8 ms·

Oh I might add another huge thing: Have a way to justify/explain your pricing and how you came to that number. When you have to "learn about my company" in or

Oh I might add another huge thing: Have a way to justify/explain your pricing and how you came to that number. When you have to "learn about my company" in order to give me pricing info, I know you're just making the price up based on what you think I can pay. That's going to backfire on you because after you send me pricing, I'm going to ask you how you arrived at those numbers. Is it by vCPU? by vRAM? by number of instances? by number of API calls per month? by number of employees? by number of "seats"? If you don't have some objective way of determining the price you want to charge me, you're going to feel really stupid and embarrassed when I drill into the details.

JoshTko 2y ago
I'm confused by this, why would sales team know in detail the vRAM contribution to sales price, and how is it relevant to your purchase decision? I've never heard of enterprise/SAAS pricing to be based primarily using cost plus pricing.
- adammarples 2y ago
  Isn't that exactly how a lot of things are priced? Ie. Snowflake. Pay for compute, pay for storage, etc.
  - malfist 2y ago
    Some things are sure. But not most. You wouldn't expect to go to McDonald's and they tell you (or even know) how much the fertilizer to grow the corn that feed the pigs that made the bacon contributed to the price you pay for a burger
    - atq2119 2y ago
      If McDonald's insisted on having a long sales phone call to sell me a burger, then yeah, I'd expect them to be able to provide me that information.
      - gitgud 2y ago
        Really? That means you basically want to know what profit margins they’re running at… which no business would want to (or should need to) reveal
        squeaky-clean 2y ago
        That's exactly what's happening to you when you're the prospective buyer in one of those calls. I'm not in sales, but I've had a job once where I could see all the financials. And we would very often be charging one customer 10x what we charged another for exactly the same tier of service. Sometimes the huge corps would be paying more for a lower service tier than a small corp on a higher tier.
        WJW 2y ago
        You can find that information in quarterly published information for all publicly traded companies, and for many non-public companies with only slightly more searching.
    - IanCal 2y ago
      But McDonalds absolutely can tell you an objective measure of what they charge you based on what you're getting. They charge you x per burger and y per fries and ... The examples contained CPU and ram but that's not what they say everything should be - just some objective measure. Snowflake charge by time, storage and size of machine - though they never tell you what the machine actually is underneath. I don't know what their "large" is. Maybe it's by concurrent users, maybe amount of hours of support, maybe API calls. I think the key thing was "we'd charge you X because you'd use Y" rather than "we'd charge you X because you look like you might pay it"
  - freedomben 2y ago
    Yes especially enterprise software marketed toward platforms/infrastructure usually are priced this way. SaaS products aimed at consumers or high-level business (like HR, Accounting, etc) often don't, so depending on what people's experience is mostly they may think differently
- freedomben 2y ago
  Some products (especially infrastructure) still bill based on (outdated and often irrelevant) core counts and memory count. A few years ago I talked to a seller of a PDF library/toolkit who wanted to know my production and staging core count before they would quote me a price. Explaining to them that it runs in a serverless function on-demand was fun, especially because they would say things like, "well, what's your average?" I would often reply and say my average is defined by a function where you take the number of active users (which itself is highly elastic) and calculate for average runtime at 4 cores per user for approximately 50 ms per page (which page count is highly elastic too) and sum to get "average core use per month". Needless to say it was like pushing a rope. More common now with SaaS seems to be employee count or some other poor proxy measurement for usage. I love actual usage based billing, but some of the proxies people pick are ridiculous. Like, if I have 5 seats or 500 employees, but 2 users spend 6 hours a day in the software and then 10 others maybe look at it once a quarter, paying the same for those is absurd and is not usage-based billing at all.
  - ricardobeat 2y ago
