Your Compensation Strategy is Your Pricing Strategy: Part I - Building for Your Ideal Customer
👋 This is a free edition of the MPL Build Newsletter—resources for running your people team like a product team. Become a paid member to get access to guides, templates, case studies, and exclusive AMAs.
The world of work has fundamentally shifted. What used to be a relatively straightforward compensation challenge—understanding your local market and staying competitive within your industry—has evolved into something far more complex and strategically critical.
Remote work has expanded talent pools globally while creating new competitive dynamics. Companies that once competed for talent within a single city now find themselves competing with organizations across continents. Geographic arbitrage, cost-of-living variations, and global talent mobility have turned compensation strategy from a regional HR function into a core business strategy challenge.
This is part one of a two-part series where we'll explore how to navigate this complexity by applying product management principles to compensation design—because the challenges you're facing now require the same strategic thinking that product teams use to win in competitive markets. I’ve given one of my old publications a bit of a facelift and contextualised the work more in the spirit of MPL Build, which should give you both a bunch of new things to think about, and then the tools you need to apply them.
The New Complexity of Talent Competition
Pre-2020, most companies had a relatively contained competitive set. If you were a SaaS company in Austin, you largely competed with other Austin tech companies for talent. Your compensation benchmarking was straightforward, your competitive intelligence was manageable, and your frameworks could be relatively simple.
Today, that same Austin SaaS company might be competing with a San Francisco unicorn, a London fintech, and a fully-remote startup based in Miami—all for the same senior product manager. The competitive landscape has exploded in complexity, and traditional approaches to compensation simply weren't built for this reality.
This isn't about HR teams not being sophisticated enough—it's about the fundamental game changing faster than most frameworks could adapt. The tools and methodologies that worked perfectly well in a geographically-contained talent market struggle with the multi-dimensional complexity of global remote hiring.
Why Product Management Principles Matter Now
Product teams have been dealing with global competition, complex customer segments, and multi-dimensional value propositions for decades. They've developed frameworks for understanding competitive positioning, customer segmentation, and strategic pricing that translate really well (I think, anyway) to today's talent challenges.
The best product teams don't just ask "what do customers want?"—they ask "what do our ideal customers want, and how do we position ourselves to win them over our competitors?" This kind of strategic thinking has become essential for talent acquisition in a globally competitive market. I like to think about compensation like product teams think about pricing, it’s a complex challenge for any business, and one that (when done well) can absolutely make or break your company’s economic success and growth, I think the same is true for us in People Ops.
Your compensation framework should answer the same strategic question: What do your ideal employees want, and how do you position your total rewards to win them in a crowded, complex marketplace?
The Strategic Foundation: Understanding Your Talent Market
Just like product teams spend significant time understanding their Ideal Customer Profile (ICP), successful talent strategies now require deep understanding of your ideal employee segments. But this has become more complex than simply defining roles and levels.
Consider the multi-dimensional nature of today's talent decisions. That senior engineer you're trying to hire isn't just comparing salary numbers—they're weighing total compensation, remote work policies, career growth opportunities, company mission, team culture, geographic flexibility, and dozens of other factors. They might choose a lower cash offer from a company that offers better equity, more interesting work, or superior work-life balance.
Understanding these trade-offs systematically across your organization is now essential, not optional.
The Market Dynamics Framework
Remote work has created new market dynamics that require more sophisticated analysis. Every role in your company now exists within multiple competitive contexts simultaneously:
Market Scarcity (How competitive is the talent pool?)
High: Specialized skills, emerging technologies, proven track records in scaling companies
Moderate: Experienced professionals with in-demand skills but broader availability
Standard: Important roles with healthy talent supply and established career paths
Strategic Impact (How much value does this role create for your specific business?)
High: Revenue drivers, key decision makers, roles that directly impact your competitive advantage
Moderate: Important contributors to business outcomes, skilled professionals who enable growth
Foundational: Essential operational roles that keep the business running smoothly
This creates different strategic contexts for talent acquisition—and each requires a different approach to compensation and positioning.
High Scarcity + High Impact = Your Strategic Hires
These are the roles where you're competing with the biggest names and highest offers. Think engineers at AI startups, enterprise sales directors with specific industry expertise, or growth leaders with proven track records. Your total value proposition needs to be compelling across multiple dimensions. Although I am a huge fan of consistent compensation frameworks, I believe it makes more sense these days to find ways to ensure your holistic approach to compensation has an element of ‘capital deployment’ baked in. I spoke to a HR leader recently who had an entirely different approach to standardised compensation reviews and promotions for engineering versus the rest of the team.
Now, I understand it may be difficult to imagine that an approach which isn’t entirely uniform may challenge your team, but I turn our thoughts to the way variable compensation may be deployed differently in revenue teams, or where signing bonuses may be used for key executive hires. We already tolerate differences, and the primary concerns that your team may have about these inequality come from a lack of transparency and procedural fairness, rather than them entirely disagreeing that various compensation approaches may be reasonable.
