I’ve met hundreds A number of founders over the years, and most, especially early-stage founders, share a common go-to-market grip: pricing.
For enterprise software, traditional pricing methods such as the per-seat model are often easier to detect than for products that are overpriced, especially used by people in essentially the same way, such as Zoom or Slack. . However, it’s a different ball game for startups that offer more complex services or products.
Most startups struggle with the per-seat model because their products, unlike Zoom and Slack, are used in different ways. Salesforce, for example, employs regular SEAT licenses and administrator licenses — customers can opt for a lower price for solutions with less-use parts — while other products are priced on a negotiated basis as part of an annual renewal. it occurs.
The CIO you’re selling to may have a strong champion of you or a very friendly person handling the purchase, but what doesn’t matter is that the pricing can’t be easily explained and understood. Complicated or unclear pricing adds more friction.
The initial pricing discussion should be centered around the buyer’s perspective and the value the product creates for them. It’s important for founders to think about output and outcome, and a number they can defend appropriately for customers going forward. Of course, self-evaluation is hard, especially when you’re asking someone else to pay you for something you made.
This process will take time, so here are three tips to make the ride easier.
Pricing is a Journey
Pricing is not a fixed exercise. There are many intangible aspects involved in the enterprise software business, and the perceived value, quality and user experience of a software product can be highly variable.
The pricing journey is long and despite what some founders may think, jumping into customer acquisition isn’t the first stop. Instead, the first step is to make sure you have a fully developed product.
If you are a late-seed or Series A company, you are focused on landing those first 10-20 clients and securing some wins to perform in your investor and board decks. But as you grow your organization to the point where the CEO isn’t the only person selling, you want your market position to be explored.
Many startups fall into the trap of thinking: “We need to figure out what pricing looks like, so let’s ask 50 imaginary customers how much they would pay for a solution like ours.” I do not agree with this point of view, as the product has not been finalized yet. You haven’t figured out product-market fit or product messaging and you want to spend a lot of time and energy on pricing? Sure, revenue is important, but you should be more focused on finding a way to earn revenue than on finding a strict pricing model.