The speed of business today, especially in the SaaS space, moves lightning quick with little room for hesitation. SaaS differs from other industries out there in the fact that customers, competitors, and technology can so quickly evolve and change. A customer can easily switch from one solution to another, and competitors can copy that new nifty feature. This environment means that your pricing, the exchange rate on the value you’re creating, needs to constantly be evolving, as well. You must be proactive.
Practically, to be proactive and make sure that your pricing strategy is evolving as quickly as your customer and product, you need two key pieces of infrastructure: 1. a pricing committee, and 2. a pricing cadence.
A Pricing Committee Ensures Everyone Is Onboard And Involved In Pricing Changes
As we mentioned previously, pricing is at the center of your business. This is a beautiful fact because it means that pricing is a single fulcrum you can use to push for profit. This is a horrendous fact though because it means pricing is something everyone will have an opinion on and an opportunity to politic through your organization.
To cut through the potential for politics, as well as to streamline the time and tasks to collect data and make pricing decision you need a pricing committee. A pricing committee is the strong grip of a hand that pulls your pricing lever. The purpose of this committee is to insure that your company is identifying the strengths and weaknesses of your pricing strategy and always optimizing for profit. Practically, this purpose manifests itself in two forms – equal representation from the organization, and managing the pricing process.
Equal representation throughout your organization is absolutely crucial, because each part of even a small company will have a perspective that’s important to the pricing process. Sales will provide valuable insights into the sales tactics that are working in pricing conversations. Marketing will provide necessary customer persona data. Product will know the roadmap.
More SaaS + Software Stats
The median average contract length is 1.3 years and the average billing term is seven months in advance in 2016. Comparable to 2015, with average contract length shortening from 1.5 to 1.3 years and average billing period increasing by one month from 2015 to 7 months