I once worked for a fairly big (500m-1b market cap) company that worked this way. Pricing was customized for every client. They, like many companies, made a ton of money doing this.
One down side, however, was that this business model can trap you. Once you've sold customers at lots of different price points, you can never go back and publish pricing, since those customers that are overpaying will be upset. You could set your prices high, but that would turn off many new customers who need a lower price point. So, while you can make a lot of money doing this, give it some thought before committing to it.
This is why Google Adwords is so genius. It's both dynamic (charging more for bigger pockets) and it scales, which is hard balance to strike.
Yep. I've been in start-ups where via simple pricing we drained the well for all other players, grabbing everything for ourselves. I've also been in start-ups where we found out that simple come-to-us pricing simply does not work and they needed an active sales rep process for the majority of the customers. (And if the majority need it, sorry, we can't just display prices. Losing the sale to you is worth keeping the other 90% of our sales.)
I view Adwords more as a marketplace than a service. Its pitting customers against each other for what is naturally a finite inventory. There is some more opaque custom pricing going on in the background that nullifies some of the true market dynamics, but I wouldn't quite call it shill bidding on Google's behalf.
The did create a very fluid and dynamic market by (mostly) removing the sales people from the process. They need no applause for this, because it makes it waaaaaay easier to buy massive quantities of advertising from them successfully over a long period of time.
Sorry, but it just doesn't work this way. My company was bought by one of those companies that doesn't list pricing up front. There's never been a case where a single person could unilaterally decide to purchase their services.
What "Call us" means is "Send us an RFP (Request for Proposal) and we'll submit a bid". Why does this work? Shareholder or government policies usually require due diligence in the form of several competing bids. That means the potential customer has an incentive to contact as many providers as they can find and send them an RFP.
Ultimately the submitted bid is deliberated on by committee and several presentations might be required before a decision is made. You might think that I'm talking about massive deals for something like contracts for infrastructure or fighter jets, but no, I'm talking about simple SaaS.
It costs a lot to sell to these companies/organizations. The bids are usually hundreds of pages long, stating everything from features to datacenter security. Companies like Rackspace helpfully provide well written documents for this purpose, but you still have to write a lot on your own. The upshot is that thanks to the sales process the prices are inflated and frankly I see more money change hands over a month than I ever did in a whole year as a startup (a startup that was profitable and growing, no less).
That seems easily solvable by giving those customers a discount to the price you want to set across the board (which is likely to make them happy), waiting a few months, and then implementing the pricing changes.
Good rule of thumb - more custom product or custom customer, then more customer/opaque pricing.
You can still do much better than a "contact us for pricing" page though.
And even when you're the only game in town, a ten minute conversation can do a much better job of helping the genuine prospect choose the $700/month plan over the $250/month plan than a couple of bullet points on a feature list. And a clients that wouldn't quibble at a quote of $2000/month for the version that does everything they think they need are a lot more likely to do so when a brightly coloured matrix points out they could get away with paying $200 if they didn't want the Excel export...
Frankly, if customers are choosing their plan from a price/feature list rather than receiving a quote based on an assessment of the level of service they need to maximise their returns on using your product, the service isn't really priced on the basis of value.
- I am given a fixed budget to implement something. (I work for the government so I spend millions of dollars a year, but budgeting is done once a year so I go into a project knowing I have $100k to spend.)
- Find that all the prospective vendors in a field are hidden pricing.
- I end up filling out the "contact us for pricing" forms on a dozen websites.
- I field calls from a dozen salespeople, who don't want to give even approximate pricing until they've done at least a demo and a second conference call.
- When I get to pricing 8 of those 12 are prima facia more than we can afford (see fixed budget above)
- I've just wasted 20-30 hours of my time and 2-3 hours of each vendors time learning about and examining products that I now know I can't afford. Plus there are always several salespeople that don't give up. (I've had salespeople continue to prospect me even after an RFP with published results and purchase from another vendor.)
I remember doing ID Management. We ended up doing Novell at about $60k. But I remember when we got to the pricing stage with another vendor and got a price on the order of $750k. That's 1/3 of the entire departmental budget including salaries and benefits. If I know some amount of pricing going in, I wouldn't have wasted their time.
It didn't pan out, but some percentage of leads not panning out is baked into the model.
