Are You Leaving Money on the Table? The Hidden Cost of Delaying Pricing Decisions

Rapidly evolving software and shortened timelines must be met with evolving pricing and packaging to keep pace.  Most companies hesitate to change until it's too late and the damage has been done. Product managers face many daily decisions and pricing often takes a back seat to feature development and market growth decisions.

What Happens When We Delay Pricing Decisions?

TechFlow fell behind. Despite being a $30M+ SaaS Fintech solution with steady upgrades—AI-driven insights, advanced collaboration tools, and integrations with major banking platforms—its pricing stayed largely the same: $2 per message with tiered discounts..  

The team proposed price adjustments twice, but fears of customer backlash and competition caused repeated delays. Despite new features, customer demands for lower prices grew louder. The sales team also pushed for lower prices to boost market penetration. When TechFlow eventually made a compromise, the backlash was severe.

1. Lost Revenue: Average revenue per customer dropped due to more discounting to retain big, vocal clients and new segment sales that never took off. 
2. Gave Up Market Positioning: Competitors matched the pricing and positioned themselves as strong alternatives for mid-size and small customers.
3. Decline in Customer Trust: The price hike shocked long-time Techflow customers.
4. Increase in Internal Strain: The TechFlow support team and relationship managers were swamped by a surge in customer price objections.

Why Are Timely Price Updates Crucial?

A product underpriced at launch could take 3 to 4 years of painful price increases to catch up.  The lost revenue $'s and cash flow accumulates quickly..   Cost of Delay (CoD) quantifies the impact of delayed feature releases in software development and can be a valuable tool for faster pricing decisions. CoD reflects the financial consequences of keeping current pricing when a change is needed. Understanding your CoD in pricing can be revealing.

Let’s revisit TechFlow. The team seized the chance to implement changes, segmenting customers to achieve an average 5% price increase and tap into a growing market of smaller, price-sensitive banks. To persuade management, they outlined the impact of a delay—CoD—in five steps:

1. Performed analysis of current message volume and usage
2. Developed a segmented pricing model using Profit Stream Canvas as a guide
3. Built 12-month $500k added revenue forecast for existing customers under existing and new pricing models, using 2 years historical data
4. Estimated additional $11.5M revenue from new segment penetration
5. Isolated the net revenue gains and costs if changes delayed again

The estimated harm to the business was $500,000 in missed revenue with current customers if the recommended changes were delayed by 12 months. The new pricing was approved and implemented in 3 months, raising the threshold by adding $2M in recurring revenue under the new model, $500,000 from existing customers and the remainder from newly acquired customers. 

The 12-month delay in executing the adjustments costs TechFlow $500,000 in additional revenue with current customer base. See image.

Are You Ready to Stop Leaving Money On The Table??

Understand the Cost of Delay in pricing decisions and prepare your infrastructure and team for more frequent adjustments. This ensures your pricing reflects the latest value your solution provides, optimizing current revenues and positioning you for sustained success in a changing market.

Are you ready for the next quarter?  Contact Kevin McCabe or Simon Chesney to go deeper NOW.  

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In our next post, we'll share the CoD tool and dive deeper into exploring how to overcome common challenges and align your organization around a sustainably profitable business.