Speaker (Jason M. Lemkin) argues that for a data-driven company a consumption-based pricing model aligns customer value with billing because value (data, queries, analytics) grows over time, making revenue scale naturally compared with seat- or license-based models. He notes the company started with very simple pricing ("maybe two SKUs"), added add-ons, and gradually developed more complex pricing as product set expanded. Major trade-offs highlighted: simplicity eases purchase velocity vs. complexity aims to capture more revenue; thoughtful packaging strategy is important to avoid frequent rework that slows the business. The speaker also notes transparent list pricing published on the company website.
Chapters
So in a lot of our sales cycle I taught, hey, how do you, what's the value of this, the customer, what's the business outcome? Because they have to be able to understand, okay, does my pricing model kind of match how I get value? And so for us, like the more data you have and the more queries and the more analysis and analytics you can do, the more value you're going to get out of it. So having a consumption based model makes a ton of sense. And also our baseline continues to grow. So as people get more and more data and more and more queries, our revenue grows as well. Right. Which I think is a way superior model than a licensing or a seat based because eventually you might run out of users. For us, data and consumption continues to grow, but it depends on your business model. But that's what made sense for us and we stayed true to that. Today we would publish our list pricing on the website still out there, very transparent. Again, we're engineering driven company so pricing's pretty transparent. And yeah, I think one thing, your second part of your question was like what's one thing looking back that maybe we might have done differently. We started with really simple pricing, right? Like maybe two SKUs and then we did an add on and now we have fairly complex pricing cause we have lots of products. And so thinking through what are the biggest value points, propensity to spend in terms of how you make your packages. Because the trade off is do you make your pricing super simple and make it easier for customers to buy or do you make it super complex and try to capture every dollar? I think we did actually a pretty good job starting simple and now we're getting a little bit more complex just with the product complexity. But that trade off I think is something you really want to look at because what you don't want to do is have to keep redoing it every year or every couple years because it'll slow you down. I think being super thoughtful on your pricing, packaging, especially your packaging strategy is really important.