This is called a Purchase funnel (or Sales Funnel)
For example, if a buyer sounds highly technical from the beginning(or if they use certain buzz words), the sales reps will transfer to me so I can have a more nuanced conversation.
It's the difference between buying a coffee, and buying a house. You wouldn't buy or sell a house without spending a bit of time on it.
And it's even better value for the vendors (and some customers), because their marginal costs are very low. They can offer a discount to some buyers, and give high prices to less cost sensitive ones.
We ended up doing Novell at about $60k. But I remember when we got to the pricing stage with another vendor and got a price on the order of $750k.
You seem to be under the misapprehension that pricing is fixed.
It's not. If the vendors have some idea of your budget they can tailor the offering to you a lot better.
Also, what the article doesn't talk about is Free Trial options. This might not really be related to pricing pages in general, but are definitely important to how buying decisions are made.
With good design you can make it happen. You'll actually help the sales process 10x, because you'll get rid of the tire kickers and people who are just sort of interested.
The best inside sales ops do not allow this because when you do this at scale, you find out that customers will realize the true value of your product over time and if you significantly overcharged them at the time of signing up, you will lose trust, have trouble renewing and getting referrals. So grossly overcharging just because they are willing to pay is generally a poor business decision.
The fly-by-night operations are more likely to do what you are saying but fly-by-night ops aren't limited to sales-rep model.
[redacted] was such a company. We could not buy (well 'lease' as it's software) the product without agreeing to also purchase training sessions for end-users from them. Even trying to get developers to talk to technical people (so the product could be evaluated) had to be mediated by a sales person so that they could inject their pitches (and up-sells) whenever possible on the conference call.
Edit: Pulling the name just to avoid possible issues. I'll just say that it was a company selling a data warehousing / business intelligence product that a company I worked for needed to use a small portion of to fulfill some contractual obligations (i.e. purchased a company, and needed to port their 100% Microsoft stack over to their 100% OSS stack while retaining feature parity for the acquired company's only customer -- a major Hollywood studio).
Yes, and included in this price is the Sales person doing a sales pitch in site, the mountains of reports and price proposals, the hours of conference calls, the kickbacks to whoever makes the decisions and a nice margin so that the price can be negotiated
And unless you're doing something really, really hard you're overpriced anyway
The "Get free trial/demo/brochure" link to a contact form works fine: that way the company gets to decide whether they want to call you or send a form email with pricing/signup information. In theory a service like Eloqua could even automate who gets a link to the pricing page and who gets a call from the sales rep, although I suspect salespeople generally have better judgement on what looks like a good lead.
And in the mid-high priced B2B market, if you move on without leaving an email/telephone number your enquiry probably wasn't serious enough to warrant giving you a price.
It's also pretty easily ignored at the high end of the market where salespeople won't quote anybody without a proper telephone conversation and/or valid company email, and will claim every package is highly customised (even if it isn't). Even at the low end it's easily dismissed as "out of date", "inaccurate" or "for a different service we've discontinued"... and believe me I've had that conversation plenty of times about third party guesstimates of product prices when those excuses were actually true
Nothing gets me more annoyed than companies and their sites that do this. It's completely the opposite reason for having a website in the first place. DUH
Check this post out where we talk about it a bit, as well: http://blog.priceintelligently.com/blog/bid/180265/Why-Your-...
A LOT of SaaS companies think they're the former when in reality they're the latter.
I was once in the "hidden prices are for silly businesses" camp. I've matured in my understanding of this over the years. You'll note that I sell many things, some of which have sticker prices which you can see on the Internet and some of which are priced by "I pick a number from the set of the reals and if you don't like it then let's talk a bit."
If our businesses can reach a mutual understanding of what is being bought and sold without two people talking to each other, sure, let's go with a sticker price. I mean that both in terms of "what it physically is" and "what it is going to do for your business." That's a product. Maybe the offering won't exactly work for your needs or capture all of the available upside, but the great part about taking the expensive Human Attention component out of the loop is that it will be very attractively priced.
You'll note that at the moment I have products (for very different people) selling from everywhere from $9.99 to $2,497 to "$200 a month".
There are some situations, though, where low-touch or medium-touch sales is not quite enough to reach a meeting of the minds between both parties on what they want to get out of the deal. Then we get to high-touch sales. Many intuitions from low-touch sales go out the window then.
