What's a pricing committee, and should you create one?

In SaaS, defining your pricing strategy requires careful planning and analysis. Because of this, many organizations create pricing committees.

The goal of this article is to explain what pricing committees are and how to create them. Most importantly, we’ll help you decide if it makes sense for you to create one for your SaaS business in the first place.

Here’s what we’ll cover:

• A definition of a pricing committee
• Steps required to establish a pricing committee
• A quick look at the responsibilities and roles within a pricing committee
• Challenges you might face when creating and managing a pricing committee
• Deciding whether or not you should create a pricing committee for your SaaS business

Let’s get started.

What is a pricing committee?

A pricing committee is a cross-functional team assembled to shape and refine a company's pricing strategy. Think of it as an internal think tank for pricing, bringing together diverse perspectives to make optimal pricing decisions.

Why should you consider establishing a pricing committee? The benefits are substantial:

• Strategic alignment: A committee ensures your pricing strategy aligns with your business objectives. These could be maximizing profitability, expanding market share, or achieving other key goals.
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• Cross-functional synergy: Pricing impacts every facet of your business. A pricing committee fosters collaboration among departments like sales, marketing, and product. The goal is to coordinate a unified approach to pricing decisions.
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• Market agility: Markets are dynamic, and your prices should be, too. A pricing committee monitors market trends and competitor pricing. This allows you to adapt quickly and remain competitive.
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• Risk mitigation: Pricing decisions carry inherent risks. A pricing committee provides a structured forum for assessing and mitigating these risks. They safeguard your profitability and guarantee informed choices.

How to establish a pricing committee

Creating a high-impact pricing committee requires a methodical approach. Here's a detailed roadmap to guide you through the process:

1. Define objectives and scope

Begin by crystallizing the goals you want your pricing committee to achieve. Are you aiming for a specific percentage increase in profitability? Maybe you’re looking to enter a new market segment. Perhaps you want to boost customer retention through value-based pricing.

We suggest defining these objectives using the SMART framework to guarantee clarity and focus:

• Specific: Clearly define your goal, avoiding vagueness.
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• Measurable: Establish criteria to track progress and success.
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• Achievable: Ensure your goal is realistic and attainable within your resources.
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• Relevant: Align your goal with broader objectives or values.
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• Time-bound: Set a specific timeframe or deadline for achieving your goal.

Next, delineate the committee's scope of work. Will they be responsible for all pricing decisions across the board? Or will their purview be limited to specific product lines or markets? Outline their responsibilities and decision-making authority to avoid overlap with other teams.

2. Select committee members

Assemble a well-rounded team of experts from various departments. You should:

• Consider a pricing manager or analyst to spearhead the initiative.
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• Bring a financial analyst on board for data-driven insights.
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• Have sales representatives for firsthand customer knowledge.
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• Include marketing professionals to understand market dynamics.
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• Ensure your product managers will be thereto help gauge product value.

Prioritize individuals who are experts in their fields and can collaborate effectively. We’ll dive deeper into the roles and responsibilities within a pricing committee in the next section.

3. Develop a charter

Craft a comprehensive charter that serves as the committee's guiding document. Begin with a concise mission statement that encapsulates the committee's purpose and goals.

This statement will serve as a compass for all future decisions. Next, outline clear guidelines for the committee's operations. Keep in mind you should:

• Define clear decision-making processes (consensus vs. majority vote).
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• Establish meeting frequency (weekly, monthly, quarterly).
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• Set up a clear reporting structure.
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• Have procedures in place for resolving disagreements.

4. Implement tools and processes

Equip your committee with the necessary resources to thrive. Invest in pricing software or tools that facilitate data analysis, price modeling, and planning. Billing platforms like Orb can help with price modeling and changes.

These tools can provide invaluable insights to inform your decisions. Additionally, develop standardized processes for various aspects of the committee's work. For instance, the processes will include gathering market data, evaluating proposed pricing changes, and implementing approved adjustments.

5. Conduct regular meetings

Establish a consistent meeting schedule that aligns with the pace of your business. As mentioned in the third step, this could range from weekly to quarterly meetings.

Prior to each meeting, prepare detailed agendas to ensure focused and productive discussions. Meticulously document key decisions, action items, and next steps in meeting minutes. This way, you can maintain accountability and track the committee's progress over time.

