SaaS pricing transparency (and lack thereof) is quite possibly the most popular internet topic on SaaS pricing
Author: Bryan Belanger
The state of SaaS pricing transparency
SaaS pricing transparency (and lack thereof) is quite possibly the most popular internet topic on SaaS pricing. Nearly every day someone notable in my Twitter feed is bemoaning the industry and/or a certain SaaS vendor’s lack of pricing transparency. At times it seems there is more consternation about whether or not a price is published than the price point itself. There are good reasons for this. At the forefront is the current SaaS industry thrust around product-led growth (PLG). The PLG movement encourages low-friction/no-friction customer onboarding motions and faster time-to-value from using SaaS products. Customers expect to be able to assess a product, consider pricing, and make a try-or-buy decision in a fully self-serve manner. Without transparent pricing (among many other things), this type of purchase motion becomes unavailable to the customer. Another issue that is increasing the call for price transparency is SaaS sprawl and usage challenges. According to data from Productiv, the average company has over 250 SaaS applications, but only about half of employees actively use the applications that are available to them. Companies are buying more SaaS applications but not using them effectively, unnecessarily expanding IT budgets and technology complexity. Purchasing often occurs in shadow IT organizations, and pricing transparency challenges further complicate budgets and planning. These issues are spurring the creation of new SaaS categories, led by well-funded startups. This class of providers, including companies such as Vendr, Tropic, Spendflo and CloudEagle, uses technology and professional services to take over SaaS procurement for companies, promising to alleviate pricing transparency headaches and save on total SaaS spend. With all these buyer pain points around pricing transparency, the question becomes, are vendors answering the call and launching more transparent pricing? Broadly, our answer is no — at least according to what the data tells us. Across the 300-plus (soon to be approximately 25,000-plus) companies in our current live database, we track about 1,700 unique product editions. Of that total number of product editions, approximately 870, or just over 50%, do not provide a published price in any form. Of those 870 product editions, about one-quarter have a product edition named Enterprise. These are offerings that target enterprise customers, and commonly, they have customized pricing that requires a sales interaction. The remaining companies and products do not list any pricing for any product editions.
Should I publish my pricing?
The market data referenced above suggests you have a 50-50 choice on whether to publish pricing data for your product on your company’s website. The obvious question is — should you? If you read articles like this one, there is no choice in the matter. You’re either doing it, or you’re wrong. We can get on board with the spirit of that opinion, but we like to take a more nuanced and data-driven approach to analyzing these types of questions. We believe you should probably be publishing pricing in some form. We say “probably” because, as usual, it depends on other factors. There are many bad reasons for choosing not to publish pricing on your company’s website, such as:
We aren’t convinced that our pricing is appropriate for our product
We are afraid our pricing is too high and that we’ll scare off potential customers
We are afraid that our pricing is too low and that we aren’t articulating our value properly
We think our pricing will confuse customers
Our competitors will get easy access to our pricing information
If we can demo our product and show the value, then the price won’t matter to customers
Our pricing isn’t representative of our real price because we discount so much
The above reasons are signals that there are other bigger issues to resolve for your company. These are symptoms stemming from pricing strategy, value proposition definition, go-to-market strategy, sales process and/or other related issues. It’s not just about the pricing page and how you articulate pricing; these challenges are creating roadblocks to publishing your pricing. There are some at least partially good reasons for not publishing your pricing on your company’s website, including:
You sell to an industry and/or ideal customer profile that prefers a sales interaction prior to discussing pricing
You sell in a regulated industry that dictates how pricing can be presented to customers (for example, the U.S. federal government)
Your product is so complex in configurability and/or customization that price is too individual to each customer to be displayed, even by a price calculator or similar tool
Your customers vary widely in usage of your product
You sell a product that the customer is able to name the price for
We acknowledge that the good and bad reasons above are an outside-in perspective, and that there are other organizational factors at play within your company that impact these decisions. Have a CEO that is staunchly against publishing pricing? That’s going to make a pricing transparency campaign an uphill battle. Is a large share of your revenue weighted to legacy customers that are on an old pricing model? Maybe you can publish your new pricing, but before you ever consider it, you will need to design and execute a careful and considered grandfathering strategy to keep your existing base happy. Ultimately, the decision about whether to publish pricing for your SaaS product is one that you have to make based on the reasons we outlined above as well as factors specific to how your company thinks about pricing. There is no single right or wrong answer for all SaaS companies, but if you keep your ideal customers at the forefront of your decision process, you’ll make a well-informed choice. Keep in mind that the choice is also not binary. There are numerous ways to approach publishing pricing. One of these approaches, or a combination of these approaches, likely suits your customers and your company’s pricing philosophy best.