    Usage-based pricing makes sense when you’re buying infrastructure products. For (most?) other things, the price is based on value, not material cost. The cost of that PDF generation might as well round up to zero, but developing the tech cost multiple man-years of work. How do you price that “objectively” unless you’re given a breakdown of the company R&D expenses, operation costs and margins. That is not a reasonable request. Either you’re happy paying $X because it solves your problem and brings equivalent value to your business, or you’re not. I do agree seat-based pricing is often ridiculous, but that’s a problem for the free market to solve. Alternatives usually pop up given enough demand.
    - freedomben 2y ago
      I agree that in general usage-based pricing makes the most sense (particularly as that is a good proxy for measuring how much "value" someone is getting from it), my biggest complaint was that the way they were trying to measure it was dumb and very outdated. It really only made sense in a world where everyone was still running on physical servers or VMs. I would certainly concede that pricing is a very hard problem for a product like this, but whatever pricing they come up with should at least map onto the system it's being used in. Basing it off of number of pages of PDFs generated might would make sense, but they insisted on knowing how many CPU cores I would be allocating (which makes little sense when it's deployed as a highly elastic lambda function!)
lotsofpulp 2y ago
>When you have to "learn about my company" in order to give me pricing info, I know you're just making the price up based on what you think I can pay. That is how 99% of sellers do business. The upper end of the price range is what the buyer can pay, the lower end is what their competitors are asking for. Some sellers are lucky to have few competitors, so they can waste more of the buyers' time trying to narrow down exactly how much they can or are willing to pay.
- willcipriano 2y ago
  This is how a lot of consumer businesses are pricing now. Then they use the same consulting firm as their competitors to set prices.
  - wat10000 2y ago
    It’s how any sensible business sets prices. Your cost sets a floor, that’s all. You set the price at whatever level makes the most money. Many prices end up being a little higher than costs, but that’s because competition drives prices down close to the floor, not because businesses set out to do that. Why do grocery stores have coupons? It’s not because they’re charitable. It’s because coupons are a way to charge higher prices to people more willing to pay. Trying to figure out your customer’s willingness to pay and matching that with your price is nothing new or unusual. The tactics just change when the purchase is big enough to have dedicated salespeople.
  - vajrabum 2y ago
    That is actually price fixing and illegal. Not that in the current regulatory environment that there's likely to be enforcement.
- mhb 2y ago
  So the college model.
- TeMPOraL 2y ago
  Which is why you shouldn't engage with those sellers and companies they represent unless you have no alternative and are truly desperate.
jhallenworld 2y ago
>you're just making the price up based on what you think I can pay It should be based on the email address used. If, for example, your email ends in @google.com, you get charged more. If it ends in @aol.com, then they take pity on you and you get a discount. My co-worker's grandfather owned a TV repair business. The price was entirely based on the appearance of the person and had nothing to do with the actual problem. This way rich people subsidize the repairs of poor people.
- WJW 2y ago
  More like the people who appear rich subsidize the repairs of the people who appear poor. Probably usually fairly accurate but it's amusing to think about the edge cases where the truly rich don't feel the need to dress wealthy anymore and get their TV repaired for cheap.
  - Aeolun 2y ago
    One of the big benefits of wealth is that everything costs less. This is just an extension of that.
    - WJW 2y ago
      Don't want to be a hater but the parent of my previous post was literally about charging more for rich people. That is the entire point of enterprise plans too.
    - eru 2y ago
      Wealthy people usually spend more---just because they are less price sensitive and care more about other metrics. I'm not sure how everything 'costs less'? You could say that wealthy people can substitute money for time. So they need to spend less eg working hours for each good consumed.
      - l0ng1nu5 2y ago
        I think he's getting at the pair of boots theory. https://en.m.wikipedia.org/wiki/Boots_theory https://en.m.wikipedia.org/wiki/Boots_theory
ozim 2y ago
You know it might be also priced on “this guy feels like a pain to work with after the way he asks questions, let’s put the price up”. There is no way to objectively explain that without having person offended - so I am going to put a price I think will cover me dealing with BS questions or attitude of the customer and if he walks it is still a good deal for me. We might think that companies need every single sale - well no sometimes you want to fire a customer or not take one on.
