This Pricing Experiment Drove 80% Adoption – And How You Can Start Designing Your Own Pricing Strategies
If your pricing model feels stuck in “set it and forget it” mode, Alo Mukerji, SVP of Product at U.S. Bank, offers a fresh perspective for using pricing as a catalyst for growth.
As a product leader who has specialized in researching, designing, and executing many successful pricing initiatives, I find it fascinating how many times I’ve heard that growth is plateauing, AI is negatively affecting growth, and that the only answer is fixing the product or spending more in marketing.
Both options are costly and time-consuming, with long lead times to ROI. Optimizing pricing as a lever rarely, if ever, comes up except in the form of the cheapest of all tricks:
“Hey, we can always increase our prices.”
Most leadership teams don’t think strategically about pricing when it comes to growth, and I suspect this is because most of us are daunted by the prospect of executing these pricing initiatives.
Having been a part of the design, decision-making, and execution of some really innovative projects where pricing was the secret unlock to growth, I believe pricing is an underused lever that can lead to exponential growth when understood and executed well.
How companies traditionally think about pricing
If you ask most tech companies how they think about their pricing, chances are they are setting and forgetting an outdated structure that their founders came up with at launch.
The founders probably looked at competitive pricing pages, guessed at price points, and did not consider customer value from their products (likely because they didn’t think they knew it at the time).
Now layer on the complexity of today’s SaaS pricing structures, including:
Subscription-based tiers
Usage-based pricing
Freemium/free trials
Pay-as-you-go
All you can eat
… and you’ve got a recipe for confusion, if not disaster.
The key to strategic pricing
Strategic pricing is about aligning the actual price to the perceived value.
This is easier said than done; deconstructing perception is a monumental challenge, so companies tend to avoid it.
But it is far from impossible, and when understood and skillfully executed, it can lead to unprecedented growth.
Case study: How we reached 80% adoption by rethinking pricing
In a past role, I was the head of product at a company focused on the SMB market. There was a desire to go upmarket to increase the TAM (Total Addressable Market) because growth was stagnant.
We debated adding several types of enterprise features, which would have taken a long time to build out. Then, we had the idea to look at a competitive product in the market that was catering to that enterprise customer.
What we realized was that it wasn’t their features that were vastly different – it was the pricing model.
Our challenge? Designing a strategy that worked for both segments of the market.
We researched the needs of each of the segments and spent our energy on a model that would cater to both audiences.
Then, with feedback from our sales team, we discovered that several large customers had used the platform and were encountering mid-market challenges, mainly around support and multi-product use.
The solution we came up with was a combination:
À la carte options for the SMB market
Strategically priced, all-inclusive bundles for the enterprise market
The result?
The pricing strategy turned out to be a huge success. About 20% of the customers in the smallest business segment that had a choice between à la carte and bundle options chose the bundle. It was well-priced and encouraged them to use more than one product, which led to greater stickiness.
In turn, this increased retention for that market segment, which is a pretty challenging metric to improve.
In the other, larger enterprise segments, adoption was even stronger. We had 60-80% adoption of the bundle, with the percentage of adoption increasing along with the size of the customer.
That was a far better, faster, and ultimately more valuable outcome than building a bunch of complicated enterprise features – not to mention supporting those features.
Unlocking growth through strategic pricing
In order to assess the value of a product or feature, there are several tools and approaches at your disposal.
1. Look into your own internal data
There are plenty of times when the instinct is to survey to look outside your company, even though there’s often more data than you realize right inside your company. If you have robust data tracking on what users are doing, take the time for introspection. And don’t forget your internal teams: both sales and support feedback is often a goldmine of information.
I would also lean on AI tools to help synthesize that data. Even if it isn’t 100% accurate, it will be directionally useful and can point you towards areas worth digging in further.
For example, you can cut and paste suggestions that customers put at the end of a support survey into Copilot (or your tool of choice) and ask, “summarize these thoughts into trends.” Within seconds, you’ll have four or five themes to explore.
Say one of those trends is “need better reporting.” That gives you a signal that you may need to look into what exactly is meant by “reporting.” It’s a clue that something is going on that requires further investigation and could be an opportunity because it is clearly something customers value and care about.
2. Look at the market space
The market is a good source not just for pricing, but to understand:
What features/functionalities are gated behind paid tiers
What features are common in a market set
Who is leading the space, and what unique features do they offer
What value propositions are being used on marketing websites
These are all clues to where customers are putting value and how they are buying. And, best of all, this information is essentially free!
3. Look externally to fill in the gaps
Most leaders think that this step is too time-consuming and inaccurate. But if you did the first two steps, this one can be the cherry on top. You know where to look, who to survey, which segments, and what to test further. It is the sequence of these events that leads to better outcomes.
Though it might seem like collecting data from customers and prospects on willingness to pay or product usage takes a lot of time, with the tools available today, I say it can be done quite efficiently.
Here are the steps I recommend taking:
Return to internal data collection first. Talk to your sales team, your customers, and other internal sources to spot opportunities for growth, or at least emerging trends
Identify one small test you can run. This doesn’t have to be a price test; it can be a ranking of your most popular features or asking customers what new feature would be most valuable to them. Even split testing value propositions on a marketing website (often easier to execute than in product changes) will help you learn something. Once you have some confidence in an idea or a trend, then you can design a bigger project
Clearly communicate the value to customers. They won’t infer it on their own, so it’s critical to work with your marketing and sales partners to be clear on the value that you want them to focus on to make pricing strategies successful
Have a thoughtful execution plan. Make sure it accounts for different customer segments and anticipates possible risks and risk mitigations. Experience and outside help can be very useful here, but if you are doing it on your own, start with your constraints to delivery and work out from there
Pricing is never going to be perfect or 100% predictable. You can do all the research in the world, and the market can shift (remember COVID?). But a smart pricing strategy can be the key to unlocking long-term growth, and it’s not rocket science or an accident.
It’s worth investing the time and effort to improve your odds for success with this underused, often misunderstood lever – just don’t forget the execution and risk mitigation.
ICYMI: Alo’s episode on LaunchPod
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