Ideas and Validation January 13, 2020

Pricing for enterprise sales?

Patrick McCurley @gainsightsPatrick

Hey hackers,

At 90% of our sales to date have been SME or Mid-size businesses with $7-40pm plans to be the normal SaaS deal.

We launched a new product in the last few months that has resonated with much larger businesses.
Not a bad problem to have, but the requests are for usually tailor-made packages, so this fits our 'Enterprise' package quite nicely.

The thing is though, how the heck do I price it?

So far have been testing the waters, and setting up voice calls with key players to try and establish what value we are delivering and pricing accordingly. But I'm really unclear if sometimes I'm selling our product too cheap, but then I don't want to scare away the deal.

Here are the challenges:

  1. Sweet spots. It seems that some don't flinch at $300+ pm deals, whereas I recently had a billion-dollar ARR company negotiate us down to $60pm. Should I even be thinking in terms of per-monthly prices and costs - annual maybe suits enterprise better anyway? This is still a part-time gig, and I can't help but feel if I'm selling the contracts for too little, I'm giving up the opportunity for this to becomes a full-time business.

  2. Overheads. I just recently read a procurement contract from another $1B ARR company that came in at 25,000 words, specified SLAs, support expectations and a million other things. Surely they aren't expecting a $60pm deal? Of course, I'm going to try and go for a higher deal here, but again I think I'm lacking a strategy.

  3. Value
    Reading about pricing strategies, a popular one is cost-plus pricing. You total your costs then add a margin, simple really. But again, does that apply to enterprise sales? I feel I should be driving up quotes here so we can become a growing company and ultimately improve our services as well as our bottom line. I can't do that as well with small deals to very large companies.

So to drive prices higher, I really need to justify something that these companies are getting for the higher quote. It can't just be the same service as what is listed on our pricing table. Here are a few thoughts:

  • client account management/premium support. We work directly with companies and ensure they are well supported day and night.
  • better technical infrastructure. We put enterprise clients on faster, more effective technical servers, etc.
  • unlimited alerts. Yes, 20 alerts (what we're usually selling on enterprise deals) will cost ~$30pm on our SaaS package. Maybe it's fine that 100 alerts cost a $1B+ business $1000pm?
  • the option of on-prem and/or custom development work.

Grateful for any help or suggestions!

  1. 5
    1. Annual terms are better and more common for enterprise deals.
    2. My experience shows that a typical price range for the enterprise starts about 10k USD per year. Neither for you nor the buyer won't worth handling the extra overhead of the deal if you go much lower than that.
    3. Cost-based pricing rarely makes sense for SaaS products. You should think about the value you provide. If you save one FTE (full-time employee) worth of work that is about 50k per year, selling the solution to let's say 20k, in this case, is win-win.
    4. With enterprise offering, the buyer indeed implicitly assumes a certain level of service and attention. The most common one is dedicated support, custom integrations, SSO, access control, audit logs, etc. But you do not have to provide any of these until they ask, and even if they ask, you can charge them for most of the extra work based on a specific contract. And build your enterprise offering on these works (not giving them exclusivity).
    5. Expect long sales cycle in any cases (6+ month something 1+ years)
    1. 1

      This response was super helpful. I've posted an update to how it ended up here. Can't thank you enough.

    2. 1

      Great response. Exactly what I was looking for. thank you.

  2. 3

    Support, reliable infrastructure, unlimited usage are key expectations for many enterprise.

    On prem is often desirable but it depends on the solution whether it is feasible. How would you deploy/support this? If don't know, don't offer.

    Plan your pricing based on your costs for a 24/7 support team and servers that can handle 1000x your current load. You don't want to sign these deals and then find you have to provide this but can't afford too.

    Ones negotiating you down to $60 fine, but offer then the pro package and be clear they get the core product but not enterprise support at that rate.

      1. 1

        Great news! Next step is meeting their expectations but if the funds are there then will be worth your time/effort or able to outsource/hire/delegate.

        Few more similar deals and can safely quit the day job.

  3. 2

    Are your prices per seat, or for your entire solution? Our enterprise level work is never a predetermined amount or scope, but always a custom quote. So instead of charging our typical $475/mo package for a SME (we can offer that price because we know what to expect and the parameters are clearly defined) we instead quote a custom price and scope.

    When you’re assuming an enterprise client, usually you’ve got to assume a massive amount of responsibility and expect to deliver them a service that’s essentially the same as a full-time employee. It may even take a dedicated team member to handle the account, so that’s worth pricing in.

  4. 1

    Great question! A few learnings from our journey so far.

    For our top tier we're definitely strongly considering ditching our monthly sub full stop. Everyone has the cashflow and budgets to pay for a year and is paying enough to justify invoice payments (which we don't allow monthly).

    Re. price point - every time I think we're overcharging a team doesn't blink, and every time I think we've got it right someone says it's 3x too expensive. What's interesting is trying to work out the characteristics of the company and importantly buyer within the company to predict that.

    Another side fact: we're definitely feeling the truism that the higher up in a company the buyer is, the less they care about demos and pilots and the more they care about macro commercials. We just had a procurement team double the number of seats they wanted to get a lower tier and lock in that price, because they're thinking 3-5 year costs and expansion. Mad.

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