- TristanBall 2y ago
  You don't have to change you process, so you can still explain it rationally. Just leave off the "then I multiplied by 10" part. Which I did by accident once ( not by 10, but it was still substantial )... but it turned out the customer was delighted because we were still 50% vs their existing vendor. Enterprise pricing is a farce. I very much agree with the poster above about vendors disqualifying themselves.. another red flag for me is the Two Suits and Skirt pre-sales Hydra Monster that big vendors love to send around, to scare you into letting them capture all the value that their purporting to provide you. And yes, the above shows I've been both sides of the fence. I felt it was going to be good experience, and it was, but I have regrets too.
risyachka 2y ago
The price is set by the market. It never was and never will relate to the seats/resources used/etc.
- immibis 2y ago
  The price is set by the market as a function of some sellers charging by seats, others by resources used, etc, and some buyers preferring simple pricing models, others preferring usage-based, etc.
ascorbic 2y ago
>just making the price up based on what you think I can pay It's called supply and demand, and it's the way things have been priced since the dawn of commerce. The only time the price is based on cost is when the market is competitive enough to drive that price down, and the cost acts as the floor. Even then, if you can get your costs below those of your competitors then it's your competitors cost that can act as the floor. The way things should be priced is based on the value it gives you. If your service makes me or saves me $100 of value per month, I should be prepared to pay up to a little below $100 for it.
- j1elo 2y ago
  What you're saying is akin to someone entering a clothes shop and the store clerk asking what they work on, to gauge the T-shirt prices according to the client's salary.
  - ascorbic 2y ago
    No, it's setting a price and seeing how many people will pay that price, varying it and see who will pay that. You can derive a demand curve and work out the best price to maximise your revenue. And you can do even better if you can do some price discrimination, so you can sell some to people who otherwise wouldn't be able to afford it, which still charging other more. This isn't judging someone's salary before quoting a price, it's things like charging different prices in different markets, or offering student or senior discounts, or coupons etc.
- radicalcentrist 2y ago
  No it's not called supply and demand, it's called price discrimination. The way things should be priced is based on the value it gives the market as a whole. Anything further is an anti-competitive attempt to vacuum up more of the buyer surplus.
  - ascorbic 2y ago
    Price discrimination is the practice of charging different amounts to different people, according to what they're willing to pay. It's a more efficient approach than just setting a single price that clears the market. It sounds underhand, but most people like it in practice: it's the basis of most discounts and coupons.
exe34 2y ago
is that how you present the price to your own customers? or do you operate on value based pricing?
lowkey_ 2y ago
I've always agreed with this take but now as a B2B founder doing sales, I think it can honestly be interpreted a lot more charitably. I get on an initial discovery call to learn a few things, like: * How much will it cost us to support you based on what you're using our platform for? * How expensive is this problem for you today? * From there, how much money could we save you? My goal is to ensure a (very) positive ROI for the lead, and that we can service them profitably. That's how I put pricing together. It seems pretty reasonable. Our platform is also rather extensible, and I want to make sure that they'll understand how to use it and what it's for, instead of becoming an unhappy customer or wasting their own time.
yabbs 2y ago
You're c-suite and you negotiate based on time and materials vs ROI?
j45 2y ago
Love it, I'm the same. Break the solution selling sales cycle. Non-technical sales people selling software need a better standard to deliver on the promises of their software. We want partners, not vendors. This can be communicated long before reaching out.
TZubiri 2y ago
I was just thinking about this today. Basically replacing my price list or prefacing it with something like : "We've designed the pricing and services to be affordable by bootstrapped startups with just one investing founder. Additionally prices are comparable to a FT SWE on a quarterly basis." Because the truth is that the contracts are almost always different, so while price tables are good to get an idea, words are just better at conveying the ballpark, and they lack the illusion of price rigidness.

