Sales CRM Pricing Structure: Why Tiered Pricing can turn out to be expensive
Tiered pricing models can be expensive for sales CRM solutions. Complex tiers, limitations, no control, costly upgrades, and complex cost structures can be a tough riddle for sales teams using the sales solution. It is advised to go with a simple and transparent model.
Evaluating and finalizing any Sales CRM solution is a highly time-consuming, resource-intensive, and not easy exercise. After all the pain realizing that you ended up paying a high premium for the value, the solution offers, defeats the objective you started with.
This is a commonly found concern with teams onboarding a Sales CRM solution, especially with first-timers and also with stakeholders not spending enough time evaluating the pricing model of the solutions.
What are some common SaaS pricing models used by Sales CRM vendors?
Having the right pricing model is super critical for any CRM vendor this determines the revenue growth for the organization. While on the other hand, it is also important to not overprice it to dissuade potential customers from buying it altogether.
Some popular Sales CRM pricing models:
- Tiered pricing
- Flat-rate pricing
- Usage-based pricing
- Per feature pricing
- Freemium Pricing
The tiered pricing model is one of the most popular and widely used by most Sales CRM vendors across the globe.
What is a Tiered Pricing Model?
Creating various product packages with pricing plans catering to the specific needs of customer cohorts having differentiated features, services, and other benefits associated with them. Each of such Pricing Tiers also comes with specific limitations and teams have to upgrade with the scale and complexity of their needs over time.
For SaaS companies, Tiered pricing works very well helping them in multiple ways:
- The Clarity for prospective buyers
- Tailored pricing for customer cohorts
- Higher revenue conversion
- Upsell opportunities
- Greater Control of system usage
7 reasons why the Tiered Pricing Model may not be ideal for you
- Features are NOT personalized: Every business has its own unique needs and would require specific features in the solution for them. Pricing tiers are far from personalized and offer the same set of features to all users of a particular pricing tier. Also, you pay for features you do not necessarily require, while on the other hand, one had to go for an expensive upgrade to a higher tier to access essential features.
- Hidden Costs: Many Tiered pricing models are enough complex and focus on feature lists that many buyers DO NOT focus on critical cost levers which are smartly masked. Some common examples are:
- API limits
- Integration Cost
- Data Import - Complex Pricing Structure: SaaS companies in the end are in the business of increasing their profit over time. They have over time unbundled the services into line items of other services along with the Sales CRM solution. As a consequence, customers have to pay charges over and above the user license fee. Some of the unbundled services are:
- Premium Support Fee
- Consulting Fee
- Implementation and Change Management Fee - Limitations on system usage: SaaS companies put limits on particular feature usage for every tier. Customers can upgrade to a higher tier, buy additional user licenses or pay an excess usage fee for the delta usage over the limit. Commonly found features that carry a limit by day, month, and even year:
- API Calls
- Data and File storage
- Documents & Communication frequency
- Assignment Rules
- Web-to-Leads generated - Incentivises User addition and NOT Automation: Tiered pricing model inherently incentivizes vendors to push the addition of more users on the Sales CRM. This is a quick hack for account management teams to increase revenue over time apart from the upselling by upgrading Pricing Tiers. Fundamentally, sales CRM solutions should, in the long run, create automation and should be able to optimize #users and improve their productivity. Pricing Tier models are not aligned with this philosophy.
- Upgrading Tiers are super expensive: The most striking characteristic of the Pricing Tiers model is the premium multiplier customers have to pay to the higher Tier. A quick look at some of the popular Sales CRM pricing gives enough insights. Most upgrades to every next higher Tier are a 2X or more multiple. For example, Salesforce Essentials (Tier-1) to Professional (Tier-2) upgrade is a 3X jump, while the jump to the next 2 tiers Enterprise (Tier-3) and then Unlimited (Tier-4) each has a 2X price jump.
- You have ZERO control over pricing: SaaS companies have designed the Tiered Pricing model to charge customers the way they wish while leaving almost ZERO control for customers.
- Pay for Low/No usage (Higher usage can incur an extra fee)
- Pay for features you DO NOT use
- All user licenses are charged, notwithstanding the usage
- Pay even for unused feature limits; pay more for overuse
In a nutshell, Sales CRM pricing turns out to be akin to your OTT subscription charges, where you get charged a fixed amount whether you did watch the latest release or not. Just like OTT subscribers evaluate the subscription package basis their viewing behavior, Sales CRM customers need to take a serious look at the solution pricing model and assess the pros and cons well while exploring a new solution.
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