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

Kyle-Poyar by

Back in June 2016, I reported on a relatively new phenomenon in SaaS: the rise of pricing transparency. We investigated pricing practices at 87 of the largest public and private software-as-a-service (SaaS) companies in the US. That study revealed that more than half of private SaaS unicorns (55%) were publishing their pricing online for the world to see, as opposed to only 28% of public SaaS companies.

These SaaS unicorns seemed to embrace a new ethos. Rather than being opaque and hard to do business with, like enterprise software companies of yesteryear, the SaaS company of the future had nothing to hide. They would be friendlier to their buyers, who often didn’t want to waste cycles talking to a sales rep just to get basic pricing information about a product.

Well, the pendulum has swung back the other direction. I revisited the private SaaS unicorns that I had analyzed back in June 2016, companies that include InsideSales.com, Docker, Slack, DocuSign and Dropbox, and found that today, 47% publish their pricing, down slightly from 55% a year and a half ago. No companies that had previously hid their pricing shifted towards transparency in the most recent study.

I also tracked down data on new SaaS unicorns, companies like  Zuora and GitHub, that reached a billion dollar valuation after our original study. Of these new unicorns, a measly 21% publish pricing – a figure lower than what I had seen for publicly traded companies back in 2016. Taken together, just 33% of SaaS unicorns of the 66 we studied currently publish their pricing.Publish vs don't publish pricingInsideSales.com – a company I highlighted in my 2016 post – has actually reversed its policies around pricing transparency. The company began showcasing their packages and pricing on their website in 2015 and kept it visible through 2016. ( Those packages and price points are archived through the Wayback Machine at web.archive.org if you’re interested).

Now, not only do they not release pricing information, they put up an onerous form to even request it. The form includes a whopping  10 fields, including email, phone number, company size, number of sales reps, title, department and CRM.

InsideSales pricing evolution

So, how did we get here?

There are a few reasons for the shift we’re seeing around 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. In 2018 I hope to see a renewed emphasis on transparency. Here’s why.

  1. SaaS companies can’t hide anymore: Buyers are almost always going to search “insert category” and “cost” or “price.” If they can’t find that information on a company’s site, they will go elsewhere. The emergence of third party review sites like G2 Crowd, Capterra, Quora and Siftery increasingly put pricing information into the public domain. Wouldn’t you rather showcase that information on your own terms as opposed to being cut out of the buyer journey?
  1. SaaS companies need to reorient their brands around transparency: Buyers are doing more and more research about vendors before they get in touch with a sales rep. The role of the modern sales rep is going to be more similar to that of an expert or consultant, rather than someone “selling” their products at all costs. To win in this environment, SaaS companies need to establish brands that emphasize trust, helpfulness, and, you guessed it, transparency.
  1. SaaS companies need to accelerate their sales cycles: Most SaaS startups with an inside sales model can’t waste precious resources on less serious, unqualified prospects or those only looking to be educated on the market. Wasted sales and marketing resources leads to poor unit economics, making it hard for a company to attract future funding. Transparent pricing acts as an important qualification gate that allows sales reps to focus their time on serious buyers.

Do you publish your pricing? Why or why not? We’d love to hear from you and learn about your results! Let us know if the comments or tweet to @poyark and @openviewventure.

Senior Director of Market Strategy

  • This is an important frame and I hope we can provoke discussion on this. I completely agree with Kyle on this.

  • Scott N.

    I think if you’re in a crowded market then your case for pricing transparency is a pretty good one. That said, I think point #2 seems less about “pricing transparency” and more about adopting a philosophy or culture of transparency as a company. And I can get behind that 100% regardless of your market vertical.

    Where I disagree is when you make a blanket statement and try and fit all enterprise SaaS startups into one bucket – especially those of us who are mostly using an SDR/outbound sales model. There are many reasons some of us don’t publish our pricing, e.g., complex enterprise deals just don’t allow for simple pricing structures. If you’ve ever worked a complex enterprise SaaS deal, you know that most are negotiated – and not just with your business buyer(s) but many times with procurement as well.

    IMO, I think the message of transparency is fantastic, but employ where it makes sense in your business and make sure pricing transparency aligns with your sales strategy.

    • Kyle Poyar

      @scott7x7:disqus Thanks for your comment. You make a very fair point – I agree that there are a number of business models or contexts where it doesn’t make sense to publish pricing, and instances when you have to deal with procurement are a good example. My thinking is more that in aggregate SaaS companies have been moving away from transparency and I hope to see that trend shift back in the other direction.

  • Jim Milton

    Pricing transparency can mean setting prospective customers up to make the wrong decision, quickly.
    Product marketing can’t always carry the full burden of communicating the utility of a complex or unique offering. I.e., it can be all too easy for a prospect to draw false equivalency between two competitive products that look the same on a web site, but differ sharply in terms of their true value. A professional sales team often has to help a prospect bridge the gap between initial perception and reality, in many cases. The educated consumer is not as educated as he thinks when all he does is skim the surface of competitive positioning without looking under the hood and stress testing against complex scenarios. Side-note: I would caution generally against any faith-based position on pricing, like the one espoused here. The word “transparent” sometimes sounds like it comes from a millennial virtue signalling handbook.

    • Kyle Poyar

      @disqus_VHRZnLTK2r:disqus Thanks for your comment – those are good points. The question then is, if you don’t publish your pricing, how many more “at bats” do you have with buyers where you have a solid chance to change their initial perception? And, how well equipped is your sales team to truly change the perception (and budget)? Also, is your company positioned as a premium, higher priced solution (where you’d need to do a lot of explaining to buyers) or a more mass market product?

  • Sebastiano Bertani

    If a SaaS is targeting different geographies, eg US and Thailand, price transparency may be tough and counter productive.

    • Kyle Poyar

      Thanks for your comment, @sebastianobertani:disqus!

  • There is a fight against transparency, I see it daily. As Scott N. says, I’d like you to go deeper into where pricing comes up in a buyer’s decision process because when you map product complexity and budget authority, the role of transparent pricing info changes.

    • Kyle Poyar

      Thanks for your comment, @chamberspivot:disqus. That’s a great idea for a future post – how and when pricing comes up and how a SaaS company can position themselves so that pricing isn’t a barrier to adoption (whether by escalating the conversation to someone with budget authority, doing a great job at explaining their advantages vs. alternatives, or something else).

  • Dale Underwood

    #1 is absolutely true. Buyers will leave a vendor’s website to search for pricing and, in many cases, will find *something*. Therein lies the danger. Do you hand over your pricing discussion to the web?

    On the other hand, #2 (full transparency/published pricing) doesn’t solve the problem for companies with deeper value props. Giving away pricing without vetting the requester or fully understanding the buyer’s situation seems more suited for well-understood, commodity type services.

    • Kyle Poyar

      Thanks for your comment, @disqus_MFwyre6Muv:disqus. Definitely fair points.