Why great pricing and packaging is an answer to improved productivity

Productivity. Such a dry word for such a critical concept. It’s very hard to successfully scale any business without increasing productivity. 

Here, productivity refers to the output a leader gets for each employee, and one way to measure it is through revenue per full-time equivalent (FTE) employee. It’s not bulletproof (e.g. you could outsource your IT so you have less FTE), but revenue measures are much easier to compare across companies than profit measures.

In 2023 Collingwood ran a benchmarking exercise in which 60 B2B media, information and events businesses with under £20m of revenue shared their productivity data. You can see the results in Figure 1 below; there is a mean average across all types of B2B media businesses of £138k/FTE. Anything above £200k/FTE is very much upper quartile. There’s quite a range though – look at the three businesses plotted at £5m of revenue. One is significantly higher in revenue per FTE, suggesting it may be significantly more profitable. (Perhaps surprisingly, if major B2B media plc companies are added productivity benchmarks don’t change that dramatically – see Figure 2).

This is what we spend much of our time doing in the Collingwood Scaleup, and the answer can vary. What we frequently see preventing scale – and therefore a higher revenue per FTE – is a value proposition that doesn’t have a product–market fit or, conversely, a strong value proposition being executed by a sales team not focused on Tier 1 clients (not as rare as you’d think). In a minority of cases, the answer is ‘too many employees’, but often that’s in a multiple-brand business, and the underlying answer is usually more radical reallocation of resources from weaker to stronger brands (i.e. where the revenue per FTE is higher) than what is achieved through a standard incremental budgeting process. 

However, in my experience, underdeveloped pricing and packaging is usually crucial to productivity. I have yet to walk into a media company with under £20m of revenue and feel that pricing and packaging have been comprehensively covered.

Here are the five lessons I’ve learned:

Price is usually a more important and more profitable lever than volume

Volume plays can be important if your strategy is to ‘land and expand’. But sometimes it’s clear that ‘land and expand‘ strategies are in reality merely a post-rationalisation of sales team feedback. Volume plays mean lots of activity; volume plays mean marketing spend and researching of targets; volume plays mean you’d better have a large addressable market. Do the maths in your own business: what would be the bottom line impact of achieving 20% more in price from existing customers, and how many new business customers would that extra value represent?

Pricing has been underdeveloped by most B2B media companies

One of the reasons for underdeveloped pricing is B2B media’s historic underplaying of customer insight. Maybe it’s a legacy mindset from ‘broadcasting to’ an audience vs. being the host of that audience community. Maybe it’s the continued misunderstanding of what product managers do and how to achieve an ROI on that investment. If your team hasn’t spent time ‘on the other side of the fence’ in client organisations, understanding which valuable decisions are made using input from your content, and by what level of seniority in that client, then I suggest you’ll never understand the true value of your service and are therefore highly unlikely to price for value.

Pricing is a team sport, but needs a captain

Pricing needs input from many quarters – sales, marketing, customer success, and engagement analysis – but it also needs someone to ride shotgun, make educated judgments, and lead the implementation in an agile, controlled way. At The Lawyer I took over a business that had launched a paywall after 30 years of controlled circulation (i.e. after 30 years of teaching its audience that they got the product for free, funded by vendors). It was an incredibly brave move, but it was underpriced; I spent much of my time leading the work that changed the pricing mechanism multiple times (seats, usage, size of the law firm, etc.) to gain the value that The Lawyer’s market-leading content and data deserved.

Segments are beautiful

Consider the airline industry, which is very good at pricing (albeit not perfect). There are usually three classes of seat, but every passenger flies the same number of miles and touches down on the same runway – even in Economy. But there are different needs and budgets, and therefore price sensitivity. And this is true within any market. Should the global blue-chip consultancy that wants your market share data for an urgent project pay the same as one of your core manufacturers? Audience vs. vendors? Large vs. small? Packaging and rate cards are core ways to tease out different price sensitivities.

Packaging is a key craft

Packaging doesn’t have to mean Good-Better-Best (GBB), but packaging as a way to tease out different price sensitivities is as old as retail. And when I face pushback (‘but we’re different, it wouldn’t work in our market’), I can cite multiple examples that have proven themselves in action. Try Central Banking Institute from Infopro, Farmer’s Guardian (from AgriBriefing, now part of Mintec), or even the way Google charges for email storage (which, one imagines, has been split-tested on millions of users). Great packaging tends to encourage buyers to walk themselves up to higher order values (same selling activity, higher revenue per salesperson). But such great packaging comes in turn from deep insight: 

• Which parts of my value proposition are must-have?
• How can I ‘stretch’ my product features to create different offers? 
• How can I layer on top different levels of access (one licence, team licence, etc.)? 
• How can I create the resulting packages that talk directly to the core ‘jobs-to-be-done’ by my user, or core marketing objectives of my vendor?

If you want help with your pricing, you can contact Andy at andy.baker@collingwood.group