Throughout my career, I’ve been part of nearly 75 pricing projects, witnessing outcomes ranging from “this changed our company’s trajectory” to “we never even rolled it out.” If you’re considering hiring a pricing consultant, this guide will help you navigate the process effectively.
In this article, I’ll cover how to identify the need for pricing help, decide between in-house efforts and external consultants, select the right consultant, and ensure success during the engagement. Investing six figures and six months of your team’s time warrants a thoughtful approach. As the saying goes: measure twice, cut once.
Signs You Have a Pricing Problem
If you don’t have someone dedicated to pricing, there’s a good chance your pricing model isn’t optimized. Pricing is one of the most underutilized yet impactful levers in a business. Here are some data-driven signals that suggest it’s time to reevaluate your pricing strategy:
- Excessive discounting: New deals regularly discounted by more than 20%.
- Low expansion revenue: Expansion revenue accounts for less than 40% of new revenue.
- Sales inefficiencies: Sales reps struggle to ramp quickly or require senior leadership to create quotes.
- Stagnant pricing: You haven’t updated your pricing in over two years.
If any of these resonate, it’s time to consider a pricing project.
In-House vs. External: Choosing the Right Approach
The first question to tackle is whether you should manage the project internally or bring in a consultant. Here’s a breakdown of each approach:
In-House
- Criteria for Success:
- A team member with prior pricing experience.
- This person has adequate bandwidth to handle a significant project.
- Time and Resource Investment:
- For a holistic revamp, allocate 50% of a senior full-time equivalent (FTE) for one year.
- For a smaller project, like adjusting a price point or pricing a new feature, dedicate 25–50% of an FTE for 1–3 months.
- Pros:
- Cost savings.
- Greater control over the process.
- Don’t need to get an external resource up to speed
- Cons:
- Longer timelines.
- Potential for internal bias and inertia
- Won’t be able to conduct the same breadth or depth of research as a specialist
External Consultant
- Benefits:
- Faster results.
- Access to specialized expertise and advanced research capabilities.
- Objectivity to counter internal biases.
- Drawback:
- Higher costs.
Scoping the Project Before Engaging a Consultant
Before reaching out to consultants, clarify your goals and resources. Here’s what to prepare:
- Data availability: Identify what information you can provide. Sales, usage, and account data are key signals that can inform pricing. If you don’t have the right data or it’s inaccurate, don’t, a good consultant can work from multiple signals. Just be transparent upfront about your data quality.
- Project scope: Define which products or services require pricing help. The number of products will be one of the biggest factors determining the difficulty level of the project. Are you looking to evaluate packaging strategy, price levels, or both?
- Stakeholder alignment: Assemble a cross-functional team to contribute. Pricing requires input from sales, marketing, finance, product, and leadership to be successful.
- Timeline and budget: Set realistic expectations. Allocate 3-6 months for the project from inception to rollout depending on scope.
Selecting the Right Pricing Consultant
The number of pricing consultants has expanded significantly the last couple years. What used to be a niche field now has many consultants who provide relatively good advisory services. I would argue much of this entry level advice has been commoditized.
If you are a startup or looking at a one dimensional problem, such as how to adjust list prices, a call or two with a consultant will be fine.
The selection process becomes tricky when you’re tackling complex pricing challenges, are a larger organization, or looking for a holistic pricing overhaul. Consultants typically differ in two key areas:
1. Depth of Research
- Solo consultants: Often rely on best practices and limited analysis.
- Boutique firms: Provide cursory research, such as competitor website reviews and light stakeholder interviews.
- Sophisticated practices: Offer deep analysis, including sales and usage data, customer willingness-to-pay surveys, and competitive intelligence.
The larger the pricing change, the more thorough the research should be. Think of it like packing for a long trip—you’ll want to be prepared with options.
2. Collaboration and Actionability
Some consultants may deliver a polished presentation and leave you to implement it on your own. The best consultants, however, partner with you to develop an actionable pricing model that fits your business and customer needs. We always say models > slideware but this is not the reality for many consultants.
When evaluating candidates:
- Ask for references: Speak with prior clients to understand their experience.
- Assess flexibility: Avoid consultants who promise quick fixes; meaningful change and true collaboration take time.
Ensuring Success During the Engagement
Hiring a consultant is only the first step. To ensure a successful outcome:
Appoint the right internal owner:
- Choose someone senior enough to make decisions but available to dedicate time to the project.
- This person should understand the business, manage stakeholder input, and navigate internal hurdles.
Set clear goals and expectations:
- Define the desired outcomes and establish a feedback loop for course corrections.
- Stay laser focused on the original goals for the engagement.
Maintain collaboration:
- Keep an open line of communication between the internal team and the consultant to align on deliverables.
When managed correctly, consultants can provide the expertise you lack in-house and elevate your pricing strategy in a short period. Whether you’re adjusting a price point or overhauling your entire pricing model, the right approach and partnership will maximize your investment and drive meaningful results.
