How a company spends money — well, that tends to define its strategy. As for how a firm makes money, that all boils down to and supports its business model.
And with Google reportedly considering charging people to use its premium generative artificial intelligence (AI) features as it looks to balance ad revenues from its regular search product, packaging and pricing models for software are top of mind. Particularly for B2B SaaS (software as a service) and prosumer companies.
That’s because Google isn’t alone in its product pricing evolutions. While the reported AI subscription plans would mark the first time the Mountain View, California-based search giant has put core features behind a paywall, its Big Tech peer, Microsoft, this week (April 2) also announced a new recurring fee for Windows 10 users. Windows 10 will reach end of support on Oct. 14, 2025, and per Microsoft, organizations looking to continue using the operating system securely rather than upgrading to Windows 11 will need to enroll in the paid Extended Security Update (ESU) program.
Organizations that run legacy software are at a higher risk of security breaches and potential compliance violations, Microsoft notes. So, in order to keep those computers safe, firms will need to pony up $61 per device for Year 1, with the fee doubling every year for up to three years.
And while pricing models — same as business models — can vary greatly depending on the nature of the software itself, the firm’s target market, and the surrounding competitive landscape, for B2B players to compete two things are paramount: how much value a feature or service delivers, and to whom; as well as how much it costs to deliver that feature or service to the buyer.
But with the rise of AI and other digital technologies, the inputs to that calculus are becoming more dynamic.
Read more: OpenAI’s GPT Store Has Arrived, What About AI’s Monetization Strategy?
Just as it is common for B2B companies to experiment with different models and pricing strategies to find the optimal balance between revenue generation and customer satisfaction, their buyers do the same and likewise judge on price at times.
“Not every buyer is going to pay all of their suppliers the same way … unlike traditional consumer payments, where there’s a standardized way in which consumers pay and merchants get paid — within the B2B arena, no two buyer-supplier profiles are the same,” Dean M. Leavitt, founder and CEO at Boost Payment Solutions, told PYMNTS.
“It is important to focus on what’s important to buyers, because that dictates their dealings with their supplier base … and buyers want flexibility with respect to their payment options,” he added.
Typically, B2B services are provided as either a core offering, an upgrade tier, or as an add-on; each coming with their own best practices.
For example, and as reported by PYMNTs, when web giant Amazon joined the corporate chatbot race it looked to undercut its rivals with a starting price of $20 per month (per user) subscription.
In response, OpenAI updated its own pricing models.
Read also: Amazon Enters Corporate Chatbot Race, Looks to Compete on Cost
But, given the realities of today’s macro operating environment where the cost of capital is higher than it’s been for decades and interest rates aren’t falling any time soon, smaller B2B firms may be staring down a bumpy path marked by layoffs, belt-tightening and balancing risk and reward with uncertain top-line momentum.
This makes choosing the right pricing strategy of paramount importance. A judicious guiding principle at the moment may even be to shrink a firm’s client portfolio while maintaining quality.
Still, today’s ongoing tough times won’t last forever, and the B2B companies that embrace a refocus on their operations and the levers that can be pulled, such as improving gross margins while keeping operational expenditure flat, will emerge all the stronger.
“People still just talk about revenue. But who cares about your revenue — unless you’re talking about driving profitable revenue,” Charlie Youakim, CEO of Sezzle, told PYMNTS. “You can … readjust your business model to make sure that you can price at the levels required to work with an enterprise … but we will not do negative unit economics.”
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