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Introducing XaaS Pricing — and 10 reasons why you should care

What is XaaS Pricing?

XaaS Pricing was launched in 2021 as the industry’s first and only market research and data platform vendor solely focused on B2B Anything a Service (XaaS) pricing. Founded on over a decade of experience delivering best-in-class, tailored, competitive price benchmarking research, XaaS Pricing arms vendors, including existing TBR clients, with actionable pricing intelligence by providing:

  • Best-in-class, price benchmarking research that arms vendors, including existing TBR clients, with competitive and actionable pricing intelligence, public and nonpublic XaaS pricing, packaging and discounting data covering approximately 50 vendors (soon to scale to 20,000) across 40-plus unique and proprietary metrics
  • Monthly Pulse, a report on key trends and updates in the B2B XaaS pricing space
  • Quarterly deep-dive reports on pervasive themes and recommendations for vendors
  • Weekly newsletter at https://xaaspricing.substack.com/
  • Access to XaaS Pricing’s analysts
  • Availability for custom competitive and market pricing research (additional fees)

All TBR clients now have access to XaaS Pricing for an introductory trial period of 90 days. XaaS Pricing is available via the TBR client portal. To participate in the beta program for the XaaS Pricing SaaS application, please click here to get set up.

How can XaaS Pricing help my business?

All those things are well and good, but they aren’t super useful unless they are actionable. Here are 10 reasons why every B2B technology vendor should care about XaaS pricing:  

You spoke, we listened  

A recent TBR survey of 200 users indicated that pricing and go-to-market strategies are the most useful areas of competitive intelligence research for you. XaaS Pricing was launched to support these needs.

‘As a service’ continues to eat the world

Cliché but true. Subscriptions are transforming consumer experience and disrupting all aspects of B2B. Even in the services sector, for example, professional services are being productized into “as a Service” offerings (Our thoughts on PwC’s actions in that space). Vendors need to understand these models at scale to make the pivots necessary to succeed.

Markets are more competitive than ever, and getting more competitive by the day

Crayon’s 2022 Statement of Competitive Intelligence Report showed that nearly 60% of companies see their markets as “much more competitive in recent years.” Competitive product advantages evaporate quickly, and differentiation materializes through positioning, which often comes down to how value is positioned through pricing and packaging.

B2B tech companies spend way too little time on pricing

According to ProfitWell, companies spend less than 10 hours per year on pricing. This is due to a number of reasons, including time available, ownership within the organization, dearth of appropriate skills, and lack of data. Differentiating companies make pricing a regular process.

Pricing success yields outsized financial performance gains

ProfitWell also reports that a 1% increase in pricing can yield an 11% increase in profitability. Companies that regularly track, manage and update pricing strategy on a monthly or quarterly cadence are best positioned to capitalize on this opportunity.

Pricing is multifunctional

Yes, there are likely pricing-specific roles and functions in place, depending on the company. For example, at growth-stage companies, pricing is a CEO decision. But pricing as a capability touches all elements of the organization — product, finance, marketing, sales and operations — when bringing an offering to market. It’s critical to have consistent, standardized data on the market to facilitate multifunctional organizational decisions.

Pricing insights are a deal accelerator for sales teams

Conversational intelligence provider Gong reports that win rates are highest (42%) when pricing is discussed in the first sales call. Sales is a critical stakeholder for competitive and market intelligence. Arming sales teams with the right pricing intelligence to discuss pricing and address competitive pricing questions early yields deal wins.

Pricing pages are where customers buy

Pricing pages are the most important landing spot for customers and are where offers are positioned to convert web traffic into trial, free or paid users. In B2B SaaS, not having transparent pricing is a red mark on a vendor. This will become  true for telecom, IT services and other sectors too. Customers want to understand pricing during their evaluation, before engaging with sales, and this requires an understanding of how to structure and position pricing publicly.

Pricing is tedious and time-consuming to normalize and compare

There are hundreds of potential pricing models and packaging models. Companies in the same space may price and package completely differently across multiple dynamics. Normalizing pricing and packaging models for comparison is hard to do at scale without a repeatable, consistent framework and taxonomy (like we’ve built for XaaS Pricing).

Pricing changes constantly

We started collecting XaaS Pricing data in October 2021, and since then, nearly 35 companies have already made demonstrable changes to price points, pricing models and/or packaging strategies. XaaS Pricing is the Wayback Machine for the “as a Service” ecosystem, with real-time updates and tracking to ensure companies stay on top of peer pricing changes.  

Will digital transformation be the catalyst for adoption of new outcome-based pricing models?

Every day I find myself reading about the developments happening in business-to-consumer (B2C) pricing.

Here’s a sample of those that jumped out recently:

These developments highlight the growing momentum behind providing dynamic, value-based and outcome-based pricing models, a movement being driven by companies’ desires to provide personalized customer experiences at scale.

While this push has been most publicized and noteworthy in the B2C world, driven by the likes of Uber, Netflix and MoviePass, it also consistently permeates the complex business-to-business (B2B) IT products and services world that we focus on. “How do we shift from a cost-plus to value-based pricing model? Are companies really doing outcome-based pricing? Who is doing it well, and for what types of customers? How?” These are common questions vendors are trying to sort through as they change their businesses.

Often, we’ve heard that IT vendors are serious about making outcome-based pricing models work, but the customers are putting the brakes on these types of arrangements. Customers will ultimately balk at the variability and risk of an outcome-based arrangement at some stage of a deal negotiation and push vendors to offer predictable fixed-price engagements. Customers like the idea of not paying when an outcome is not achieved more than sharing the benefit of an outcome that is met, and somewhere in that trade-off the fallback becomes a traditional contractual arrangement.

