We’re pleased to announce the Bowery Capital 2020 Startup Sales Stack Report! This report is meant to serve as a guiding framework for anyone evaluating sales solutions. Whether sales, marketing, customer success or management, if you’re thinking of using or buying software to optimize customer…
We’ve talked about product pricing a bunch on the Bowery Capital blog but never in the context of devops. DevOps pricing is one of the more interesting elements of the entire infrastructure ecosystem pricing. With such a high emphasis on inbound marketing to drive leads through to conversion the pricing vector requires much more attention than some other spaces Bowery Capital invests in. A while back, I was keyed in by my friend Bob Farzami at Metricly to Adrian Cockroft’s great presentation from Monitorama called “Monitoring Challenges” which lays out some thinking on devops pricing strategies (particularly slides 24 – 35) and how you as an entrepreneur should think about this element of your business. If you haven’t, go and watch the video. Below lays out some of the key takeaways from the talk and beyond focused on devops pricing strategies that work.
1. Place Equal Importance On Pricing. A lot of companies tend to think about pricing as a narrow part of the overall story when selling their tooling. This can be detrimental to your business when thinking through devops pricing strategies. Your price points and pricing model are as important to your success as your product features, business model, end-user experience and go to market strategy. They deserve as much if not more attention.
2. Proportionality Matters A Lot In This Ecosystem. You can’t cost more than the underlying platform that you are helping manage, monitoring, or automating. 5-10% may be a good ratio to think about when thinking through devops pricing strategies for your company.
3. This Comes Down To The “Least Bad” Option. There is no perfect pricing model, especially in devops. So, you will have to pick the one that fewer people dislike. Whether you price based on the value you provide (savings that users derive), your cost for delivering it (API calls or data retention), or based on the number of instances, user seats, tiers, or percentage you ultimately will have a bunch of unhappy people. Knowing this alone can save you a lot of sleepless nights.
4. Experiment, Experiment, Experiment. The more users you have, the harder it is to change your pricing. At some point, it may even be impossible. Which is why it remains a good idea to experiment with “beta accounts” for as long and as often as you can. As Adrian lays out in his talk, new vendors have new schema, and an order of magnitude lower cost than per node. Thus, they are going to be trying to kill you from the moment you get started. Having this experimentation layer is another one of the smart devops pricing strategies.
5. Simple Is Always Better. If you are an early stage company, chances are you have an engineering background and have an analytical mind which means that you are likely to create a complicated pricing model. After you have designed it then take a few passes at simplifying it. Send it around to as many people as you trust and get their opinion on the pricing page.
6. It Is Way Easier To Go Up. There is a ton of research around this, but if you have a high price on your web site and lots of customers on a monthly pricing plan then you may lose over 10% of your MRR if you decide to lower your price. It is much easier to raise pricing and grand-father in your early customers than lower your pricing.
7. Anchored Pricing Creates Opportunity. This is probably the most important point. Now that you have designed the perfect pricing model, and grow to be a successful company, you will have a hard time changing it. As Adrian talks about, new vendors will exploit it against you and use your devops pricing strategies against you. So you should exploit industry leaders in the markets that you are trying to disrupt. Vendor pricing models are anchored in the era during which they became successful (ex. client/server, cloud, container, server-less, etc.) and your company is likely not anchored in that schema. Use this to your advantage.
Adrian Cockcroft’s video implicitly and explicitly emphasizes items 1, 2, 6 and 7 however we think all of them are key to building a successful devops company.
If you liked “DevOps Pricing Strategies That Ensure Success” and want to read more content from the Bowery Capital Team, check out other relevant posts from the Bowery Capital Blog.
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