 * 37% = $705
PRODUCT C $100 $160 $160/$2,160 = 7% $1,900 * 7% = $140
TOTALS $1,900 $2,160 100% $1,900
Review Pricing Compliance
Rates And Share Results
With Your Pricing Committee
Ensure You Understand How
Revenue Shifts When
Discounted Products Are
Bundled Together

24. Suggestion: A pricing council/committee that has a well defined and
regular operating cadence
Items to consider:
• Market research (incl. historical analysis)
• Revenue Recognition Considerations
• CAB Input
• Communication/Training
• Systems Implications
Sales
Leadership
CSM
Leadership
Finance
Leadership
IT
Product
Leadership
Sales
Strategy
Legend
StakeholdersCore Team
Coordination/Alignment

25. Suggestion: An innovation alignment framework
PRIMARY PRICING GOAL
Product Innovation
Benefits
Competitive
play
Reduce
sales/
acquisition
friction
Generate new
business
revenue
Generate
upsell/
expansion
revenue
Increase
package
differentiation
Benefit name 1 +
Benefit name 2 +
Benefit name 3 +
Benefit name 4 +
Benefit name 5 +
Force yourself and your primary stakeholders to attach ONE primary pricing goal to each benefit

26. Suggestion: De-couple pricing offers from packaging to give
you the most flexibility to iterate on pricing
PRODUCT
Storage
OFFER A
$10 per month CAPABILITIES
❑ BENEFIT 1
❑ BENEFIT 2
❑ BENEFIT 3
❑ BENFEIT 4
❑ ….
❑ ....
❑ BENEFIT N
OFFER B
$100 per year
OFFER C
Pay-as-you-go
OFFER N
Custom pricing

27. END