For example, you may make slightly different tweaks or approaches to different cohorts or functions in your business using a framework like the below:
High Scarcity + Moderate Impact = Your Specialist Positions
These might be your technical specialists, compliance experts, or niche skill contributors. Still difficult to find, but their individual impact is more contained. Your value proposition can focus on professional development, interesting challenges, and competitive (but not premium) packages. These may be roles which you use a 60th percentile market rate, where within your high scarcity, high impact role (or high competition, high impact) you may focus on 75th or above, plus incorporate variable compensation.
Moderate Scarcity + High Impact = Your Growth Investments
Think high-potential individual contributors who could become leaders, or experienced professionals in key growth areas. More available than specialists, but the right ones drive significant value. Your value proposition could emphasize share options or a performance-based upside.
Standard Scarcity + Foundational Impact = Your Operational Excellence Hires
Essential team members who enable everything else to work well. Your value proposition focuses on culture, stability, career development, and fair market compensation. These are the roles that you don’t need to disproportionately invest into for compensation, and become the easier customers to “acquire” without better pricing.
Geographic Complexity and Strategic Choices
One of the biggest changes remote work has brought is the need to make explicit strategic choices about geographic compensation philosophy. This used to be simple—you paid market rates for your location. Now you have strategic decisions that directly impact your competitive positioning.
Global Talent Pool Dynamics:
When you hire remotely, you're not just accessing cheaper talent in lower cost-of-living areas. You're also competing with global companies for talent in every location. That engineer in Portugal isn't just comparing your offer to local Portuguese companies—they're comparing it to offers from Silicon Valley companies, London fintechs, and other global remote companies.
This creates three (and perhaps more, these are the ones I primarily focus on) fundamental strategic approaches:
Premium Global Positioning: Pay everyone as if they're in your most expensive market. You're betting that top talent justifies premium investment regardless of location, and you want to win primarily on compensation competitiveness.
Regional Market Alignment: Set compensation based on regional competitive dynamics and cost structures. You're betting that regional talent markets have distinct characteristics and that local competitive context matters more than global standardization.
Value-Based Hybrid: Balance role impact and market dynamics with geographic considerations. You're betting that talent value transcends geography, but economic realities still matter for both company sustainability and individual purchasing power.
Each approach has strategic implications for the type of talent you'll attract and the competitive battles you'll win or lose.
The Research Challenge in a Complex Market
Understanding your competitive landscape used to mean researching companies in your city and industry. Now it requires much more sophisticated market intelligence.
Your real talent competitors might include:
Direct industry competitors (traditional competitive set)
High-growth companies in adjacent industries competing for similar skill sets
Global remote-first companies competing across geographies
Large tech companies expanding into your talent segments
Well-funded startups offering equity upside
The complexity isn't just in identifying competitors—it's in understanding their total value propositions. Salary benchmarking alone doesn't tell you why candidates choose one offer over another. You need to understand how different companies position themselves on the full spectrum of what employees value. Compensation tools such as Ravio, CandorIQ, Pave, Figures, and ERI are great starting points, but I encourage you to use AI deep research, read compensation and public handbooks, and review published job ads to understand compensation across your competitors.
Building Your Strategic Foundation
Before diving into frameworks and calculations, you need the same foundational clarity that successful product teams start with:
1. Business Context Clarity
What are your growth goals and how does talent acquisition support them?
What's your budget reality and how does that constrain or enable different strategies?
What's your geographic strategy and how does that impact talent competition?
Where in the framework above does your business or teams sit? How could you use this to apply different compensation approaches?
2. Competitive Intelligence
Who are you really competing with for each type of role?
How do they position themselves in the talent market?
What are their strengths and weaknesses in talent attraction?
3. Value Proposition Definition
What makes your opportunity uniquely compelling beyond just compensation?
How do different employee segments value different aspects of your offer?
Where can you differentiate in ways that matter to your ideal candidates?
4. Strategic Trade-offs
Are you optimizing for speed-to-hire, cost efficiency, quality of hire, or retention?
Are you willing to pay premium for certain roles or segments?
How much complexity can your operations handle?
The Path Forward
The compensation challenges you're facing aren't just administrative—they're strategic. The companies that recognize this complexity and approach it systematically will have significant advantages in attracting and retaining talent.
In Part II, we'll translate these strategic insights into practical frameworks and systems. We'll explore how to build compensation structures that are both sophisticated enough to handle today's complexity and simple enough to scale with your growth.
The goal isn't to make this more complicated—it's to acknowledge the complexity that already exists and give you better tools to navigate it successfully. Your talent strategy deserves the same strategic rigor you apply to your product and go-to-market strategies.
Because in today's market, your compensation framework isn't just an HR policy—it's a competitive advantage.
P.S. Want hands-on help bringing product principles to life on your people team? Let’s talk — send a message to build@themodernpeopleleader.com.