Background and challenge

A leading online educational content and training provider engaged L.E.K. Consulting to develop a new packaging and pricing strategy aimed at maximizing overall revenue and promoting upsell across its subscription plans.

Pricing and functionality misalignment across legacy subscription packages had restricted the upsell journey, which, combined with excessive discounting, left considerable revenue untapped.

In addition to the revised pricing and packaging strategy, the company also sought guidance on and a structure for implementing the recommended changes, including determining the execution steps and owners, governance structure, testing recommendations, key performance indicator (KPI) uplift, etc.

Approach

We conducted extensive research and analysis to deliver an optimized pricing and packaging strategy:

  • Developed a thorough market fact base analyzing the go-to-market strategies of the client’s competitors in order to understand their feature offerings, pricing models, subscription bundles, discounting (volume, contract duration and discretionary) philosophies and governance structures
  • Undertook an in-depth analysis of the client’s internal transaction data to understand customer upgrade journeys, on-ramping conversion rates, retention rates, customer engagement metrics and discounting dynamics and identify key areas for performance improvement
  • Fielded an online quantitative survey to analyze customer preferences and price sensitivity through conjoint and Van Westendorp analysis to determine the optimal feature configuration and price levels that should be targeted to each customer segment
  • Provided a detailed recommendation of the exact pricing and packaging strategy that should be pursued (feature breakdown between tiers, pricing levels, governance structure, discounting mechanisms, etc.) and quantified the estimated financial uplift from each of the strategic recommendations
  • Formed views on appropriate pricing and packaging models in key international markets based on customer behavior, preferences and localized purchasing power
  • Detailed an implementation roadmap (e.g., KPI targets, A/B testing) and strategic rollout plan (e.g., customer messaging, customer transition strategies) to ensure the successful execution of the pricing and packaging strategy

Results

We delivered an optimized pricing and packaging strategy designed to help the client elevate its market position and drive annual recurring revenue growth from existing and new customers.

Through extensive internal engagement, alignment on the recommendations was achieved across all key stakeholders spanning multiple departments (e.g., product, sales, marketing, professional services) and international regions, enabling immediate momentum behind the execution.

We ensured the recommendations were actionable by providing detailed guidelines to inform the implementation and rollout strategy for each recommendation; these included information on the key execution next steps, messaging and actions needed to ensure market acceptance, testing recommendations and rollout target timelines (see Figures 1-5). 

Figure 1: Overview of our pricing and packaging strategy
Figure 2: Research conducted to benchmark vendor pricing
Figure 3: Van Westendorp analysis
Figure 4: Our guidance
Figure 5: Quantification of the estimated financial uplift provided

We have helped businesses across a range of industries optimize their pricing strategies to increase revenue and improve profitability. To learn how we can help with your pricing needs, please contact us at technology@lekinsights.com.

L.E.K. Consulting is a registered trademark of L.E.K. Consulting LLC. All other products and brands mentioned in this document are properties of their respective owners. © 2024 L.E.K. Consulting LLC 

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