JoshTko 2y ago

I'm confused by this, why would sales team know in detail the vRAM contribution to sales price, and how is it relevant to your purchase decision? I've never heard of enterprise/SAAS pricing to be based primarily using cost plus pricing.

adammarples 2y ago
Isn't that exactly how a lot of things are priced? Ie. Snowflake. Pay for compute, pay for storage, etc.
- malfist 2y ago
  Some things are sure. But not most. You wouldn't expect to go to McDonald's and they tell you (or even know) how much the fertilizer to grow the corn that feed the pigs that made the bacon contributed to the price you pay for a burger
  - atq2119 2y ago
    If McDonald's insisted on having a long sales phone call to sell me a burger, then yeah, I'd expect them to be able to provide me that information.
    - gitgud 2y ago
      Really? That means you basically want to know what profit margins they’re running at… which no business would want to (or should need to) reveal
      - squeaky-clean 2y ago
        That's exactly what's happening to you when you're the prospective buyer in one of those calls. I'm not in sales, but I've had a job once where I could see all the financials. And we would very often be charging one customer 10x what we charged another for exactly the same tier of service. Sometimes the huge corps would be paying more for a lower service tier than a small corp on a higher tier.
      - WJW 2y ago
        You can find that information in quarterly published information for all publicly traded companies, and for many non-public companies with only slightly more searching.
  - IanCal 2y ago
    But McDonalds absolutely can tell you an objective measure of what they charge you based on what you're getting. They charge you x per burger and y per fries and ... The examples contained CPU and ram but that's not what they say everything should be - just some objective measure. Snowflake charge by time, storage and size of machine - though they never tell you what the machine actually is underneath. I don't know what their "large" is. Maybe it's by concurrent users, maybe amount of hours of support, maybe API calls. I think the key thing was "we'd charge you X because you'd use Y" rather than "we'd charge you X because you look like you might pay it"
- freedomben 2y ago
  Yes especially enterprise software marketed toward platforms/infrastructure usually are priced this way. SaaS products aimed at consumers or high-level business (like HR, Accounting, etc) often don't, so depending on what people's experience is mostly they may think differently
freedomben 2y ago
Some products (especially infrastructure) still bill based on (outdated and often irrelevant) core counts and memory count. A few years ago I talked to a seller of a PDF library/toolkit who wanted to know my production and staging core count before they would quote me a price. Explaining to them that it runs in a serverless function on-demand was fun, especially because they would say things like, "well, what's your average?" I would often reply and say my average is defined by a function where you take the number of active users (which itself is highly elastic) and calculate for average runtime at 4 cores per user for approximately 50 ms per page (which page count is highly elastic too) and sum to get "average core use per month". Needless to say it was like pushing a rope. More common now with SaaS seems to be employee count or some other poor proxy measurement for usage. I love actual usage based billing, but some of the proxies people pick are ridiculous. Like, if I have 5 seats or 500 employees, but 2 users spend 6 hours a day in the software and then 10 others maybe look at it once a quarter, paying the same for those is absurd and is not usage-based billing at all.
- ricardobeat 2y ago
  Usage-based pricing makes sense when you’re buying infrastructure products. For (most?) other things, the price is based on value, not material cost. The cost of that PDF generation might as well round up to zero, but developing the tech cost multiple man-years of work. How do you price that “objectively” unless you’re given a breakdown of the company R&D expenses, operation costs and margins. That is not a reasonable request. Either you’re happy paying $X because it solves your problem and brings equivalent value to your business, or you’re not. I do agree seat-based pricing is often ridiculous, but that’s a problem for the free market to solve. Alternatives usually pop up given enough demand.
  - freedomben 2y ago
    I agree that in general usage-based pricing makes the most sense (particularly as that is a good proxy for measuring how much "value" someone is getting from it), my biggest complaint was that the way they were trying to measure it was dumb and very outdated. It really only made sense in a world where everyone was still running on physical servers or VMs. I would certainly concede that pricing is a very hard problem for a product like this, but whatever pricing they come up with should at least map onto the system it's being used in. Basing it off of number of pages of PDFs generated might would make sense, but they insisted on knowing how many CPU cores I would be allocating (which makes little sense when it's deployed as a highly elastic lambda function!)

lotsofpulp 2y ago

>When you have to "learn about my company" in order to give me pricing info, I know you're just making the price up based on what you think I can pay. That is how 99% of sellers do business. The upper end of the price range is what the buyer can pay, the lower end is what their competitors are asking for. Some sellers are lucky to have few competitors, so they can waste more of the buyers' time trying to narrow down exactly how much they can or are willing to pay.

willcipriano 2y ago
This is how a lot of consumer businesses are pricing now. Then they use the same consulting firm as their competitors to set prices.
- wat10000 2y ago
  It’s how any sensible business sets prices. Your cost sets a floor, that’s all. You set the price at whatever level makes the most money. Many prices end up being a little higher than costs, but that’s because competition drives prices down close to the floor, not because businesses set out to do that. Why do grocery stores have coupons? It’s not because they’re charitable. It’s because coupons are a way to charge higher prices to people more willing to pay. Trying to figure out your customer’s willingness to pay and matching that with your price is nothing new or unusual. The tactics just change when the purchase is big enough to have dedicated salespeople.
- vajrabum 2y ago
  That is actually price fixing and illegal. Not that in the current regulatory environment that there's likely to be enforcement.
mhb 2y ago
So the college model.
TeMPOraL 2y ago
Which is why you shouldn't engage with those sellers and companies they represent unless you have no alternative and are truly desperate.

jhallenworld 2y ago

>you're just making the price up based on what you think I can pay It should be based on the email address used. If, for example, your email ends in @google.com, you get charged more. If it ends in @aol.com, then they take pity on you and you get a discount. My co-worker's grandfather owned a TV repair business. The price was entirely based on the appearance of the person and had nothing to do with the actual problem. This way rich people subsidize the repairs of poor people.

