To learn more about York IE’s advisory services for B2B tech companies, click here.
A well-crafted B2B pricing strategy will help your company generate repeatable revenue, build strong customer relationships, and position yourself competitively within your industry.
Developing a B2B pricing strategy can be difficult for founders and operators. Finding the right pricing structure often requires experimentation and iteration.
York IE hosted a webinar in tandem with J.P. Morgan, “Price It Right: Best Practices for B2B Startup Monetization,” to help founders and operators hone their B2B pricing strategy.
The webinar included a panel of investors and entrepreneurs, who each provided their unique perspectives:
- Matt Shapiro, Director, Investments, York IE
- Vickrum Nabar, Vice President, Startup Banking, JP Morgan
- Gina Perrelli, CEO and Co-founder, Stay AI
- Jordan Lieberman, Team Lead, Price Intelligently by Paddle
- Rob Litterst, Founder, PricingSaaS
“Pricing is a discovery conversation with your earliest customers, and you have the ability to really dig in and ask those critical questions,” Shapiro said. “Those insights are really what help you generate the most interesting and impactful pricing solutions from day one in the startup world.”
Let’s explore five B2B pricing strategy tips from our panel of experts, and dive into three real-world B2B pricing strategy examples.
What Is a B2B Pricing Strategy?
A B2B pricing strategy is the approach that a business takes to set prices for the products or services it sells to other companies. B2B pricing is about a lot more than just covering costs; a sound strategy requires an understanding of how your pricing and packaging affects demand, customer acquisition, and long-term growth.
An effective pricing strategy often involves market research, competitor analysis, and a deep knowledge of what your target customers are willing to pay for the value you provide. Companies seeking to raise funds will need a firm grip on their pricing strategy and metrics before meeting with investors.
5 Tips For Nailing Your B2B Pricing Strategy
The panelists provided both strategic and tactical advice during the webinar. Common themes included gathering customer feedback, constantly iterating, and ensuring clear communication around your B2B pricing strategy.
1. Flip the psychology of pricing.
Nabar said that many founders are thinking about pricing backwards. Rather than trying to provide a specific pricing number, operators should focus on listening to their early customers.
“The founders who flipped the psychology and are actively collecting and structuring pricing feedback from their early customers or design partners are those that have transformed pricing from a question into truly a competitive advantage,” Nabar said. “These are also those founders who gained the deepest understanding of their company’s value in the market as well, which is massively helpful as you go and grow this thing from just an idea to Series A and beyond.”
2. Don’t overcomplicate your first pricing model.
In a similar vein, Litterst advised founders not to spend too much time scrutinizing over their pricing models in the early stages. Oftentimes, looking at your competitors provides a good start.
“When you’re going for your first pricing model, competitor based pricing gets a bad rap,” Litterst said. “But at the end of the day, you can probably infer a decent idea of price just from looking out at the market and seeing what’s happening.”
“Over time, as you have more conversations with customers and start to learn more and more about how they’re actually using your product and how those engagements are going to mature, you can start to add more wrinkles.”
3. Constantly iterate on your pricing.
When it comes to adding wrinkles, Lieberman suggests that constant experimentation can spur pricing success, especially in the early stages.
“It’s just so important that you are testing and iterating on your pricing in some form or fashion,” Lieberman said.
“This doesn’t mean overhauling your pricing strategy every six months, but rather moving a feature around, testing a different limit on a value metric or something of that nature. Playing around with this stuff will pay huge dividends in the long run, when you learn what works and what doesn’t.”
Lieberman specifically recommended chatting with “closed-lost” customers that ended up opting for a competitor. Their insights can help you understand what you need to improve moving forward.
4. Assign ownership to your B2B pricing strategy.
Pricing is a topic that encompasses many areas of your business: product, marketing, sales, finance, etc. For this reason, it’s often difficult to find one person at a startup to take ownership of the pricing strategy.
“Pricing, unfortunately, is so important, but it often falls to no one to actually own,” Shapiro said.
“The hard part is, how do you actually figure out a clear owner within a scaling organization that cares about it, is incentivized properly behind that, and also willing to take in the input of both go to market, product, and finance leaders as well?”
Perelli mentioned that in the early stages of StayAI, she often took reigns of the pricing conversation
“For me as the CEO, I had to do it for the stage we were at,” Perelli added. “I was probably the one that cared the most about retention, our growth and our revenue.”
5. Clearly communicate your pricing with investors.
As your company gains traction and customers, you’ll often have conversations with potential investors. These investors will want to understand your pricing strategy as they analyze metrics such as annual recurring revenue.
As she navigated StayAI through its fundraising journey, Perelli recalls the need for thoroughness and clear communication.
“We had to provide our investors with all of our customers, what they pay us per month and the history of the last year so that they could really see that our revenue was pretty predictable,” Perelli said.
“Knowing how sticky our product was really helped us push that it was truly predictable revenue.”
3 B2B Pricing Strategy Examples
It’s often helpful to examine how successful B2B technology companies handle their pricing strategies. Here are three examples of innovative models or approaches:
Zoom: Creativity as a former challenger brand
When Zoom was coming on the scene as a new video conferencing platform, the company got creative. Most of their competition was charging per user, and had very little in the way of free plans.
“Zoom completely flipped it on its head; they allowed up to 50 users on a free plan, but they cut the meeting limit to 40 minutes,” Litterst said.
“They got creative with the different value metrics there and created all this value as the challenger in the industry to allow people to use the product and see that it was way better than everything else on the market.”
Monday.com: Constant feature iteration
Monday.com, the popular project management and productivity software, is constantly tweaking to its pricing, Litterst said. The company introduces small changes — introducing new products, features, and value-metric emphasis — to experiment and find combinations that customers gravitate towards.
“They’ve earned the ability to do that because they’ve set this foundation that they’re an iterative company when it comes to pricing and are going to make changes like this on a regular basis,” Litterst said.
“I think most of the time their customers are gonna be totally fine with it because they understand that they’re adding new value to the product.”
Intercom: Outcome-based pricing
Intercom, which offers AI agents for customer service, has landed on a unique pricing model. The company charges per positive resolution, meaning customers are only charged when Intercom’s AI agent successfully resolves a support ticket.
“This is like the Holy Grail pricing, right?” Litterst said. “You want to get to the point where you’re telling somebody that we have skin in the game, and we are only getting money if you guys get a successful outcome”
Only about 1% of companies charge for AI-based outcomes, Litterst said. But this trend could become more common.
“I think there’s a select number of companies and types of companies that can do this successfully today. It’s going to expand, I think, as AI continues to grow.”
B2B pricing strategy can be tricky to nail. These B2B pricing strategy examples and expert tips should give you the foundation to start experimenting on your own. Remember to prioritize communication with your customers, constant iteration, and avoiding overly-complex models in the early stages.
To learn more about York IE’s advisory services for B2B tech companies, click here.
