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Blog, Tip of the Week

Why SaaS Companies Don’t Post Prices

For anyone who has looked around our site, or shopped for any software solution (ex. Salesforce) in recent years, this post is for you. The question of whether or not to post prices has come up a ton in this industry, with varying viewpoints on the benefits and drawbacks.

By and large, most software and SaaS companies keep their pricing sheets gated, and only available at the discretion of a sales rep. While this can certainly be frustrating for potential buyers, especially when all you really want to learn at that moment is the price and not to talk to someone about value and benefits, there are a number of reasons leading to this practice.

 

In this article, we will look at some of these reasons, and using our own first-hand knowledge, hopefully shed a little more light on why it can be for the benefit of both the selling company and the client to not have prices posted outright.

The relationship of software quality to price isn’t always 1 to 1

  • More expensive isn’t always the best solution for your company. Maybe you don’t need the top of the line option – or when you get partway into a demo, you realize it has tons of features you don’t need and don’t want to pay for.
  • Conversely – just because something is affordable to purchase up front, doesn’t necessarily mean it will work as well as advertised.
  • Buying software isn’t like buying everyday items, like food or clothes, where it is pretty easy to estimate how much quality you get for your price. With software, it really does take thorough vetting of a product to determine if it will really meet your needs – and you can easily discount the right decision too early if it seems either “too cheap” or “too pricey” from the outset

Posted prices can scare away buyers who would actually save money in the long run

  • Poor software, that costs less up front, might require more investment long term just to maintain. A few years later when you have grown too big for the product, you have to buy a more expensive version anyway – effectively spending more over that time span than if you had gone with a more expensive option to begin with.
  • How much you should spend on a software solution is a complex calculation, and involves much more than what your budget is, and how much does X product cost. You need to factor in things like, how much money am I losing by not having a better product, and if my processes were X% more efficient, how much more money could I be making? When you start doing advanced calculations, often times higher priced software options turn out to be the better option because they pay for themselves quickly, and after that its all profit.
  • Finally, companies shopping for software are often buying something they have never purchased before. As a consequence, they may not have a particularly concrete idea of what the solution should look like, let alone how much it should cost. In these situations, sticker shock can push businesses onto the wrong product.

 

The price isn’t fixed!

  • What’s the real price? “Well, it depends”. If you have heard this before and want to pull your hair out, know that the feeling is shared by many, but that doesn’t make it less true.
  • For many SaaS and software companies, their products are not one size fits all, or even available as Out of the Box packages. They are designed to be customized and tweaked. Yes, this is a built-in cost, but it also means that you get a solution that is tailored to your business.
  • Then, of course, there is always the fact that Sales just might change the price, depending on the situation. Trying to make their quarterly goals, you just might get a discount if you sign right away. Or maybe additional options and features are thrown in to sweeten the deal. Simply put, posted pricing gives Salespeople less wiggle room to get the deal done.  

Too transparent pricing leads to competitors undercutting you

  • Isn’t this a good thing? Competition leading to the best possible product, for the lowest possible price? … Not always
  • When a product is all about man-hours, and expertise, competition undercutting prices can dehumanize the people who built the software. This could potentially have a huge ripple effect in the company if they are forced to cut the price of their products, leading to decreased profits, resource turnover and a whole host of other issues.
  • This can also put excessive pressure on the software builders to make the product “cost-effective” – leading to corners being cut. And do you really want all of your hard earned business data being housed on a system that is less than thoroughly vetted?

 

On the other side, there are a number of arguments for more transparent pricing that are equally valid, ex. Pricing pages can quickly weed out unqualified buyers, or they increase trust. While these are both true, they can also lead to some of the negative effects discussed above.

No matter how you slice it, there is no clear cut best answer for whether or not software companies should post their prices. There are benefits to both sides of the coin, and in the end, it’s up to each individual company, knowing their target markets, their business model and their history to determine what will yield the best results for both themselves and their customers.

 

-Ryan and the CloudMyBiz Team


 

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