I used to do consulting. At the end of my career $30k was a pretty typical week rate for me. The last proposal I ever wrote had 7 figures attached to it. You can reasonably guess that it was not simply "50 weeks at $20k each" for somebody who looked like my typical clients with me doing my typical thing. You can also reasonably guess that "This proposal represents approximately 2X the lifetime billings of my company" would not have been to my advantage if I had stickered it on the website prior to entering the negotiations. (Don't probe for details on this anecdote, please, as it is brought to you by the letters N, D, and A and the number $LOTS.)
Back before I quit consulting, I was publicly available for it but publicly coy about what it would cost. If firstname.lastname@example.org wrote me "Hey Patrick, We want to hire you, what would that cost?" I'd get in touch with them and feel them out a bit about what they do and how they were envisioning working together. Occasionally that would mean that I was talking to somebody who couldn't possibly pay any rate I'd consider working at. Sometimes they'd say, after talking for 15 minutes or an hour, "Whoa, you could have saved me some time if you had just quoted that at me. I'll never pay it." Being told this a dozen or a hundred times is worth preserving the option value of being in the solution set for the Fortune 500 or allowing my rates to move faster than common intuition says is reasonable as my demonstrable achievements and changing client base began to allow it.
Also, published pricing versus private pricing is not a value judgment about people who can't afford (or otherwise won't purchase) the thingies on offer. "Moving from private pricing to published pricing will make us more money" is a testable proposition. It is, for some offerings, testably false. Some people passionately believe that it is true in a way which confounds refutation by numbers. Oh well. At least some people believe that about many things. In general, numbers still win.
> Being told this a dozen or a hundred times is worth preserving the option value of being in the solution set for the Fortune 500 or allowing my rates to move faster than common intuition says is reasonable as my demonstrable achievements and changing client base began to allow it.
I didn't understand this sentence. Could someone explain what this means to me?
Hidden pricing will inevitably create some circumstances where a lead and I spend a bit of time talking to each other despite that lead not being a great fit for my services. From my perspective, this is OK, because if I were to unhide my prices it would make it impossible for me to do things like pitch BigCo on a million dollar engagement, which is valuable to me. Unhiding prices would also limit my flexibility in changing them. Over the 2.5 year course of my consulting career they went from $100 an hour to $30k a week, often with discontinuous jumps between engagement N and engagement N+1. Clients who were prepared to pay the price I quoted N+1 might be less inclined to pay it if they were aware that, mere days earlier, I had been charging the rate I charged for engagement N for what might, to that client, feel like "the same" thing.
Allowing him ALSO, to set his rates continually higher then one would expect (fast-growth of pricing, from 20k/week to six figures).
So, it was "ok" to have a "wasted" conversation between parties who couldn't afford his rates, to be able to continually raise his rates for those that could afford it. While, not publishing this pricing, and creating his own ceiling.
Then don't tell us the story. You signed an NDA.
You've created a persuasive, socially powerful HN persona (and I'm sure your consulting income thanks you for it), but at what cost? To gain authority you need to make claims for it and back it up with evidence, otherwise nobody cares. So bragging comes with the territory. To keep up your reputation you are forced to write phrases like "Fortune 500" or "7 figures." No problem.
I'm not criticizing you for it. I'm curious. You obviously made a personal choice to engage in personal branding, so why'd you do it? Does it feel liberating to be so open? Or does it feel tiresome, like you're trapped on a treadmill powering your reputation?
"If you have to ask, you probably can't afford it."
Seriously though, if you have to contact a salesperson, it's likely that the product is a "reorganize-the-entire-budget-to-pay-for-this product" type of service. Ergo, if that isn't appealing to you, you aren't the target market, and therefore a waste of time to them. This assumes a "smart" approach as nostromo mentions, of course.
I'll add the caveat that I see several "idiot" approaches to this simply because the "talk to our sales rep" approach is the default in many industries, particularly B2B. You can often hear it expressed as "If we publish our prices, our competitors will know them too!". In my industry - insurance - I've seen 6 figure sales consultants involved in week long sales processes that make us $200 in revenue a year. That's not "smart" at all.
There isn't a 'right' approach, but it depends entirely on the product being sold and the target market whose needs are being addressed.
