The Pricing Team: Key to Maximizing ARPA

To increase Annual Recurring Revenue (ARR), pricing strategy is just as crucial as expanding the customer base. There are basically only three approaches to increasing ARPA

• Increase the number of approaches to enterprises
• Increase the number of products and add-on functions to appeal for up-selling.
• Review pricing itself

In this article, we will focus on the Pricing Team, which promotes the most direct approach to increasing ARPA, such as reviewing pricing, to see how to optimize the company's overall profitability.

Background of the Pricing Team

There are two primary reasons to consider implementing a dedicated Pricing Team.

First, it is necessary to design pricing by utilizing a variety of data across departments, including market-related data as well as data accumulated in CRM (Customer Relationship Management) to promote Marketing, Sales, and CSM (Customer Success Management). In addition, in the case of SaaS, data accumulated in CRM (Customer Relationship Management) is also utilized to promote Marketing to Sales and CSM (Customer Success Management). In addition, in the case of SaaS, user usage logs can be obtained by providing the service through the cloud. By understanding what functions are being used and to what extent, user personas can be defined quantitatively, and plans can be set up to suit individual personas.

Second is the complexity of the SaaS business. Software has been sold as a package, but with SaaS, there are a variety of billing structures, and billing occurs on a regular basis (monthly, annually, etc.). It is very difficult to perform the billing process without delay and requires a dedicated person.

Pricing Team Structure

The Pricing Team typically consists of three key roles. Let's examine each in detail.

1. Pricing Strategy

*. The first role is Pricing Strategy. This function leverages cross-departmental data to define user personas, determine feature availability, and establish billing logic and pricing. In addition, as SaaS is said to be in perpetual beta, the functionality is constantly being expanded. You will also be responsible for deciding which of the expanded features will be made available in which plans.

In advancing these projects, almost the entire company will be involved, from Marketing to Sales, CSM of course, but also PM (Product Manager) and PMM (Product Marketing Manager). As it is said that pricing is management, collaboration with the management team is also essential, and this is a very important role.

Based on various data and user feedback, you will be responsible for defining user personas, formulating plans, announcing them to the entire company, and implementing the new Pricing. Specifically, the candidate must be able to analyze data and drive complex projects. For this reason, people from strategy consulting firms and others are similarly suited for this position.

2. Pricing Ops

. Pricing Ops, which we will cover next, must be implemented once the Pricing Strategy has been decided. Therefore, we will implement a sales management system for SaaS and CPQ (Configure, Price and Quote) and mainly put it on Bisiness-side operations. We need to correctly configure the contracted plans for each user and turn them around to billing. You will need to link it to the accounting system and check it all the way through to payment. In addition to this, the role also includes planning and development promotion related to the billing infrastructure, such as the expansion of payment methods. In the case of enterprise SaaS, the number of users is not so large that a simple system is sufficient, but in the case of SMB SaaS with a very large number of users, there is a high need to automate everything up to billing, which requires advanced Pricing Ops. Ops will be required to establish a SaaS sales management flow, which requires skills in establishing fairly complex operations. The requirements are quite diverse, including enterprise ERP, and you must be able to coordinate with all parties involved.

3. Deal Desk

. The Deal Desk** plays a last resort role in sales activities to close complex deals that cannot be closed through normal discounting alone. The Deal Desk is the last stop for sales activities, especially enterprise sales, and handles complex, large transactions involving multiple products and services, customization, and long sales cycles. The Deal Desk is responsible for coordinating the most difficult deals in enterprise sales. The Deal Desk is responsible for coordinating the most difficult deals in enterprise sales, and therefore requires the ability to understand the coordination of past deals, and to create a proposal that makes sense, while sewing together the details based on past deals.

Organization of the Pricing Team

The Pricing Team typically collaborates with various departments across the organization, with its structure and reporting lines varying from company to company. In other cases, it may be placed directly under the CRO (Cheif Revenue Officer), considering its impact on the entire Business Side. For a slightly different perspective, they may be placed on the Product Side, close to PM or PMM, considering the appropriateness of the mid- to long-term pricing strategy, or they may be placed in Business Management, emphasizing the linkage with accounting and finance. The role of the Pricing Team varies depending on the phase of the company, whether the company wants to operate Pricing in a stable manner or actively change the Pricing Strategy, and what the company wants to achieve through Pricing.

Summary

In today's business environment, it is imperative to improve ARPA. Adding products or introducing them to the enterprise is of course a useful approach, but it does not have an immediate effect. Therefore, optimizing the overall view of Pricing and business side processes can be done even now, and is one of the functions with a very high ROI.

References.

• Price to Scale