Why SaaS Companies are Moving Away from Pricing Transparency (and Why That’s a Bad Thing)

Extract from article by Kyle Poyar of OpenView Venture Partners

There are a few reasons for the shift we’re seeing around [and away from] pricing transparency. The first is secular in nature. The new unicorns that have emerged over the past year and a half over-index in verticals like Cybersecurity (Crowdstrike, Cylance, CloudFlare) and Analytics (Uptake, Medallia, Rubrik), as opposed to SaaS Apps or SMB solutions. These verticals haven’t been known for transparency given that they typically target large enterprises and have complex inputs to calculate pricing.

The second main reason has to do with the fact that many companies often see it as in their best interest to be as private as possible. That way they don’t have to worry as much about competitors seeing their pricing, and then undercutting them to win a deal. It also means they don’t have to keep their pricing simple and straightforward since it won’t be shared without the aid of a sales rep. Keeping pricing under wraps provides for the flexibility to change prices and packages without as much fear of having to re-price their base of customers.

Thirdly, many sales leaders believe that they have a better chance to win a deal if they lead with value as opposed to price. A buyer might get sticker shock if they see pricing online out of context. But if the sales team has a chance to showcase the capabilities and get more executive decision makers involved, perhaps they could catalyze a deal from an initially skeptical buyer.

Making the case for transparency.

These are all fair reasons, especially for companies that sell into large enterprises with long sales cycles. But I believe companies have gone too far, and in the process have hurt both buyers as well as themselves.

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