3 ms·

I find these things horribly annoying too, but here’s what they’re for: They’re there so that the sales person can extract a variable amount of revenue from yo

by wheels 6y ago

I find these things horribly annoying too, but here’s what they’re for: They’re there so that the sales person can extract a variable amount of revenue from you based on how much value you’re getting from their system, and how much you can afford to pay. Utility pricing assumes that service volume is high and can mostly be recouped at slightly above infrastructure costs. In that case, utility pricing is a win for most parties. But in smaller services, where R&D costs are almost certainly more relevant than infrastructure, sales must recoup R&D. You may have a customer with 500 instances, but extracting low value per instance, paying the same as a customer with one instance, for whom the service is business critical. From the point of the provider, both are probably a win. But if they charged the customer with one instance 1/500th of the larger customer, their service might be unsustainable.

tbrock 6y ago
Does this actually work? Usually when this happens to me I write off the service and never interact with them again unless I absolutely have to. If I have a gun to my head I’ll make peace with it but otherwise I’m not going to talk to your sales rep to try your product. Period. I had this happen with loggly when we first started out and the first sales rep was pleasant enough. I even felt like I got a deal because he customized a plan and was working with us to help our little company succeed. Nice work! Time passed and they changed who our rep was 3x in one year. Each time it happened they wanted to have a 30 minute call to “get to know me”. I did that twice then told them to get lost and cancelled my contract. Get the notes from the previous sales rep! I hope that the economics studying folks account for lost sales while trying to maximize their profits because I bet they lose a lot of business this way.
- codegeek 6y ago
  Yes this works, for the right customers. We sell a B2B platform for our business and our price point starts at $499/Month (even though we are considering adding cheaper options but that is a whole diff. discussion). Whenever a trial customer signs up, our sales rep. reaches out and tries to talk to them to understand how we can help them and if we are the right fit. It is not necessarily about maximizing profits but ensuring that we are the right fit for them and vice versa because they will otherwise leave anyway. Our platform is complex which means we also need to ask a lot of questions to ensure the prospect sees and understands the value proposition. It is not one of those dead simple SAAS where you signup and can start using it with just 2-3 features (even though if I could, I would love to be running such business, lol). Btw, this is something our company battles with all the time on whether to try and reduce some of the touchpoints but for that, we need to do a hell of a lot more work on automated onboarding etc which is difficult for smaller companies with low volumes of leads.
- deleted 6y ago
  [deleted]
- bdibs 6y ago
  Of course it works, otherwise they wouldn’t continue using it. It’s a simple way to extract the most value from a customer, as well as filter out customers they don’t deem viable for their business.
  - tbrock 6y ago
    That’s a load of crap sales folks tell their leaders. Who’s out there measuring that the value created by this strategy exceeds the value sitting on the sidelines because it grinds their gears? Maybe it doesn’t? I’m sure a lot of people that feel similarly command millions if not billions of budget.
    - wheels 6y ago
      I've known more companies start with utility pricing and move to "high touch" sales than companies move the other way. Companies don't want to have that kind of sales process. They usually have to. Some of the mechanics of that is that if you're doing very large contracts, a lot of the software buyers expect things to be that way. For a lot of businesses, a couple expensive accounts are worth more than all of the small accounts put together. I've seen lots of companies start to disrupt a particular market with utility pricing only to fall back to enterprise sales when they realize that there's a reason everyone else in their industry does that.
      - tbrock 6y ago
        For the higher level tiers absolutely, for a trial just take my credit card and get out of my way. I’ll call you when I want to upgrade my plan. You aren’t “selling” me anything. The product sold itself. At that point let’s have a steak dinner and figure out the details.
        wheels 6y ago
        In a lot of those cases, the company has decided that the lower tiers do not exist, because they lose money, and part of the point of the sales process is to weed them out. (And even if they do have lower tiers, they don't want to hurt their actually profitable higher tiers by providing price anchoring.)
- SpicyLemonZest 6y ago
  Yes. Many customers feel calls with the sales rep are valuable, and would be unsatisfied if a new one didn't offer an introductory call. In my experience, the highest value customers of most SaaS apps want these kinds of calls at least once a quarter.
  - rekabis 6y ago
    > the highest value customers of most SaaS apps want these kinds of calls at least once a quarter. Seriously? Why?? The point of a sales rep is to know me and my needs, and if they can’t get that from the notes on my file, then the company’s internal processes are exceptionally ill suited for sales. And if I am that high value, repeat/continuous calls like that are a bloody waste of my time. Fine, touch bases with me occasionally to see if things have changed, but if nothing has, that phone call had better be over and done with inside of 120 seconds. I’ve got better things to do than shoot the shit with a sales person.
- lefstathiou 6y ago
  It’s called MSFT Azure. It works and people want it.