What’s interesting is that based on recent research, this customer hesitance seems to be abating. In our 2H17 Digital Transformation Customer Research, we asked 165 global enterprises that are undertaking digital transformation initiatives to identify the pricing structures they’ve experienced, and outcome-based pricing emerged as the most common model globally.

As my colleague Jen Hamel points out in the report, “This indicates vendors have become more flexible and creative with pricing to convince clients to take the DT [digital transformation] leap but may see delayed ROI from DT skill investments as revenue depends on project success.”

As digital transformation continues to take root, the question of how vendors can shift to outcome-based pricing will only be asked more frequently, particularly as changes in the timing of revenue recognition from engagements impact vendors’ flexibility around resource investments. We are eager to watch (and to report) as best practices develop and new models emerge and would love to hear about what others think on this topic.

Drop a comment here or email me at [email protected].

 

Pricing research is not always about price

I recently read an article summarizing an onstage interview with Amazon CEO Jeff Bezos at the George Bush President Center. During the interview, Bezos described Amazon’s data mindset:

“We have tons of metrics. When you are shipping billions of packages a year, you need good data and metrics: Are you delivering on time? Delivering on time to every city? To apartment complexes? … [Data around] whether the packages have too much air in them, wasteful packaging … The thing I have noticed is when the anecdotes and the data disagree, the anecdotes are usually right. There’s something wrong with the way you are measuring it.”

This is critical insight for market research practitioners, including those (like myself) focused on pricing. As analysts, we tend to deep dive on the facts and seek hard evidence. We rely on the data to tell the story and articulate the outcomes. Bezos isn’t saying that we should totally discount data. What he’s saying is that data has value when contextualized and re-examined in the context of the actual customer experience.

Pricing is an inherently data-driven exercise. IT and telecom vendors lean on transactional systems, price lists, research firm pricing databases, and other data-centric tools to make pricing decisions and determine appropriate price thresholds. Most of the pricing projects that we do on behalf of our clients start with the question, “Are we competitively priced versus our peers?” That is usually the most basic component of the results that we deliver.

What we’ve found over the years doing this work is that pricing in the ICT space is often more art than science, and that customer anecdotes about pricing are often as valuable and instructive to pricing strategy as the market pricing datasets produced. Our approach to pricing research is rooted in interviews with representatives of the vendor and enterprise customer communities. Often in conducting these interviews, we’ll uncover that the root issues with pricing, which were thought to be associated with the price itself, are often broader issues — something related to value articulation, market segmentation, packaging or delivery efficiency. These aspects influence the customer experience, create pain points, and ultimately dictate willingness to pay and value capture.

When we deliver these results to our pricing research clients, the outcomes are often not only a list or street pricing change, but rather, a rethinking of a broader pricing, go-to-market or customer engagement strategy. Clients will utilize customer anecdotes to rethink how they message a product in their marketing campaigns and content, devise a new approach to customer segmentation, or take a hard look at the delivery cost structure and resource pyramid levels that are driving their price position. In designing pricing research initiatives, we encourage our clients to think more broadly about pricing and incorporate multiple organizational stakeholders into the process, as this can uncover true unforeseen drivers of price position.

How does this compare to your organization’s approach to pricing? How important are customer anecdotes to your pricing processes? Drop a comment here or email me at [email protected].

 

Critical success factors for successful pricing research

In my day-to-day life at TBR, I regularly interact with clients seeking to undertake pricing research. Their needs are varied. Some want to understand pricing for a new product or service or sustain their competitive position for an existing offering, while others seek to design an overarching commercial strategy or to increase the effectiveness of their sales teams by arming them with tactical data and insights — and nearly all are focused on influencing revenue and margin.

Capturing pricing data that can be utilized defensibly for decision making is challenging. All pricing is situational and can be influenced by any number of factors. Pricing decisions influence, and are influenced by, nearly all organizational departments, from sales and finance to product management and business strategy, and thus are often highly politicized within ICT enterprises.

Based on our regular experience in serving the pricing research and consulting needs of our client base across ICT industry segments, we have identified five critical success factors that can help clients navigate these challenges:

  • Start with outcomes: We often find that our customers come to us with a research concept in mind, but not a defined goal or set of operational plans for how the research will be deployed in their organization. Sometimes the request is: “We need to know what vendors like us are charging.” But the real goal of the team may be to answer the question: How can we be more efficient in resourcing deals? By starting with the end goal and use case in mind, we find that we often explore areas adjacent to pricing, and that insights on those topics, in concert with pricing data, unlock business value for our client base.
  • Focus on business impact: For all the research we do at TBR, including in pricing, we advise our clients to frame all research needs around the underlying business impact. We design projects, including the questions we propose to cover in primary research and the data that we seek to capture, to ensure that the recommendations we deliver around pricing aim directly at influencing business strategy, revenue and profitability.
  • Focus on context: Our pricing research methodology relies on interviews with vendors and customers. This approach allows us to capture not only pricing data but also contextual data and insights on topics such as discounting, commercial incentives, pricing structures and portfolios. When paired with core quantitative pricing data, these types of interview-driven insights provide predictive value focused on vendor and customer pricing and consumption behavior.
  • Build market constructs: To normalize against deal-specific influencers that can impact a true view of market pricing, we design our research to focus on deal constructs. These constructs are used in all interviews to ensure apples-to-apples comparisons and that we are characterizing a full spectrum of potential price points. Context on topics such as discounting is addressed through qualitative conversations.
  • Consider adjacent markets: Many times, particularly with clients seeking to stand up pricing models and price levels for new offerings, we find that the direct peer landscape may not be the best basis of comparison. By looking at adjacent offerings and considering how similar-yet-adjacent offerings are packaged and delivered, clients are able to gain a broader foothold in their peer landscape in its entirety, and often identify areas to elevate value proposition and raise prices accordingly.