Step-by-Step Guide to Software Pricing and Packaging
Pricing and packaging is tricky – how do you identify the perceived value of a product or feature? How do you assign a monetary value? How do you know what customers will pay more for? All these questions can be answered through a well-designed pricing and packaging initiative.
Pricing and packaging is a critical part of a company's go-to-market strategy. It can be a complex undertaking, but If done right it can create significant growth opportunities.
Great pricing and packaging clearly articulates the right value to the right audience, and sets a price that matches the perceived value and willingness to pay for that product.
Every organization looks a little different, but generally the steps to successful pricing and packaging are:
Define customer segments. Understanding customer segments is an important first step because we need to align packages with the value desired by each segment.
Document current marketecture. Understanding, or even taking this opportunity to define, a marketecture is going to help with clarifying what is a product vs. feature, and knowing what elements are on the table to package.
Conduct competitive research. Depending on your market and desired strategy, understanding how competitors are presenting their products and services is helpful to take into consideration (but important to note: not always mimic).
Define packaging options. Using a tool like a feature-value matrix, define where product features fall in uniqueness and popularity to package them appropriately.
Test, model, and price plans. Working with internal teams - test willingness to pay and upsell/cross sell hypothesis, model out pricing options, and then set prices based on your analysis.
Plan for go-to-market. Communicating new pricing and packaging could be challenging, but could also be an opportunity to make a splash in the market – planning for implementation is crucial for success.
This work can never be done in a silo. It’s important to bring key stakeholders along for the ride and communicate every step of the way. Below are a few examples of how you might show your work to get to which features you package, what product lines you may be thinking about, or how to show good / better / best plans for socialization.
Having done pricing and packaging for clients at Fluvio, I can tell you first-hand these projects are challenging, but at the end of it comes clarity around what you’re offering to whom, and ultimately can help boost revenue through defined paths to grow customer acquisition and expansion.
And, did I mention you’re never really done? Pricing and packaging should be continually reevaluated with market changes and opportunities.
Bottom line: Pricing and packaging is an art and a science that takes a lot of cross-functional work to bring to life. If done right, it can create significant growth opportunities for your business. If done wrong, you could be leaving a lot of money on the table. So, do it right.
Need help with your product’s pricing and packaging strategy?