In a recent YouTube video titled "8 Steps To Conduct A Pricing Project For Your SaaS Organization," Ajit Kumar, co-founder of Monetize.ly, shares his expert insights on executing successful pricing projects. Drawing from his extensive experience running pricing teams at multiple companies, consulting on pricing strategy, and authoring a book on the topic, Kumar breaks down what is often an overcomplicated process into eight actionable steps that can truly move the needle for SaaS businesses.
The Pricing Paradox: Simple Yet Critical
Pricing is one of the most powerful levers for driving growth in SaaS companies, yet it's frequently mishandled. As Kumar points out, "This is one of the most critical levers that you can pull to drive growth, yet 50% of companies either ignore it or the other 50% overcomplicate it." This observation sets the stage for his practical framework designed to cut through the confusion and frustration that often surrounds pricing projects.
Several triggering events might necessitate a pricing review: a major fundraising round, moving through different growth stages, launching innovative new products, or responding to market changes like fluctuating interest rates. Whatever the catalyst, Kumar's methodology provides a clear path forward.
Step 1: Internal Alignment - Win the Battle at Home First
Before tackling external pricing challenges, organizations must resolve internal conflicts. Kumar emphasizes that misalignment among leadership can torpedo even the most well-designed pricing strategies.
"The first problem you'll face isn't external, it's internal. Your sales VP thinks prices should be lower to close more deals. Your CFO wants higher prices for better margins. And product, they just want to keep shipping more product. Maybe they don't even want to worry about monetization. This isn't theoretical. Misalignment kills companies, misalignment kills giant projects," Kumar warns.
He shares a telling example: "I was once involved with a SaaS company where the VP of sales would never adhere to any pricing model. This created havoc in maintaining our customer base or getting any pricing strategy to work."
The solution? Get key stakeholders in a room to reach fundamental agreements on:
- Where the company is in its growth journey
- Whether to optimize for acquisition or monetization
- The main reasons for the pricing revamp
- What success looks like in the next 12 months
Step 2: Data Analysis - Cut Through Narratives with Facts
After alignment, the next step is rigorous data analysis. Kumar advises pulling 1-2 years of sales data plus product usage information to uncover the truth behind internal narratives.
"Sales teams love to tell stories. 'Hey, enterprises always need a discount about 60-70% to close. We can't sell the premium tier.' But do the numbers add up?" Kumar asks. The analysis typically reveals eye-opening insights: inconsistent discounting practices, premium features that are widely used, or pricing that doesn't correlate with customer willingness to pay.
Step 3: Segmentation - If You're Selling to Everyone, You're Selling to No One
A critical mistake many companies make is assuming their ideal customer profile (ICP) and segmentation remain static as they grow. Kumar challenges this assumption: "As you grow, your product will evolve, your customers will evolve, your market evolves. Segmentation and ICP documents are not updated."
This step requires revisiting segmentation with fresh eyes to identify:
- New market segments you've entered
- What these customers want
- Whether you've moved upstream or downstream
- New use cases or buyer types
The output should be a clear qualitative and quantitative description of each segment, including their needs and representative customers.
Step 4: Packaging - The Underrated Revenue Multiplier
Kumar considers packaging the most overlooked weapon in the pricing arsenal. "Most executives obsess about price points when they should be obsessing about packaging," he states. The impact can be dramatic: "The right packaging structure can 4-5x your revenue and I'm not kidding without changing a single price point."
Companies typically choose between:
- Traditional "good, better, best" tiering (which should match the number of customer segments)
- A modular, "Lego block" approach with a core platform and add-on capabilities
Kumar emphasizes that packaging should directly map to your segmentation: "Each tier should feel tailor-made for a specific customer profile. When that customer profile sees the package, they should think, 'that one's obviously for me.'"
A common mistake is creating tiers based on internal logic rather than customer perception. "Your engineering team might think feature X is super advanced. We put a lot of effort into it. But if customers think it's table stakes, you've got to include it in all of the tiers," Kumar advises.
Well-designed packaging also facilitates upselling, which becomes increasingly important as companies mature: "By the time a company is at 50 million in ARR, they're already reaching a point where half their ARR is coming from existing customers."
Step 5: Pricing Metric - Aligning Your Business with Customer Success
The pricing metric—what you actually charge for—is a strategic decision with far-reaching implications. Whether you charge per user, per usage, with a flat platform fee, or based on outcomes, this choice should align your success with your customer's success.
Kumar cautions that changing your metric is essentially changing your business model: "If you were set, let's say doing a per user model before and now you move to a usage model, so many things have to change. Sales compensation, financial reporting, there's not going to be any ARR anymore because there's not going to be anything recurring."
The ideal pricing metric should:
- Scale with customer value
- Be easily understood
- Create the right incentives for product adoption
- Be technically feasible to implement and track
Step 6: Price Points - Where Science Meets Art
After establishing your segmentation, packaging, and metric, it's time to set price points. Kumar recommends understanding:
- Your unit economics and cost of goods sold
- Benchmark pricing in your market
- Your strategic goals (market share vs. profitability)
He also shares a counterintuitive insight about enterprise sales: "Enterprise sales software can act like Veblen goods. Lower price points may actually disqualify you, and it is only when you have higher price points will you be taken seriously."
Step 7: Testing - Validating Your Hypothesis
Testing can take multiple forms depending on your business model:
- For B2B companies: Structured qualitative feedback from 15-20 customers
- For PLG companies: Van Westendorp or conjoint analysis through surveys
"These studies may take four to eight weeks to do them thoroughly, and I highly recommend you take the time," Kumar advises. The results often reveal surprising insights, such as higher-than-expected willingness to pay or opportunities to simplify packages for certain segments.
Step 8: Launch - Where Even Smart Companies Falter
The final step is execution—and according to Kumar, this is where many companies stumble despite solid strategy work. "Launching new pricing isn't just updating your website, it's a comprehensive go-to-market shift that touches every customer-facing part of your company."
The implementation typically takes 2-3 times longer than the strategy development and involves:
- Updating systems (CPQ, billing, CRM, etc.)
- Training sales teams on new collateral and discounting guidelines
- Preparing customer success for questions
- Revising marketing messaging
Kumar also emphasizes two critical decisions:
- How to handle existing customers (grandfather them, force migration, or create upgrade incentives)
- How to adjust sales compensation to align with the new pricing structure
The Bottom Line: Worth the Effort
Kumar concludes by emphasizing the tremendous value at stake: "By research by OpenView Partner and Bessemer Ventures, on a conservative estimate, the change from the table that you can pick up is 12 to 20% per year of revenue. So think of how much that is on a compounding timeframe and you could be getting much more than 20% of a bump from a pricing project."
With such significant returns possible, investing the time in a well-executed pricing project is more than justified—it's essential for maximizing your SaaS company's growth potential.
When approached methodically with these eight steps, pricing doesn't have to be the overcomplicated, frustrating process that many companies experience. Instead, it becomes a powerful strategic tool for driving sustainable growth and profitability.