Product pricing is thorny business, especially for digital goods, and even more so for SaaS products. Pricing models abound in the SaaS world, and a rapidly-growing company may find itself shifting models, and repackaging their product almost continuously in the early stages. For startups, deciding on a pricing model is like buying shoes for toddlers – by the time you pick a pair, the kid has grown out of them. As companies grow and more distinct swimlanes form internally, pricing decisions further complicate, raising questions of authority and ownership around pricing. A small startup may be able to get all the stakeholders in a room to figure out their pricing model, but as the product evolves and more customers are added, pricing becomes harder to negotiate.
This complexity was clearly reflected in the responses to our poll when we asked who should own product pricing. 42% of poll takers believe that product management should own pricing, 34% think it should be product marketing, and 25% voted for “somewhere else.” This diversity in opinion is likewise reflected in our debaters’ responses this week, who responded to this question eagerly, and as you’ll see, are also divided. Product management did enjoy a small lead, mainly because as our debaters point out, pricing requires a cross-functional approach. And, really, what’s more cross-functional than a PM?
Pricing is one of those things that should have a wide consensus from all the stakeholders involved, including product, marketing, sales, engineering, and the executive team (and as a proxy, the board). This is especially true for enterprise products with a value-based component, and therefore complexity, to the pricing. That said, I think product should drive this effort, and sync regularly (quarterly, semi-annually, or annually depending on how mature the market is) with a pricing committee composed of the key stakeholders. Product has the most exposure to how customers are using and getting value out of the product, any infrastructure costs (especially for SAAS products), and can act as a neutral party when reviewing existing contracts as part of a pricing review. As an added benefit, owning pricing makes PMs think about go-to-market and pricing early on when developing big new features that could potentially lead to an upsell opportunity.
Head of Product, ActionIQ
It doesn't matter which department owns pricing (and packaging), but whoever owns it needs to be really smart and very connected to senior leadership. Get a single owner. Set a strategy. Have her drive a process. Communicate it broadly. Measure it often. Pricing and packaging are hard to get right - clear strategy and process are more important than departmental ownership.
VP Product Strategy, Zendesk
I agree with many of the points made by fellow debaters on this topic. I agree that pricing strategy needs to extend cross functionally given the impact it can have on the business. At our company, we have a Pricing Steering Committee that serves this purpose and approves pricing strategy and tactics. That said, I believe that Product Management is the place where pricing should be owned and that PM should drive the process for the organization. PM is in the best position to drive the strategy and process with the least conflict of interest – sitting between functions, understanding the competition, and keyed into new sales and retention motion.
I believe it should be owned by management or marketing. Not product management or product marketing. But product does have to be in the loop.
VP Product, Wix