Practices

Professional proposals win deals

Running a tight sales process is essential. In many cases, you can win a deal simply by moving faster than a competitor. Send that proposal immediately instead of tomorrow. Respond to the email in minutes instead of later. Invest in a well-designed proposal document that reflects your brand and clearly communicates your pricing. Call out customer testimonials, quotes, and visuals to stand out from the competition. Use variables to avoid mistakes such as forgetting to update a customer’s name in a copied proposal.

Don’t innovate on pricing

Choose a pricing model that is well understood by your customers. Most of the time, it’s a good idea to stick to the standard model in your category. If you’re a collaboration platform, charge per seat. If you’re a general purpose SaaS business, you may charge a platform fee. If you’re an API business, charge based on API usage. Trying to come up with innovative pricing models in your domain creates friction for customers as they compare you to alternatives.

Pricing is never done

As your business grows, your pricing will change. New market segments, product launches, bundling opportunities, and go-to-market changes will result in new pricing and packaging initiatives. Just because you’ve wrapped up a pricing project, doesn’t mean your pricing will not change in the next 6 months. Pricing decisions are complicated because you need to balance technical limitations and customer value with driving revenue.

Invest in third-party tooling with a flexible data model and avoid building a costly in-house engine geared towards your current pricing — it will inevitably change.

Use hybrid pricing models

Today’s successful companies don’t just rely on a single, one-dimensional pricing model. Instead, they align the pricing model of each product or feature with the value delivered to customers (e.g. per user, per event, platform access). Companies like Github, Zapier, and Hubspot use the most appropriate pricing model for each feature in their offering, combining platform fees with seat-based charges, usage credits, and minimum commitments.

As you’re introducing new modules, add-ons, or product lines, consider the most appropriate pricing model, instead of defaulting to your existing one.

Keep packaging simple

Your packaging is your chosen set of plans, bundles, add-ons, and product lines and evolves as your company grows. Packaging fundamentally influences how a buyer perceives your offering and whether it’s a fit for them. Resist the organizational pull towards breaking up your offering in myriad ways. Instead, minimize your number of plans, bundles, and add-ons and optimize for simplicity.

Remember that each additional SKU has upstream implications for sales quoting, commissioning, revenue tracking, and downstream implications on product feature entitlements, billing calculations, revenue recognition, and tax.

Align sales and finance goals

Sales and finance teams have fundamentally different incentives. For CFOs, control, accuracy and margins are top of mind. Contrast this with the sales team’s incentive to meet quarterly revenue targets. With the right standards, processes, and guardrails, speed and flexibility don’t have to be at odds with control and accuracy.

Standardize your offering with list prices and bundles to avoid contracts with esoteric product offerings that your finance teams can’t support. Introduce lightweight approval workflows prior to contract issuing to ensure deals are profitable.

Define a source of truth for products, pricing and contracts

Invest in a single source of truth for products, pricing, and contract information across your customer base. In most companies, this data is fragmented and inconsistent. It’s spread across different systems and teams, making it difficult to reconcile what’s accurate. This creates manual work for everyone involved and results in a constant back-and-forth causing errors that harm your business.

Whatever you choose as your source of truth, it’s essential this data is distributed into other systems, such as the CRM, your data stack, and your ERP where needed.

Dealing with products, pricing, and contracts is inherently multi-disciplinary, so baking it into any one team’s system will not work for other teams. For example, a CRM is not suited to run Finance workflows like billing. Equally, your ERP is not suited to drive sales workflows like quoting. You must invest in a neutral middle ground as the source of truth.

CRMs are for sales, not finance

Use a CRM to manage sales interactions with current and prospective customers, not to run your financial operations. CRMs are not designed to store nuanced pricing and billing information like tiered usage fees, committed minimums, percentage-based pricing with caps etc. Unless you want to spend hundreds of thousands on managed CRM instances with CPQ add-ons, don’t rely on your CRM as your source of truth for products and pricing. Instead, invest in deep integrations and real-time syncs between the CRM and your billing system and ERP.

Design good value metrics

If you’re launching a new usage-based product, invest in designing a robust value metric. It’s difficult to change a value metric once it’s part of your pricing, product and metering infrastructure. A good value metric ties the cost of your product to the value received by the customer. Ensure your metric is transparent, scalable, and fair for customers to justify their spending. In designing a good value metric, ask yourself the following questions:

1. Does the metric require complex calculations?
2. Does the metric correlate with the value our product delivers?
3. Can the metric be measured accurately with our existing systems?
4. Is it possible for customers to manipulate the metric to reduce their costs?
5. Does the metric drive positive customer behaviors?
6. Does the metric provide clear feedback that customers can use to optimize their usage?

Introduce pricing guardrails for sales

Once you grow your sales team, consider standardizing your pricing terms. Add simple guardrails to your contracting process to prevent your sales team from quoting highly bespoke terms that you are unable to actually support. For example, you might require custom engineering work to enable the product offering quoted in the contract. Your billing system might not support the quoted custom pricing model and your finance team may not have a process to recognize revenue for it.

Define standards for your sales team and enforce them through simple approval workflows. Finance, Sales and RevOps teams should collaborate in designing these guidelines to ensure there is alignment across teams. Over time, this workflow will be owned by your deal desk.

Roll out pricing changes effectively

Raising prices and experimenting with new models are essential levers to drive growth. Pricing changes require careful planning and must be executed with precision and transparency to avoid backlash and confusion. Fail to clearly communicate your change to customers and risk negative press and churn (see Unity).

To mitigate this risk, establish a pricing council within your customer base. Assemble a group of customers within your ideal customer profile who are open to sharing early, candid feedback on your planned pricing changes.

Executing a pricing change can be a company-wide initiative, depending on the scale of the change. An annual price increase should be a standard process, while a repacking or new pricing model requires planning and thoughtful execution.

In planning a wider ranging pricing change, account for infrastructure changes, new finance processes and customer communications. A common approach is to grandfather an existing pricing model in which the new pricing only applies to new business. Existing customers are gradually moved over to the new model (e.g. at renewal).