A few years ago I had a number of price management software companies pitch me on their solutions. At the time I was Director of Pricing at a large B2B software company. We had a fairly complex global organization, a direct, inside sales force as well as multiple channel partners, and a big portfolio. We were trying to up our game on the pricing strategy and execution front to improve profit, velocity of sale and customer experience.
Some of these vendor meetings and demos were pretty compelling. The Price Management software packages were fairly robust and highly configurable. Most were geared toward pricing analytics. I wasn’t convinced this was what we needed but thought it was likely that with a lot of implementation work, they might be able to support what we were doing.
There was one company in particular whose product I was leaning toward. But over the course of multiple phone calls and an in-person demo, the sales reps of this company never once raised the topic of how much their solution would cost. It was the elephant in the room. So, of course, as an expert in pricing strategy, and a potential client, I asked the inevitable question: “How much will this cost? What does your pricing look like?”
Their answer quickly deflated any thoughts I’d had of buying the software. First of all, the two guys in the room paused and looked at each other first — not a good sign—and then one of them, the account lead, gave a vague answer which basically equated to “it depends.”
When I pushed again and asked for a ballpark number and explanation of the structure of the pricing, I got “Well, it depends on what capabilities of the software you’re using, but generally, it would be at least $1 million to get started.” As soon as these words left his mouth, the conversation was over from my perspective. Why?
- They had no pricing structure. And no pricing structure to me screams “amateur.” If they don’t even understand their own business from a pricing perspective, how are they going to help me with mine?
- There was no willingness to talk about a starting point or ramp-up phase, nor any acknowledgement of the process. There was no way I, as a director-level employee, was going to get sign-off on a million-dollar deal without a significant POC (proof of concept).
- Last, but certainly not least, their lack of transparency on this topic and their clear discomfort with the discussion of price and how it would be determined made me feel that this was just a way for them to test the waters and see where the limit was. This is not a good beginning to a trusted relationship—which is what any long-term vendor relationship, especially enterprise software, should be.
As SaaS increasingly takes over the world of software sales, sales and pricing transparency is increasingly essential for B2B SaaS companies.
[pullquote align=center]Any company hoping to increase sales velocity and create trusted relationships with customers must create the culture, policies and approach that ensure transparency in sales and pricing communications with customers.
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Often, especially in a start-up context, this requires a significant up-front effort. To ensure that both the pricing structure and levels are in the right ballpark, it’s necessary to understand the competition, frames of reference, value of the solution, buying center and usage patterns. One benefit of doing this homework and being able to talk openly and rationally about pricing structure is that companies gain a lot of credibility with their customers. Customers are not distracted by the thought that they might be getting a higher price than one of their competitors. In the process, sales gets valuable feedback on their price in the marketplace, and this can inform product, marketing and pricing strategy. Particularly in the case of small, growing companies, the strength of these initial customer interactions can lead to referrals and subsequent customers.
Matt Bellows, CEO of Yesware www.yesware.com , articulates the benefit of this transparent approach in a recent Entrepreneur.com article: “The radical transparency approach is more and more required for sales. You get a lot of benefit from sharing what used to be considered sensitive information with a customer. It’s a way to stand out in a crowded marketplace.”
Pricing and sales transparency continues to be a much-debated topic by the high-tech executives with whom I have worked. There is, of course, a spectrum of transparency. Some companies are completely transparent with some percentage of their transactions (smaller, online, or reseller-based) and less so with others (largest deals/customers).
But regardless of where companies end up on this spectrum, there are undeniable benefits to transparent pricing:
1.) A customer more quickly makes a decision when they feel they have all the relevant information.
2.) A trusted relationship is established, and
3.) Customers don’t worry that they have been “suckered” into paying more than one of their competitors for the same solution or benefits.
We’d love to get your perspectives on sales and pricing transparency in your business or in your interactions with vendors. We hope you’ll take this quick survey. We will share aggregated results back to you when our survey is complete.