The pricing page ‘transparency staircase’
We call this set of options for publishing SaaS pricing the “transparency staircase.” Analyses of SaaS pricing transparency often focus on whether the actual price point is published. But the concept of the transparency staircase extends well beyond just the dollar figure into decisions regarding presentation of packaging models, pricing models and discounting. Transparency decisions also influence key website calls to action (CTAs) and conversion strategies. Our model considers this broader view of pricing presentation. One thing to note also, is that this model is flexible. It can apply for a company overall and/or can apply for only specific plans of a given product. For example, a company might use one strategy for its self-serve lower-tier plans and another strategy for its enterprise plan. Without further ado, here is our staircase model for pricing transparency in SaaS:
Of the eight total options, only four involve publishing price points. Our data suggests transparency approaches overall follow a bell-type distribution curve. Most at least have a pricing page, and the majority publish “starting at” or self-serve plan pricing. But few take the next step and provide volume-based pricing for self-service purchases. Standard volume pricing and/or negotiation-based volume discounting is reserved for sales negotiation and procurement activities.
Which part of the staircase makes sense for your SaaS pricing strategy?
Again, this depends on your specific situation, but there are some good rules of thumb to follow.
In general, if your product targets only an enterprise audience, or you have a product with an enterprise-facing tier, a pricing page that provides packaging details and a description of the pricing model with no price points should suffice. Enterprise customers operate differently than other businesses for technology purchases and will understand the sales-led pricing and negotiation process. If you offer self-serve plans or non-negotiated plans in any form, then by the very nature of those plans, you should provide clear and transparent pricing and allow customers to transact via your website. As your self-serve strategy matures, you can explore volume-based calculators or related approaches if customer feedback suggests these would be valuable to implement.
One last note: The overall SaaS movement toward transparency and “build in public” has ushered in a class of players that commit to this model for pricing as well. These types of vendors go beyond pricing page transparency and presentation to share internal wikis, blog posts, cost models and/or other assets that explain their internal pricing policies and strategy decisions. We don’t put these strategies on the same plane as the staircase model, since the aim is less about positioning pricing to customers and more about building in public overall, although this approach may support customer acquisition.
There are no rules of thumb or advice we can offer on deploying a build in public strategy. Building in public to this level of detail certainly is part of a much broader and central organizational culture. But at a minimum, there are great companies using this approach from which you can learn. Our favorite example is GitLab, but you can find others by Googling “Why we changed our pricing model” or “our pricing strategy,” and similar phrases. Many case study blogs will pop up from a cross-section of leading SaaS firms.
The pricing transparency staircase in action: Vendor case studies
To help illustrate the pricing transparency staircase options in action, we’ve highlighted three example case studies, each aligning to a different vendor with a different staircase tactic.
Motive, a leading provider of fleet management and operations SaaS solutions, has a pricing page that is structured around a form. The form flow asks about the prospect’s use case and company size, and then requires that he or she fill out a form with contact information such that a Motive sales rep can follow up with pricing. This is a common model in this space, as well as in other categories such as sales engagement and intelligence (e.g., Gong uses a similar model).
For many companies, Motive included, we believe a better approach would be to provide a pricing page that at a minimum describes the product tiers available and shares details on the pricing model that is used to charge for the product. While the actual price points may be understandably too negotiable or variable to be presented, customers typically at a minimum want to see how the product packaging and pricing model are structured. Further, in Motive’s case, the company actually publish some pricing information on its blog. So why not take this to the next step and include it on a standard pricing page?
The standard self-serve plus enterprise model: Airtable
Airtable offers a free plan, two self-serve plans and an enterprise plan. Airtable provides detailed information on packaging and pricing models on its website for all plans. For the Plus and Pro plans, self-serve purchasing is available, and published pricing is provided for annual and monthly term options. Volume pricing is not available; purchase options at the time of this posting included a single seat for either plan as well as promotional pricing for a discounted basket of five seats for the Pro plan.
With Enterprise, prospects are steered toward a “contact us” CTA to engage with an Airtable salesperson. While pricing for Enterprise is not published on the Airtable website, there are various web sources, such as this one, that provide details on Airtable Enterprise pricing.
ConvertKit provides a marketing platform aimed at creators. ConvertKit offers three plans — one free plan and two paid plans — each with successive tiered features. ConvertKit’s pricing scales by the number of subscribers a customer is engaging using ConvertKit’s tools.
ConvertKit provides a sliding scale at the top of its website that enables prospects to assess how pricing for either of the company’s plans would scale based on the number of subscribers managed by the platform. This option is provided for both monthly and annual plans. Customers can use the sliding scale to see pricing for different tiers of subscribers ranging from zero to 400,000 in increments as defined by ConvertKit.
For customers with 400,000 or fewer subscribers on the sliding scale configurator, ConvertKit requires customers sign up for a free trial period before committing to purchase of a plan. Post-trial, customers have the option to enter a credit card to purchase a plan that suits their requirements.
For customers with 500,000 or more subscribers, ConvertKit’s CTA adjusts to recommend a demo meeting with a sales representative. ConvertKit’s approach combines pricing transparency via volume-based standard discounting with an enterprise sales CTA for the largest customers. This approach to price transparency seeks to align customers to a specific and clear value metric (subscribers), and disincentivize custom pricing and discounting except for the largest and most strategic customers.
You’re probably wondering at this point, what about XaaS Pricing? What will you guys do when it comes time to price your own product? XaaS Pricing will offer self-serve plans as well as an enterprise plan for larger customers. Packaging details for all plans, including pricing details for self-serve plans, will be published on our website soon.
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