Product, pricing, packaging; this trio trips up both new and veteran Marketplace sellers, but for different reasons.
New sellers often aren’t sure how to translate their current business model into a Marketplace listing, especially considering some of the nuances and limits between platforms. On the other hand, Marketplace sellers that have been transacting for a while may wonder how to embrace new Marketplace features and leverage updates to pricing models.
If you find yourself puzzled over Marketplace packaging and pricing, you aren’t alone. Tackle recently hosted Cloud Marketplace Office Hours about Optimizing Your Product Packaging and Pricing for Marketplace. In this discussion, Tackle answered community questions about:
- How to translate your SKUs and products to Marketplace
- Ways to package your product to make the sales process easier
- What to keep in mind when setting Marketplace prices
Here’s what you need to know to get your pricing and packaging right on Marketplace.
Public sales and Private Offers require different SKU strategies
Sometimes figuring out how to align your product’s SKUs with Marketplace is like fitting a square peg in a round hole. Marketplace limits, like 25 SKUs on a listing, mean there might not be a direct translation.
If you find yourself at a loss in managing your product offering for Marketplace, start by considering what type of sales you’ll make most often. A public transaction from your organic reach or a Private Offer handled by the sales team requires different approaches.
Public sales can “stock the shelves”
“One school of thought is to set up your Marketplace listing like a shelf and cram it full of all the different products and SKUs that you have to show the menu of available options,” said Matt Small, Director of Account Management at Tackle.
Listings with entry-level price points (under $20k) tend to entice more public orders due to the lower barrier to entry. Most of our sellers combine this with a “land and expand” motion, getting in touch with the customer directly to help ensure they have ordered the correct SKU and forge a path to potentially expand that account. For this approach, consider pay-as-you-go, trial-based, or freemium offer types.
“This is a model that’s preferred by sellers that are trying to capture organic public interest from Marketplace, and aren’t as focused on Private Offers.”
There are a few things to keep in mind if you go this route, though. Matt shared that a full “shelf” of self-service SKUs can result in customer’s being confused, buying the wrong thing, or adding a product that’s dependent on another one, which would complicate onboarding.
Matt sees a way to turn this into an opportunity by using it to open conversations with customers. Customers that commit on Marketplace have already taken a substantial purchasing step forward, much more significant than standard lead capture.
“Maybe they bought the wrong SKU, but now you know who they are and you can tell them, “Well, you can’t just buy this alone, you need to buy this thing also. But now, let’s put together a Private Offer for you to get you exactly what you need.” And you have a great reason to get your sales team involved in that process,” Matt shared.
Private Offers create custom packages
A simpler approach to translating your product suite to Marketplace is to leverage Private Offers to curate a custom offer per deal. Private Offers don’t come without their challenges but they are the most successful avenue we see for software sellers on Marketplace.
Listings priced higher than $20K that have a call out to engage for custom deal terms are typically set up to operate in parallel with a direct sales motion and enable you to leverage Marketplace to engage with buyers on their committed cloud spend.
Matt noted that “the Private Offer vehicle is a way to take your existing enterprise sales process and map it to Marketplace. We’ve had customers take a 90 SKU order form and create a Private Offer from that, bypassing the 25-SKU limit on a public Marketplace listing.”
Don Addington, CRO at Tackle, echoed Matt’s thoughts. “We’ve seen customers leverage their existing listings to drive the business, and then use that to create a bespoke product or package in a Private Offer.”
Read up on how the Tackle Platform can help you scale Private Offers within Marketplace.
Review past transaction history to identify adjustments
No matter which route you take for organizing your Marketplace product, it pays to review past sales for trends on a recurring basis, like quarterly or bi-annually depending on your transaction volume.
“Take a look at your last few contracts to see where features or add-ons are bundled together to create the most common bundles, or find repetition to figure out what you often need,” Don shared.
Keep your packaging as close to normal as possible
Getting onto a Cloud Marketplace feels like the beginning of an exciting journey and a fresh start. However, Matt cautions that you should resist the urge to reinvent your packaging for your listing.
“It’s best to look at the way that you transact today, and how you structure your initial deals, expansions, and renewals, and then make the Marketplace work for you,” he noted.
Fair warning though: selling on multiple Cloud Marketplaces makes you accessible for more buyers, but it can be a challenge adhering to different Cloud Provider practices. For example, free trial lengths and annual discount structures vary between Marketplaces.
If there’s no direct translation, consider selling credits
If you’re having a hard time finding a direct match between your typical packaging and Marketplace limits, you can sell pre-committed credits. With this method, you sell credits through Marketplace to debit and track their consumptions in your system on the backend.
Matt gave an example of this process as, “let’s say you have a baseline subscription that’s 10,000 credits. You can set up a credit for anything, like a widget hour or a dollar, and you track the consumption of the pre-committed usage internally. Then, customers can come back to the Marketplace, and they can add more credits when needed.”
Use pricing to encourage Marketplace adoption
Increasing costs to offset fees isn’t advised
It’s a natural reaction to wonder if you should raise pricing on Marketplace transactions to offset the listing fee, but Don suggests against it.
Don said he “asks the question, ‘how do you handle your business through your traditional channels?’ If you’ve got a traditional VAR channel, are you uplifting those deals to the customer? Are you charging a premium to cover the percentage that goes out the door to the VAR?”
Often, the answer to the question is no. Don’s recommendation is to “try to keep your Marketplace business as consistent with your own business as possible because you don’t want to penalize the buyer for purchasing through the Marketplace.”
You also might not need to worry about the transaction fee cutting into your profits with the Marketplace. Don noted that “once you start running scale through Marketplace, you’re going to be transacting deals faster and there should be fewer hands on those deals. So the cost of sale once you start looking at volume over time actually becomes pretty appealing.”
Zero upfront metering gets users in the door
Another way to use pricing to set your Marketplace listing up for success is to create a free trial or freemium offering.
“More and more customers are putting free trials with either limited terms or usage limits on their Marketplace listings. We also see more zero upfront consumption-based style,” Matt shared.
“This heavily relies on having a metering-centric strategy. Zero upfront gets people in the door, and it allows you to engage with them, but doesn’t start charging them any money until you’re ready to get the meter running. That’s then in your domain [to decide] when you want to start that meter after a certain amount of time in a free trial, above a certain level of usage, immediately on the first cycle that they run, etc.”
Getting your Marketplace product’s packaging and pricing right for Marketplace will take some thoughtful planning and adjustments over time. Need help working through your company’s Marketplace challenges? Reach out to see how we can help.