A recurring realization by various SaaS operators has found me a half dozen times in recent months, always with real energy behind it: we need to fix our pricing!
My response to this declaration is generally consistent:
- I bet you are right: The enthusiasm is warranted. Countless factors, including AI, are quickly making old pricing practices obsolete. The pricing of virtually every business deserves to be scrutinized not just once, but on an ongoing basis.
- I bet this is about more than price: Almost always, this is about much more than charging $2 versus $1. And it’s about more than layering annual price increases into contracts or what capabilities belong in which tier – these are important but largely housekeeping. It’s often about something as fundamental as what the business charges for, the value metric. This is Packaging & Pricing – a much bigger endeavor.
- I bet we aren’t ready to tackle this: As urgent as this need is, it would be unwise to rush into a solution – any solution – to packaging and pricing issues without real forethought. The stakes are high, and we have only one chance to get this right without the risk of confusing the market and gravely stalling our pipeline. This requires preparation and careful sequencing.
It’s this last sentiment that I want to focus on here. A building metaphor might be helpful. Packaging & pricing is a major construction job, not a paint job. And yet, the instinct of many high-performing leadership teams is to reach right for the paint brush. They show up on site with a crew, a permit, and real ambition — but no blueprints, no plans, and no foundation poured. That’s no way to frame a house, unless you are willing to learn the hard way which walls are load-bearing – existentially dangerous. So, proceed with caution.
A word on what this post is not. This is NOT a how-to about Packaging & Pricing. That is an extremely rich topic that deserves every bit of the expert attention it receives in outstanding books, posts, and podcasts. Instead, this post is about the foundation — what needs to exist before a sub-scale B2B SaaS business undertakes full-scale re-packaging. This is about the work operators must do to “earn the right” to take on packaging & pricing. Those “earn the right” conditions and activities include:
- Leadership and Strategy: This is not a spreadsheet project. It’s not a Finance project, and it’s not “Marketing’s responsibility.” It’s a company-wide initiative involving Product, Marketing, Sales, CS, Finance, Operations, and Engineering. All have to move in coordination. This requires a fully-staffed, high-functioning leadership team going in, not one we hope will coalesce under pressure. It also needs a real articulation of product vision and strategy, plus a product framework and guiding principles that are actively used to structure and inform product investments. Packaging / pricing decisions are strategy decisions wearing a price tag; with no strategy to appeal to, every pricing debate becomes a matter of opinion, and the loudest opinion wins.
- Not “Only Marketing”…but also “Definitely Marketing:” There needs to be product marketing thinking in the building — a dedicated resource ideally, but at minimum someone whose instinct is to translate capability into value in the buyer’s language. It’s also necessary to have an up-to-date website that accurately reflects how we want to articulate the value of our offerings, and a demand-gen apparatus sturdy enough to carry a launch. The bar for demand-gen is high – it includes the ability to read and analyze the results after the introduction of packaging and pricing changes — traffic, conversion, pipeline shape. Otherwise, we run the risk of learning nothing. Finally, packaging IS messaging, whether we intend it to be or not. For example, one of our companies labeled a product tier in a way that read as “enterprise ready.” That unintentionally told every enterprise buyer the tiers below weren’t for them. Nobody decided that. The label’s message decided it.
- Customer Voice and Customer Data: Three things: (1) the ability to conduct deep customer research and understand what customers truly value; (2) access to accurate usage data, so we know what they’re really using; and (3) a keen understanding of churn drivers, with proven mitigation tactics. That middle one (data) humbles teams and crushes these initiatives. If we are using intuition, rather than data to make decisions about value-metrics, we are literally just guessing. Oh, and customer contracts need to be in reasonable shape. Not glamorous, but also not a given. These are load-bearing walls of the construction project. Do the systems and data work in advance.
- Modeling Chops: A key success criterion is a sophisticated financial model that utilizes high-fidelity data. In-house modeling competency also matters. If this competency doesn’t exist in-house, it needs to be contracted. As a baseline, we need to be able to show where money is being left on the table, and to stress-test what new model variables do to revenue, retention and cash balances through a pricing-packaging migration.
- Product and Engineering: The roadmap has to align to commercial, competitive and business impact — and to those same guiding principles. And the product has to be capable of being modularized or containerized if that’s where the packaging lands: out of the woods on dire tech debt, configurable enough to lock features down cleanly. A major new module landing alongside is a gift, but the core product needs to allow us to add modules seamlessly. Again, this is not a given.
- Above all Else: a business undertaking this new packaging & pricing has to be able to articulate and deliver value BEFORE the market perceives them to be asking for more money. Packaging is a lever on value that already exists. It doesn’t manufacture value.
In sum: the eagerness to rethink packaging and pricing is a good instinct, and in an AI-inflected market it may soon be unavoidable. But it’s a major construction project – a full-scale re-model – which MUST sit on a sound foundation. Get honest about which parts of that foundation are yet to be poured. .
And then — the mildly deflating part — all of this pre-work earns you exactly one thing. The right to do more work! It earns the right to start the genuinely hard work of examining, designing, pressure-testing and executing a re-packaging / re-pricing initiative. That’s where the real fun begins.