Jason Lemkin argues that SaaS companies raising prices 40% over three to four years are hitting a wall. Aggressive hikes crowd out upsell opportunities and trigger seat contraction, an existential threat. Palantir, Workday, and Shopify all show the same pattern: customers shrink headcount rather than pay more.
Price increases is almost self defeating because it only works so long. And so if you're not tapping into the budget, that's, you know, Mark, when he was on this show and his own show was saying how much better a deal Palantir got, I think that was echoed in some of these army contracts because maybe he had to take a haircut on those deals and get the budget where it is. And so it's there. It's just there are so many other issues unfortunately that are attacking sas. They are. Seat contractions are existential. Workday said seats are perpetually under pressure. We are. Shopify has held headcount flat for three years and grown 40 something percent in that time. We're not hiring anybody and we're going to hire less people. Price increases have become destructive because SAS price products are up 40% the last three to four years. And that's great for a CRO to make their plan this quarter, but it crowds everything out. There's no room to upsell or anything when price increases take up everything. And so there's like all these different issues. If we're not buying as many seats and we're radically increasing pricing, there's just multiple ways the old models getting attacked and if it were just as simple as adding an agent, that would be hard enough. But it's not. And our workforces are shrinking and what we expect from our workforces is shrinking. And so SaaS will adapt and sure we will get. But just magically charging per token doesn't necessarily change the fact for many providers, tweaking pricing models doesn't change how much folks want to spend for a product. Right. That's a fallacy. That's what consultants do. They're pricing consultants. It's great. But if no one wants to pay more than 20 grand a year for your product, you can't force them to with a clever pricing model.
