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Fast Company
2 days ago
- Business
- Fast Company
Why tying B2B software pricing too closely to usage and performance is risky
During tough economic times, buyers' usage and performance often take hits, leading to financial losses for B2B software companies. [Courtesy of Chris Mele] The Fast Company Executive Board is a private, fee-based network of influential leaders, experts, executives, and entrepreneurs who share their insights with our audience. BY Picture this: You decide to focus on your fitness and order a monthly protein bar subscription. The protein bar company tells you that it will only charge you for the products if you build a certain percentage of muscle in the first year. That pricing strategy is absurd—certainly a great deal for you, the customer, but a bad one for the protein bar company. You could eat every single protein bar in your subscription, but still not build a certain percentage of muscle in the first year because you have a habit of skipping the gym. The problem with pricing strategies like this is that they tie pricing not only to customer usage but also to customer performance. I've yet to see a protein bar company that uses such a pricing approach, but unfortunately, I've seen many B2B software companies link their pricing to the usage and performance of their customers. Essentially, some leaders of software companies go beyond arguing that their products provide value; they are so convinced that their products are foolproof that they argue that, actions aside, customers will get results. Software companies that tie their pricing too closely to customer usage and customer performance often end up suffering, especially during uncertain times. On the surface, heavily tying pricing to customer usage and customer performance in the software world doesn't look as extreme as the two examples above. Some software companies might opt for one or the other—and/or have a softer interpretation. For instance, in terms of usage-based pricing, a corporate messaging solution provider might charge buyers by the number of active users or storage consumption. Moreover, not every example of usage-based pricing has the same level of risk. As for pricing centered on customer performance, a CRM solution provider might charge by the number of qualified leads a buyer produces with its software or by taking a percentage of revenue a buyer generates through its software. When the economy is doing well, sure, pricing tied to customer usage or customer performance can keep software companies afloat and even result in record profits. In a booming economic environment, buyers with usage-based pricing are likely to be willing to write larger checks for more users or storage. Buyers with performance-based pricing will be more likely to generate leads and revenue in a prosperous economy, leaving the software vendor with a larger share of the profits. But when the economy starts to decline, that's when software companies that have made their pricing too reliant on customer usage or customer performance—or worse, on both customer usage and customer performance—can find themselves in trouble. Tying pricing too heavily to customer usage and customer performance can harm software companies during times of economic uncertainty. Under a strained economy, buyers' usage and performance often take hits. For example, in terms of usage-based pricing, a software company that charges for the number of quotes generated through its platform might see a drop in numbers during tough economic times, as its customers have less of a need and lower budgets. As for performance-based pricing, consider the same software company instead charging for the number of quotes won through its platform. If those buyers start making less during an economic downturn, the software company could be left with even less. It is imperative that software company leaders revisit their pricing models as soon as possible to strike a balance between predictability for their companies and flexibility for their customers. Software company leaders should proceed carefully and thoughtfully, with detailed rollout plans that include iteration and testing schedules, when making more substantial changes to their packaging and pricing. An example of a larger change would be a software company's executives changing the basis by which they charge for the software, such as moving from the number of users to the number of surveys, especially during uncertain times. As far as the trifecta of licensing, packaging, and pricing, it's generally riskiest for a software company to change its licensing model. Pricing and packaging iterations tend to be less risky. Regardless of which part of the trifecta software company leaders want to change, they should take strategic de-risking measures. The specific de-risking measures they should pursue depend on their unique circumstances. However, there are several approaches they can consider. For one, they could revisit their offering models. When revising their offering model, executives of a software company could look for a lower entry point on an offer with less functionality, explore various sales promotions, or revisit their minimum purchase threshold, to name a few options. Software company leaders should also consider examining their cost structures to identify potential optimizations. By doing so, they can reduce their spending without impacting their margins or increasing prices for their customers. Software company leaders could also increase implementation support to help customers get onboarded more quickly, which, in turn, enables them to see the value of the software faster. For