WJW 2y ago
More like the people who appear rich subsidize the repairs of the people who appear poor. Probably usually fairly accurate but it's amusing to think about the edge cases where the truly rich don't feel the need to dress wealthy anymore and get their TV repaired for cheap.
- Aeolun 2y ago
  One of the big benefits of wealth is that everything costs less. This is just an extension of that.
  - WJW 2y ago
    Don't want to be a hater but the parent of my previous post was literally about charging more for rich people. That is the entire point of enterprise plans too.
  - eru 2y ago
    Wealthy people usually spend more---just because they are less price sensitive and care more about other metrics. I'm not sure how everything 'costs less'? You could say that wealthy people can substitute money for time. So they need to spend less eg working hours for each good consumed.
    - l0ng1nu5 2y ago
      I think he's getting at the pair of boots theory. https://en.m.wikipedia.org/wiki/Boots_theory https://en.m.wikipedia.org/wiki/Boots_theory

ozim 2y ago

You know it might be also priced on “this guy feels like a pain to work with after the way he asks questions, let’s put the price up”. There is no way to objectively explain that without having person offended - so I am going to put a price I think will cover me dealing with BS questions or attitude of the customer and if he walks it is still a good deal for me. We might think that companies need every single sale - well no sometimes you want to fire a customer or not take one on.

TristanBall 2y ago
You don't have to change you process, so you can still explain it rationally. Just leave off the "then I multiplied by 10" part. Which I did by accident once ( not by 10, but it was still substantial )... but it turned out the customer was delighted because we were still 50% vs their existing vendor. Enterprise pricing is a farce. I very much agree with the poster above about vendors disqualifying themselves.. another red flag for me is the Two Suits and Skirt pre-sales Hydra Monster that big vendors love to send around, to scare you into letting them capture all the value that their purporting to provide you. And yes, the above shows I've been both sides of the fence. I felt it was going to be good experience, and it was, but I have regrets too.

risyachka 2y ago

The price is set by the market. It never was and never will relate to the seats/resources used/etc.

immibis 2y ago
The price is set by the market as a function of some sellers charging by seats, others by resources used, etc, and some buyers preferring simple pricing models, others preferring usage-based, etc.

ascorbic 2y ago

>just making the price up based on what you think I can pay It's called supply and demand, and it's the way things have been priced since the dawn of commerce. The only time the price is based on cost is when the market is competitive enough to drive that price down, and the cost acts as the floor. Even then, if you can get your costs below those of your competitors then it's your competitors cost that can act as the floor. The way things should be priced is based on the value it gives you. If your service makes me or saves me $100 of value per month, I should be prepared to pay up to a little below $100 for it.

j1elo 2y ago
What you're saying is akin to someone entering a clothes shop and the store clerk asking what they work on, to gauge the T-shirt prices according to the client's salary.
- ascorbic 2y ago
  No, it's setting a price and seeing how many people will pay that price, varying it and see who will pay that. You can derive a demand curve and work out the best price to maximise your revenue. And you can do even better if you can do some price discrimination, so you can sell some to people who otherwise wouldn't be able to afford it, which still charging other more. This isn't judging someone's salary before quoting a price, it's things like charging different prices in different markets, or offering student or senior discounts, or coupons etc.
radicalcentrist 2y ago
No it's not called supply and demand, it's called price discrimination. The way things should be priced is based on the value it gives the market as a whole. Anything further is an anti-competitive attempt to vacuum up more of the buyer surplus.
- ascorbic 2y ago
  Price discrimination is the practice of charging different amounts to different people, according to what they're willing to pay. It's a more efficient approach than just setting a single price that clears the market. It sounds underhand, but most people like it in practice: it's the basis of most discounts and coupons.

exe34 2y ago

is that how you present the price to your own customers? or do you operate on value based pricing?

lowkey_ 2y ago

I've always agreed with this take but now as a B2B founder doing sales, I think it can honestly be interpreted a lot more charitably. I get on an initial discovery call to learn a few things, like: * How much will it cost us to support you based on what you're using our platform for? * How expensive is this problem for you today? * From there, how much money could we save you? My goal is to ensure a (very) positive ROI for the lead, and that we can service them profitably. That's how I put pricing together. It seems pretty reasonable. Our platform is also rather extensible, and I want to make sure that they'll understand how to use it and what it's for, instead of becoming an unhappy customer or wasting their own time.

yabbs 2y ago

You're c-suite and you negotiate based on time and materials vs ROI?

j45 2y ago

Love it, I'm the same. Break the solution selling sales cycle. Non-technical sales people selling software need a better standard to deliver on the promises of their software. We want partners, not vendors. This can be communicated long before reaching out.

TZubiri 2y ago

I was just thinking about this today. Basically replacing my price list or prefacing it with something like : "We've designed the pricing and services to be affordable by bootstrapped startups with just one investing founder. Additionally prices are comparable to a FT SWE on a quarterly basis." Because the truth is that the contracts are almost always different, so while price tables are good to get an idea, words are just better at conveying the ballpark, and they lack the illusion of price rigidness.