SaaS pricing and its models are changing throughout the history of SaaS companies. Trends are changing from company to company to earn as much as they can, one following what bigger SaaS companies do, others going against the stream and testing new SaaS pricing models out.
Old - visible SaaS pricing model
Only two years ago a surprising majority of private software companies were publishing their SaaS pricing online for the whole world to see. No need to fill out forms or jump through phone hoops to see what the software cost. As early-stage VC company Openview remarked, “rather than being opaque and hard to do business with, like enterprise software companies of yesteryear, the SaaS company of the future has nothing to hide”. Certainly a harsh critique, but their point reinforced what was then the industry normal.
New - hiddden SaaS pricing model
But the trend didn’t last and today, the pendulum is swinging back. Over the last two years, the number of private companies publishing pricing is down 10%. No SaaS companies that were reviewed in an industry-wide pricing study that did not publish pricing had made a move toward more transparency. Some had actually reversed course. Of the publicly traded SaaS unicorns in the study, a meager 21% put pricing online. Another study shows that today, 80% of the top 250 most successful SaaS companies in the world don’t list pricing.
This is NOT a post about the merits of transparent versus opaque pricing. There are plenty of compelling reasons and good companies funded by principled investors on both sides. (Full disclosure: Cleanshelf does not publish its pricing on the web, however, our pricing approach and model aligns with the financial and compliance goals of SaaS buyers).
Automated sales experience issue
The issue is that as the strategy of obscured pricing goes mainstream, most employees don’t stand a chance. Once they find a hot new SaaS product to try and are forced to connect with a salesperson, they’re battling a machine. Immediately they’re thrust into the flow of a massively automated and rigorously managed sales experience. They are the target of sales tactics honed by deep analytics and optimized for conversion.
Every question or area of natural resistance offered by employees has an easy answer. Even with the best of intentions, the average company marketing analyst checking out a SaaS tool is overmatched. They’re a near-certain conversion – unfamiliar with software procurement and never having sparred with a seasoned salesperson.
- There’s free trials.
- There’s no obligation demos.
- There’s volume discounts.
- There’s promotional pricing.
- There’s pay-later annual contracts.
It is no surprise then that in 2019 the average employee has 44 SaaS applications. That an 800-person U.S. company will spend more than $15.11 million dollars on cloud apps and services, and of that $4.35 million dollars will be wasted on unused licenses or wasteful contracts.
Why do SaaS companies hide pricing?
With non-public pricing, companies can effectively sell to the perceived budget or size of the target company. Salespeople can offer a no-brainer entry price and be flexible early on to grab a foothold in a high-growth company. From there, license creep happens throughout the org. They can reel in new business with custom pricing without having to re-contract existing clients. Most importantly, by leading with value and selling the upside of productivity, collaboration, and money savings, they can rationalize pricing to a prospect and avoid turning sticker-shocked prospects away.
Price is not the only factor
Of course, companies that don’t share pricing aren’t to be feared or avoided. A million dollar deal should be sold different than a $10,000 deal. Price is not the only deciding factor. Support, service, and feature sets are important and, often, best explained by a knowledgeable salesperson. SaaS isn’t like buying a sandwich (although, it is getting as cheap and nearly, as simple); there are other aspects.
Hidden SaaS pricing consequences
What the trend away from vendor pricing transparency means is that companies need to improve the visibility they have into the various apps and licenses inside their companies.
Building intelligence into license management can reduce wasted spend, avoid compliance nightmares, and ensure the right tools are being deployed in the right ways across the right teams. This level of visibility is impossible to achieve with a finance or IT-led spreadsheet management, or worse, self-reporting by managers around the organization. As important, since no one is publishing pricing, is knowing what the going rate for licenses is.
We’ve written about how companies are taking a page from Salesforce and finding wilding success selling into companies everywhere. More than ever you need to manage healthy license adoption and spend.
You need a tool to slow the upswell of licenses in your org. And for the ones you do keep around, you need to know that you’re getting a competitive price. Contact Cleanshelf today to find out how our simple tool can help create an easily managed cloud software experience in your company.
Oh, and breathe easy, our SaaS sales approach is all about you.