by wheels 6y ago

tbrock 6y ago

Does this actually work? Usually when this happens to me I write off the service and never interact with them again unless I absolutely have to. If I have a gun to my head I’ll make peace with it but otherwise I’m not going to talk to your sales rep to try your product. Period. I had this happen with loggly when we first started out and the first sales rep was pleasant enough. I even felt like I got a deal because he customized a plan and was working with us to help our little company succeed. Nice work! Time passed and they changed who our rep was 3x in one year. Each time it happened they wanted to have a 30 minute call to “get to know me”. I did that twice then told them to get lost and cancelled my contract. Get the notes from the previous sales rep! I hope that the economics studying folks account for lost sales while trying to maximize their profits because I bet they lose a lot of business this way.

codegeek 6y ago
Yes this works, for the right customers. We sell a B2B platform for our business and our price point starts at $499/Month (even though we are considering adding cheaper options but that is a whole diff. discussion). Whenever a trial customer signs up, our sales rep. reaches out and tries to talk to them to understand how we can help them and if we are the right fit. It is not necessarily about maximizing profits but ensuring that we are the right fit for them and vice versa because they will otherwise leave anyway. Our platform is complex which means we also need to ask a lot of questions to ensure the prospect sees and understands the value proposition. It is not one of those dead simple SAAS where you signup and can start using it with just 2-3 features (even though if I could, I would love to be running such business, lol). Btw, this is something our company battles with all the time on whether to try and reduce some of the touchpoints but for that, we need to do a hell of a lot more work on automated onboarding etc which is difficult for smaller companies with low volumes of leads.
deleted 6y ago
[deleted]
bdibs 6y ago
Of course it works, otherwise they wouldn’t continue using it. It’s a simple way to extract the most value from a customer, as well as filter out customers they don’t deem viable for their business.
- tbrock 6y ago
  That’s a load of crap sales folks tell their leaders. Who’s out there measuring that the value created by this strategy exceeds the value sitting on the sidelines because it grinds their gears? Maybe it doesn’t? I’m sure a lot of people that feel similarly command millions if not billions of budget.
  - wheels 6y ago
    I've known more companies start with utility pricing and move to "high touch" sales than companies move the other way. Companies don't want to have that kind of sales process. They usually have to. Some of the mechanics of that is that if you're doing very large contracts, a lot of the software buyers expect things to be that way. For a lot of businesses, a couple expensive accounts are worth more than all of the small accounts put together. I've seen lots of companies start to disrupt a particular market with utility pricing only to fall back to enterprise sales when they realize that there's a reason everyone else in their industry does that.
    - tbrock 6y ago
      For the higher level tiers absolutely, for a trial just take my credit card and get out of my way. I’ll call you when I want to upgrade my plan. You aren’t “selling” me anything. The product sold itself. At that point let’s have a steak dinner and figure out the details.
      - wheels 6y ago
        In a lot of those cases, the company has decided that the lower tiers do not exist, because they lose money, and part of the point of the sales process is to weed them out. (And even if they do have lower tiers, they don't want to hurt their actually profitable higher tiers by providing price anchoring.)
SpicyLemonZest 6y ago
Yes. Many customers feel calls with the sales rep are valuable, and would be unsatisfied if a new one didn't offer an introductory call. In my experience, the highest value customers of most SaaS apps want these kinds of calls at least once a quarter.
- rekabis 6y ago
  > the highest value customers of most SaaS apps want these kinds of calls at least once a quarter. Seriously? Why?? The point of a sales rep is to know me and my needs, and if they can’t get that from the notes on my file, then the company’s internal processes are exceptionally ill suited for sales. And if I am that high value, repeat/continuous calls like that are a bloody waste of my time. Fine, touch bases with me occasionally to see if things have changed, but if nothing has, that phone call had better be over and done with inside of 120 seconds. I’ve got better things to do than shoot the shit with a sales person.
lefstathiou 6y ago
It’s called MSFT Azure. It works and people want it.