And that's exactly how GEICO and Progressive were able to come out of nowhere to capture 18% of the automobile insurance market. By using direct sales, they can replace the insurance agent's 10% commission with hourly call-center employees in low-wage states.
In fact, GEICO is now getting very close to knocking Allstate out of its perennial #2 position. Who would've thought, ten years ago?
Private passenger automobile premiums written in 2012:
1. State Farm $32.10 billion 18.37% share
2. Allstate $17.48 billion 10.00%
3. GEICO $16.75 billion 9.58%
4. Progressive $14.44 billion 8.26%
Imagine the answer was always >$50k/year. Would said company ever have anybody click the "add to cart" button after browsing a website for a while? It could be that the missing price is just a signal that this is not that sort of business and if you're looking for something that doesn't require sales people, contracts and purchase orders, you're probably better off just looking elsewhere.
I suppose they could say that directly on the site, but even that might turn out to not be such a good idea.
Unless you test these sorts of things, you never really know.
Coyness has it's place I suppose, especially when you're first starting out with your pricing or need to optimize for touch over scale. Hopefully they figured that out ASAP.
I look at the second example--the "good" example--and the basic plan looks like it gives me---nothing. So now I have to go to some other marketing page, read the description, then, in my head, subtract all the great things that higher tiers give me to figure out what exactly I'd get with the base tier. Having it all in one place is preferable to me. The second problem with the "good" site is by summarizing feature each plan comes with, rather than being more specific, they are assuming that they know what is important to me. What if I could care less (and this has happened to me several times) about some big picture feature, and just need the version that provides database X integration? More clicking, and more likelihood that I buy a higher specced plan that I actually need.
And that is where I think these come from. Not a desire clearly layout what you get for your money, but a desire to obfuscate just enough with requisite marketing to push you towards more expensive options.
Anyone here ever been to Santana Row in San Jose? They have a GUCCI store in there; no prices are displayed for anything.
"If you have to ask, then we're too expensive for you."
It's like how most of us can generally walk into any Target Store or even Macy's(well, some of us) and just buy what we like without looking at the price.... or maybe this is just me.
I've been considering a similar approach for a simple SaaS we run, which we have had trouble with getting traction for.
Look at the Hootsuite example for instance - at this point with 8 million users they should really have more than one plan because there are several different personas in the mix.
Buffer on the other hand had a mono-price schema for a long time, because they wanted the simplicity while they were getting traction (to your point). Now that they're solid, they've been iterating the product and the pricing into their business plan.
- Each customer persona = a pricing tier
- Price based on the customer willingness to pay = talk to them about pricing
- Iterate - your pricing should change as your product and customer do
LOVE you guys with all caps intended. I'd look to Wistia as a really good example for you guys. Your value metrics follow a similar slide up and you can use that extra space for what you do best - awesome content/product marketing.
Biggest thing I'm curious about from a data perspective concerns the science behind the thresholds they've set. You want to see where the break in usage or value is and make sure you capture 95% of that group. Power users of that plan are then pushed into the next plan accordingly.
If you click the link in the article it still is the older version.
It seems like you're trying to tier the pricing based on a customer attribute (their venue size) rather than actual customer usage (ie their interest in value-added features, increased quota for certain features, etc). It seems hard to enforce, and also harder to upsell (ie if I'm a smaller fry, I'm never going to buy your premium plan). But I'm quite a bit out of my league here..
If it were my blog, I would have included a link to "Pay me to show you what I would have done differently", or some other equally organic and not-too-weasely way of selling exactly that service: Reporting on best and worst examples is one thing, relatively LHF, but working with a company to improve is something they should be rewarded for!
Not to mention that doing so may require a company to completely overhaul sales and marketing. Or culture. Or both.
LHF: Low hanging fruit, easily obtainable item.
EDIT: PCCAMPBELL was replying at the same time as me. I like their reply.
The ebook linked from the page has a lot on the right stuff to do.
> As always though, if you need any help, even just a sounding board to chat things through with, we’re here to help.
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Also, spelling error:
You’re making it harder to upsell me
On the eight day
Should be eighth.
Fixed the spelling error and added something a bit better in.
Tell Brendan to stop grinding his coffee so loudly.
Is this the first time you have been to our pen company Circa?"