Monday Price Point:​

Most customers I work with try to apply some form of 'linear' pricing to an 'exponential' world.
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Let me explain:
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Whatever pricing model you have it probably runs on some kind of metric or measurement - e.g. Users, API calls, CPU cores, Employees, AUM, Store Locations etc..
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(I've done pricing projects with 'Tons of live Salmon biomass' and 'Orbits around the globe... so the metric really can be whatever makes sense for your business.)
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And whatever metric you measure it is probably distributed in the market in some form of a power law function (think 'hockey stick'), where 20% of the potential customers have 80% of the total volume:
20% of retailers have 80% of the store locations
20% of companies need 80% of the CPUs
... and so on
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... except that most markets actually are way more 'hockey sticked' than that:
Out of several hundred Mobile operators only three - Verizon, TMobile and AT&T - holds a combined ~70% market share.
Walmart, Krogers, Costco and Target hold about ~50% the total grocery market out of more than 300,000 total operators
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And this is where most B2B SaaS pricing breaks down :
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Your pricing can be really good at handling 98% of all of your customers... and still fail to properly handle more than 50% of the total economic value in your market.
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I'll repeat: you can get 98 customer right, but still have HALF the revenue potential missed in just 2 accounts.
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Your sales team doesn't know how to handle the discount pressure when Verizon wants a price for their 146 million subscribers if they are used to giving our pricing for 1 million subscriber MNOs.
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And they don't know how to price Walmart's 699 million square feet of retail space.
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If you are used to selling $100K deals it just feels like a win to sell a $400K deal to a new, big accounts.
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... totally missing you could have priced it at $3M.
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I see this issue over and over and over again.
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And it's hard - because the $400K account is going to fight you. And it's a bad day if you mess it up and loose it.
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But it's still half the revenue left on the table.

How to do it:

You need to do four things to capture value from your largest accounts:
Make the net bigger than the fish: if your price list - and the planned, structural discounts - only go to 10M square feet then it can't handle Walmart. Just build it for Walmart from day one.
Enterprise Packaging: invent stuff for the super XL accounts to buy. 'Enterprise Tier'. Premium Technical Support. Enterprise Security. Commercial SLA. This adds other revenue items that can offset the discount you have to offer on the core pricing metric.
Flexible Contracts: do not offer 3-year fixed price deals with pre-defined or capped price increases. Offer a simple 1-year contract with auto-renew and your ability to unilaterally (= without their prior approval) update pricing. This is crucial for long-term development of the account.
Conviction: Believe the numbers. If Verizon is really 100x larger than your previous largest customer - surely they can pay 25x the price (and not just 5x). If you don't buy it - neither will they.
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Happy whale hunting!
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That's it: a point about pricing - every Monday.
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PS: Just hit 'reply' to this email if you have a concept or issue you'd like me to write about.

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