30+ Founders and Execs Share Pricing and Billing Practices … That Just Weren’t Worth It

Q: What billing or pricing tactic have you found in the end just wasn’t worth it?

“[You] have to get some sort of dollar commitment for pilots in Mid Market and Enterprise deals. 9/10 times they don’t work otherwise.”  and “Something we found really effective at CoursKey, and other vSaaS businesses will likely find as well: Instead of running pilots, sign a multi-year contract but give them an opt-out after 3-6 months. Gets them in a comfortable mindset but we’ve had 1 or 2 out of 30+ ever opt out”

— Luke Sophinos, CEO @CourseKeyEDU

  • Jason, ed.: Unpaid pilots almost never work.  Usually, they are a sign of a weak VP of Sales (who can’t close), or founders just trying everything possible (which isn’t all bad).  A short, paid pilot is a great way for a customer to force a new vendor to prove themselves.  You should stand behind your product and sign up for those until you have a real brand in the space.  But an unpaid pilot?  No one ever puts in the work to get them off the ground.  I’ve seen a few exceptions, and personally closed Google after a year-long unpaid pilot.  But the reason the exception worked was the customer stakeholder truly deployed the resources to make it work.  And it was early.  I had to try.  🙂

“Unless your product has a huge TAM to cast your net in, no-touch onboarding, and an obvious first “wow” moment you’re trying to reach, free trials and/or freemium pricing does not work well.” — Eric McClure, Head of Revenue Operations, Xplor

  • Jason, ed.: A good reminder that Freemium doesn’t really work as a business model without a mass-scale product.  If not, it’s better to charge but smother your prospects with attention … and make 100% sure they are successful.  More here.

“Regular price increases for SaaS” — Benjamin Irvine

  • Jason, ed.: Yeah this one is really hard to pull off, even for Salesforce, which nominally has automatic annual pricing increases.  It creates a lot of renewal friction.  It’s generally much better to focus your energy on adding usage, seats, etc. to grow deal size vs. blanket price increases.  Save them for when growth truly slows.

“Selling a data product to non data users at $500 USD in MRR, when $2500 is the sweet spot. Account management it’s same work. However TAM is small hence closing whatever we can no matter the price point unfortunately.” — Mircea Gabriel Eftemie, CEO Cavea.io

  • Jason, ed.: Pricing too low can sometimes make sense in the earliest of days, but in the end, almost every SaaS category has a rough norm for pricing these days.  Pricing at the low end of normal can help establish you as a value option, but much lower than that just hurts.

“Quarter ending arbitrary pricing “deals” where your price is good till x or y date, where the date has nothing to do with the customer timeline and everything to do with a quarterly or monthly quota.  Now I know that some of you may say, well, actually that does work Jesse, I will argue that even when it works, it fails.” — Jesse Ofner, VP Client Experience, InterviewIA

  • Jason, ed.: A lot going on here, but the overall point that excessive discounting doesn’t help is an important one.  A great VP of Sales gets really good at using discounting as a strategic asset at the very end of a deal, but doesn’t over-discount when it doesn’t help to hit the ARR goal for the year.

“Self-service trials” — Pedro Góes, CEO InEvent

  • Jason, ed.: A lot of discussion on when self-service doesn’t work in these answers!  A reminder you have to really have a zero-friction, almost zero-on boarding experience for it to work.  Otherwise … add humans!

“We tried doing ACH via Plaid. No one was comfortable entering bank info and signing in.” — Siddharth Mohan, CEO Yembo.ai

  • Jason, ed.: Plaid is obviously wildly successful.  But a reminder adding friction to sales processes, in particular, is rarely worth it.  Let customers buy the way they want to buy … and are used to buying.

“1/ Free plans on software with setup costs 2/Affiliate links or referral bonuses on B2B software 3/ Competing on price in general” — Parthi Loganathan, LetterDrop

  • Jason, ed.: A good reminder on Free.  For it to work, the setup cost has to be $0.  But perhaps, if you make your product even easier to use … you could get there?

“1 year contracts for enterprise software. We have pivoted today 3 yr and 5 yr. 7% and 15% Discounts for cash up front. 75% have opted for the cash discount” — Adam Livesay, co-founder, Elevat

  • Jason, ed.: An interesting take for a startup.  In the public SaaS companies, ServiceNow, Palantir Workday appear to be the main ones doing 3 year contracts — ServiceNow almost exclusively (see here).  But if the application is truly mission-critical, the brand established, and the onboarding significant, 3 years can work.  ServiceNow has 99% GRR as a result … More here.

“Free” — Paul Jozefak, CEO Receeve

  • Jason, ed.: Free can be a great way to get folks using a very easy to use product.  But it’s rarely if ever a marketing strategy in B2B.

“Reducing the price to get a customer.” — Krishnan

  • Jason, ed.: pricing is rarely the true reason a customer picks one vendor over another, if both are fairly priced — and priced consistent with market expectations.  You may have to match or, if you are the up-and-comer, beat the price of the competition.  But that alone won’t make the deal.

“‘Contact us’ for enterprise level pricing. In the end price simplicity and transparency wins.” — Matthew O’Neal, Sales Leader, Sprout Social

  • Jason, ed.: An interesting take from Sprout Social, which has been wildly successful and IPO’d (more on them here).  Still, its pricing is fairly low in a competitive space.  A good challenge and a scenario when “Contact Me” doesn’t work in the enterprise.

“Ramped pricing over a 36 month term. If a company is growing and using the service, we’ll tear up the contract and do a new term and pricing at a higher minimum.”  — Brandon Rothe, DSTRB

  • Jason, ed.:  The best VPs of Sales manage this well.  It can be hard to rip up a contract, but top revenue leaders do it right when usage ends up being much higher or different than expected.

“Pay as you go when there isn’t a direct revenue stream for the customer at the other end of usage. Doesn’t create enough urgency to get over initial hurdle of onboarding.”  — Robert Andersson, Founder, Evercate

  • Jason, ed.: An interesting point with Pay as You Go.  Done wrong, it has the same problem as free pilots.  There’s just no urgency to deploy.  If the product can be instantly used / deployed though, it can work a lot better.

“Giving discounts for people to try new products.” — Chris Whitson, Bomvida Farms.

  • Jason, ed.: I’ve also rarely seen this work in practice.  Discounts don’t get people’s time.  They can, done just right though, create that final urgency to get a deal in flight finally closed.

“I considered moving from seat-based to usage-based and decided to stick to seat based.” — Bruno Larvol, CEO Lavrol

  • Jason, ed.: We all should be more open to usage-based pricing these days, when it’s the right fit for the customer.  But in traditional enterprise software, it doesn’t work as well in most cases.  A fixed price to solve a large problem is what most customers are looking for, as Bruno points out.

 

 

 

Published on October 25, 2021

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