instance, instead of taking six months for implementation, software teams could set a goal to reduce the timeframe to three months. Additionally, software company leaders might consider offering managed services. For instance, if an email marketing solution provider notices that its customers are laying off large numbers of marketing employees, it could offer a managed service to help those customers with email marketing in the interim. Finally, software company leaders could offer temporary sales promotions that protect their companies while giving customers some breathing room. However, they should make it clear that these price cuts are temporary sales promotions and not permanent. Permanently cutting a list price can backfire in a big way—cut a $1,000 list price down to $500, and good luck bringing it back up to $1,000 even once the economy gets better. During turbulent economic times, software companies should clean up and de-risk their products and pricing. If they're struggling or taking a hard hit, they should consider making larger changes to prevent further damage. However, at the core, the software companies that avoid tying their pricing too closely to customer usage and customer performance stand the highest chances of survival when uncertain times hit. The early-rate deadline for Fast Company's Most Innovative Companies Awards is Friday, September 5, at 11:59 p.m. PT. Apply today. ABOUT THE AUTHOR The Fast Company Executive Board is a private, fee-based network of influential leaders, experts, executives, and entrepreneurs who share their insights with our audience. More
New York Times
27-07-2025
- Health
- New York Times
The Protein Bar Arms Race
In late August 2024, the physician and longevity guru Peter Attia posted a new reel for his 1.3 million Instagram followers, featuring a close-up of a stack of golden boxes, each about the size of a hardcover book, piled up on a marble countertop. The image stood out; Mr. Attia's grid consists mostly of snippets from his popular podcast, The Drive, and straight-to-camera clips of him sharing advice on topics like zone 2 cardio training or the importance of getting regular colonoscopies. 'Pretty awesome day in the Attia household,' he said from behind the camera. 'Just received, yesterday, the first official shipment of the new David bar.' These protein bars would become available to the public in a few weeks, Mr. Attia explained, and the teenagers in his home — a demographic not known to be obsessed with optimal nutrition — had been devouring his supply. 'I think these are just awesome, and I am really excited for people to start trying these things,' he said. The David bar, created by the RXBar co-founder Peter Rahal and a Keto cookie entrepreneur named Zach Ranen, was diving into a marketplace already up to its eyeballs in protein. In recent years, protein supplementation has crossed the species barrier from fitness-coded products like bars into everyday foods. Today's supermarkets offer high-protein frozen waffles, breakfast cereals, popcorn, pastas, ice cream — even protein-enhanced soda and candy. According to the market research firm Mintel, the number of food and beverage products coming to market with a high protein claim quadrupled between 2013 and 2024. The protein maximizer can now begin her day with a Legendary Foods Brown Sugar Cinnamon Breakfast Pastry (20 grams of protein), move on to Immi's pea protein-based instant ramen for lunch (24 grams), snack on Wilde chips made from chicken and egg white (10 grams), and microwave a Vital Pursuit high-protein frozen pepperoni pizza (22 grams) for dinner — all, to borrow Michael Pollan's aphorism, without eating anything her great-grandmother would have recognized as food. But for the protein-obsessed, the bar still reigns supreme. The category-leading protein bar, Quest, tops out at 21 grams of protein for 180 calories: almost as much protein as a McDonald's Big Mac, for less than half the calories. 'We knew we could do more,' Mr. Rahal said recently, during a visit to the brand's offices in Manhattan. 'The question is, what's the upper limit?' Want all of The Times? Subscribe.
CNET
22-07-2025
- Health
- CNET
The 5 Best Protein Bars a Fitness Expert Has Tested in 2025
What we like about it: The Perfect Bar needs to be refrigerated to stay fresh. This protein bar reminds me of a solid yet crumbly cookie dough bar. One bar can have approximately 200 to 300 calories, give or take, and 11 to 17 grams of protein, depending on the flavor. The total sugars are under 20 grams, but don't include added sugars since they vary depending on the protein bar. This is a dense protein bar, and while higher in calories than others on the list, it can be good to have on hand if you need something to hold you over before your next meal. Who it's best for: This bar is best for those who love chocolate and don't have nut allergies, since most of the bars consist of either peanut, cashew or almond butters. The chocolate chip cookie dough is my favorite flavor and has 12 grams of protein. These bars have more calories and sugar than some others on the list, so be mindful of that if you're trying to lose weight. I can vouch that one of these bars can keep me full for hours, so it's ideal if you're not going to be able to sit down to eat between meals. Other flavors you can enjoy by Perfect Bar include: chocolate brownie, dark chocolate almond, salted caramel and chocolate hazelnut. Who should avoid it: If you have a nut allergy or don't like a protein bar with a heavy nut profile, you may find this option to be too much. Additionally, if you don't want to have to refrigerate your protein bars, you're better off with one that is shelf-stable.
