I recently was in discussions with senior execs at 3 of the top SaaS companies about their platforms and partners. And all 3 made the same point — their partners can charge for stuff they can’t. Even if it doesn’t totally make sense.
For example, the average Salesforce customer will buy a fairly expensive stack such as DocuSign / Adobe Sign. Gong, Scratchpad, Salesloft / Outreach, and so much more, on top of the already significant costs of Salesforce. And the average Shopify customer will also pay for Klaviyo, Yotpo, Gorgias, and more on top of the Shopify fees. Neither Salesforce or Shopify alone could really charge the same for all those products.
The same will happen to you as you scale:
- There will be product additions you can easily charge more for. Your customers want to buy it from you already.
- Those you just have to include, and can’t charge more for. They become tablestakes, or the customers just assume it’s included in the price. And feel ripped off if it isn’t.
- Those you might be able to charge more for, but only if they are much, much better than the standalone competition.
- And … those your partners can charge for, but you can’t get away with charging for yourself.
I recently had a version of the same conversation with Ben Chestnut, CEO of Mailchimp, for SaaStr Annual 2022. He pointed out it was fairly easy to charge more for their landing page product, but harder for some of their e-commerce products. The specific reason here was their core buyer — the marketing team. They have budget for high ROI landing pages, but don’t really control the website itself.
HubSpot is also a fascinating example. Recently, they’ve very successfully expanded into a broad-based, multi-product CRM and suite, and driven ACVs up by doing so. But all the way until about 2020, they didn’t really charge anything more for more additions and products. All were basically included in the base price.
So the reasons can vary why some additions you can charge for, and others you can’t. But I’ve seen it again and again.
What I have learned is:
- You have to experiment and learn. Where customers are fine paying more, and where they expect it included.
- It’s easier to sell an addition or second product to the same ICP and buyer. It’s much harder to sell a variant of your product to a brand-new buyer at the same company.
- You sometimes have to include what others charge for. It just is what it is. Especially if your version of a feature or product is relatively basic vs the competition.
- It’s probably easier to charge for product expansions and additions when the ROI is very clear. Your customers will want to buy more from you, if they trust you. You want to buy more from your trusted vendors. When the ROI is super clear, it’s a much easier sale.
I don’t have a magic formula here. But I have learned it’s not always the obvious product enhancement you think you can charge more for … that you actually can.
Go to Publisher: SaaStr
Author: Jason Lemkin