Roles and responsibilities within the pricing committee

A pricing committee is a well-oiled machine, with each part playing a crucial role. Let's take a closer look at who does what:

• Committee chair: This is the person who leads the committee. They make sure everyone is in sync and working towards the same goals. They guide discussions and encourage collaboration. Most importantly, they guarantee the committee's decisions align with your company's overall objectives.
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• Finance representative: This is your numbers person. They're the ones who dive into the financial data. They analyze how different pricing strategies could impact your bottom line. They'll help you understand the potential profits, losses, and risks associated with each decision.
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• Sales representative: Your sales team has a direct line to your customers. They know what customers are willing to pay, what the competition is charging, and how your pricing is perceived in the market. Their insights are key in making sure your prices resonate with your target audience.
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• Marketing representative: These folks have their fingers on the pulse of the market. They track trends, analyze competitors, and understand the broader market landscape. Their expertise helps you position your prices strategically and stay ahead of the curve.
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• Product manager: Your product team knows your offerings inside and out. They understand the value your products bring to the table and how that value should translate into price. They'll help you create a pricing strategy that aligns with your product roadmap.

Challenges in creating and managing a pricing committee

Let's not sugarcoat it — setting up and managing a pricing committee comes with its own set of hurdles. With a bit of foresight and planning, these challenges can be tackled head-on:

Challenge 1: Decision-making delays

Ever heard the phrase "too many cooks in the kitchen"? Well, it can apply to pricing committees, too. Getting everyone to agree on a decision can sometimes take a while.

Solution: Set clear timelines and decision-making processes from the get-go. Encourage open communication, but also establish a framework for reaching timely conclusions. Perhaps you could set voting thresholds or let the chair make the final call in certain scenarios.

Challenge 2: The tug-of-war of conflicting interests

It's natural for different departments to have different priorities. Sales might want lower prices to close more deals, while finance might be focused on maximizing profit margins.

Solution: Foster a collaborative space where everyone's perspective is valued. Encourage members to think beyond their individual goals and consider the bigger picture. The goal is to find a pricing strategy that benefits the entire company.

Challenge 3: Keeping it consistent

Imagine if your product prices were all over the map. It would confuse customers and damage your brand image. Maintaining consistent pricing across different products and markets can be tricky.

Solution: Develop clear pricing guidelines and principles. These should outline your overall pricing philosophy. They should also help you determine prices and any specific factors you consider. This will help make certain that your pricing decisions are aligned.

Is a pricing committee right for your SaaS business?

Now it’s time to answer the big question. If you’re entertaining the thought of creating a pricing committee, here’s what you need to consider:

Your SaaS business’s size and complexity

Think about your business as it is right now. If you're a smaller SaaS company with a simple product and a simple pricing model, a full-fledged committee might be more than you need. You might find that pricing decisions are manageable within a smaller, less formal group.

However, as your business grows and your product offerings become more complex, a pricing committee can be a valuable asset. It provides the structure and expertise needed to tackle the intricate pricing challenges that come with scaling up.

Your current pricing challenges

Reflect on how your current pricing strategy is performing. If everything is running smoothly and you're not encountering any major obstacles, a committee might not be an urgent priority.

If you're grappling with issues like adapting to market changes, a committee can bring fresh perspectives to the table. It can help you get back on track and navigate those rough waters.

Your resource availability

Be realistic about the commitment a pricing committee requires. Building the right team, planning regular meetings, and training demand a significant investment.

Before jumping in, honestly assess whether you have the bandwidth to support a committee effectively. Remember, a half-hearted effort can be counterproductive. Make sure you can dedicate the necessary resources to make it a success.

Next steps

Upon reading this piece, you should know how to create a pricing committee for your SaaS business. Not only that, but you’ll also know if you need to create one in the first place. Now, let's talk about turning your well-crafted strategies into reality.

Implementing a new pricing strategy can be complex, especially if you're working with intricate usage-based or hybrid models. Some solutions can simplify the entire process, allowing your pricing committee to focus on the bigger picture.

One such solution is a billing platform likeOrb.

Orb is designed to handle the intricacies of SaaS billing. It helpsincorporate best practices that your pricing committee will appreciate.

By integrating Orb into your workflow, you can:

• Simplify billing: Orb takes care of tedious tasks like usage tracking, calculations, and invoicing. This frees your team from processes that can be error-prone and time-consuming.
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• Embrace pricing flexibility: Orb's platform lets your pricing committee create and adjust pricing tiers, discounts, and usage-based metrics. This means you can adapt to market shifts and customer feedback without getting bogged down in technical details.
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• Integrate easily: Orb integrates with your existing tools and data warehouse natively. This ensures a smooth transition to your new pricing model without disrupting your workflow.

Ready to explore how Orb can elevate your pricing committee's efforts?

Learn more about how Orb can solve all of your SaaS billing needs.