In a recent video titled "Why SaaS Pricing Projects Fail, And How To Make Them Succeed" from the "AI, SaaS & Agentic Pricing with Monetizely" channel, the speaker provides valuable insights into the organizational challenges of pricing projects. The video explores how different departments within a company approach pricing with their own distinct biases, and how aligning these perspectives is crucial for project success.
Why Pricing Projects Often Fail
The success of a pricing project doesn't just depend on the pricing strategy itself but on something much more fundamental: organizational alignment. As the speaker emphasizes, "The success of a pricing project is actually your alignment inside a company over where the company is, where it is going, the markets that it's addressing, and what changes in pricing are going to help move the company to the next level."
Without this alignment, pricing projects are destined to fail. In fact, the speaker notes that "eight out of 10 times the reason pricing projects fail is everybody has a different understanding of the goal in their mind." This misalignment can lead to months of work with little to no progress.
Understanding Departmental Biases
Sales Team Bias: Recency and Deal-Closing Focus
Sales teams provide valuable ground-level feedback, but their perspective comes with inherent biases. The speaker points out that "sellers are going to always have a very recency bias about pricing. They're going to always give you the feedback about what happened last quarter."
This recency bias means sales teams often remember only their most recent or impactful deals, not necessarily providing a complete picture of pricing effectiveness. Additionally, less experienced salespeople commonly default to the "our price points are too high" refrain when facing any resistance in the sales process.
However, the speaker also acknowledges that "at the same time, they're actually the closest to the ground truth. If something hasn't been working for a long time, they will be able to tell you that as well." To get the most accurate insights, you should "do a lot of seller interviews and ask your most experienced sellers for their input."
CEO Bias: Growth and Simplicity Focus
CEOs, especially those working with venture capital, often push for pricing strategies that facilitate rapid growth. The speaker cautions that "the CEO is also going to be biased about pricing to their own detriment. If the CEO is talking to growth investors, venture capital is going to push your company to scale very fast… and as a result, the pricing that they are going to advocate for is pricing that is very simple."
While simplicity can accelerate growth in some contexts, this approach might not align with what's actually working for your company, particularly for enterprise-focused businesses. The speaker warns that "if you simplify it too much, you may start to see a decline in revenue. You may start to see your customers churning much more."
Finance Team Bias: Margin-Centric View
Finance teams naturally focus on margins, especially in high-interest-rate environments. However, their calculations may not always reflect the current reality of your business. The speaker shares a personal experience: "I have personally had my finance team revise these calculations to find out the actual margin was around 97% to everybody's happy surprise."
This highlights the importance of ensuring that margin calculations are updated as your business scales, as "how much your cost of goods sold was last year is going to be different as you're scaling."
Customer Success and Product Team Bias: Effort-Based Pricing
Both customer success and product teams tend to value offerings based on the effort required to create them. The speaker describes this as the "I did so much work, hence this should be more expensive bias."
This perspective fails to account for the customer's perception of value. As the speaker points out, "What input you are putting in to create something either from a product standpoint or from a service standpoint has only some relation to the end value perceived by the customers."
Some features or services that require minimal effort might be highly valued by customers, while labor-intensive offerings might be seen as merely table stakes.
Aligning Perspectives for Pricing Success
The key to a successful pricing project lies in bringing these various biases together into a cohesive strategy. The speaker advises that "as the leader of this pricing project, you have to merge together all of these perspectives and align them across an agreed context for the company."
This alignment process must happen before you begin developing strategies or presenting options. "The more time spent in alignment is going to ensure that you are able to succeed in a project," the speaker emphasizes.
Key Takeaways for SaaS Pricing Projects
Successful pricing projects require:
- Recognition of departmental biases and their impact on pricing perspectives
- Comprehensive data gathering from multiple sources, not just the loudest voices
- Alignment on company context, goals, and market position before strategy development
- Regular updates to underlying calculations and assumptions
- Focus on customer-perceived value rather than internal effort
By addressing these elements and creating cross-functional alignment, SaaS companies can develop pricing strategies that truly advance their business objectives rather than becoming stalled projects that never reach implementation.
Remember that pricing is not just a financial decision but a strategic one that touches every part of your organization. Taking the time to build consensus and understanding will pay dividends in the effectiveness of your pricing strategy.