Either everyone that does this is an idiot (unlikely) or it actually works for their markets and increases their bottom line (likely).
I once worked for a fairly big (500m-1b market cap) company that worked this way. Pricing was customized for every client. They, like many companies, made a ton of money doing this.
One down side, however, was that this business model can trap you. Once you've sold customers at lots of different price points, you can never go back and publish pricing, since those customers that are overpaying will be upset. You could set your prices high, but that would turn off many new customers who need a lower price point. So, while you can make a lot of money doing this, give it some thought before committing to it.
This is why Google Adwords is so genius. It's both dynamic (charging more for bigger pockets) and it scales, which is hard balance to strike.
> Either everyone that does this is an idiot (unlikely) or it actually works for their markets and increases their bottom line (likely).
Yep. I've been in start-ups where via simple pricing we drained the well for all other players, grabbing everything for ourselves. I've also been in start-ups where we found out that simple come-to-us pricing simply does not work and they needed an active sales rep process for the majority of the customers. (And if the majority need it, sorry, we can't just display prices. Losing the sale to you is worth keeping the other 90% of our sales.)
With on demand pricing and instant sign up, your lead may already be your competitor's customer before their first phone call.
I view Adwords more as a marketplace than a service. Its pitting customers against each other for what is naturally a finite inventory. There is some more opaque custom pricing going on in the background that nullifies some of the true market dynamics, but I wouldn't quite call it shill bidding on Google's behalf.
The did create a very fluid and dynamic market by (mostly) removing the sales people from the process. They need no applause for this, because it makes it waaaaaay easier to buy massive quantities of advertising from them successfully over a long period of time.
> With on demand pricing and instant sign up, your lead may already be your competitor's customer before their first phone call.
Sorry, but it just doesn't work this way. My company was bought by one of those companies that doesn't list pricing up front. There's never been a case where a single person could unilaterally decide to purchase their services.
What "Call us" means is "Send us an RFP (Request for Proposal) and we'll submit a bid". Why does this work? Shareholder or government policies usually require due diligence in the form of several competing bids. That means the potential customer has an incentive to contact as many providers as they can find and send them an RFP.
Ultimately the submitted bid is deliberated on by committee and several presentations might be required before a decision is made. You might think that I'm talking about massive deals for something like contracts for infrastructure or fighter jets, but no, I'm talking about simple SaaS.
It costs a lot to sell to these companies/organizations. The bids are usually hundreds of pages long, stating everything from features to datacenter security. Companies like Rackspace helpfully provide well written documents for this purpose, but you still have to write a lot on your own. The upshot is that thanks to the sales process the prices are inflated and frankly I see more money change hands over a month than I ever did in a whole year as a startup (a startup that was profitable and growing, no less).
> Once you've sold customers at lots of different price points, you can never go back and publish pricing, since those customers that are overpaying will be upset.
That seems easily solvable by giving those customers a discount to the price you want to set across the board (which is likely to make them happy), waiting a few months, and then implementing the pricing changes.
Sure, but that means you lose the revenue from being able to charge them more (obviously) and it also means the customer still knows that you weren't giving them your best price all along.
That's where you always bury key features to business (AD/LDAP integration) in a "call me" plan. That way you grab the early adopters with purchasing cards and get the service implanted in the customer's business process.
Agreed. It's a bit of a tradeoff. Definitely companies that need to hold prices in, but I'd venture that a lot of mid market companies that are opaque about their pricing should actually be more transparent.
Good rule of thumb - more custom product or custom customer, then more customer/opaque pricing.
You can still do much better than a "contact us for pricing" page though.
I once worked for a fairly big (500m-1b market cap) company that worked this way. Pricing was customized for every client. They, like many companies, made a ton of money doing this.
One down side, however, was that this business model can trap you. Once you've sold customers at lots of different price points, you can never go back and publish pricing, since those customers that are overpaying will be upset. You could set your prices high, but that would turn off many new customers who need a lower price point. So, while you can make a lot of money doing this, give it some thought before committing to it.
This is why Google Adwords is so genius. It's both dynamic (charging more for bigger pockets) and it scales, which is hard balance to strike.