Greater Value From Enhancements = Pay More.
According to the letter, the stated reasons for the accounting-as-a-service company dramatically increasing the price of its SaaS Sage One (including Sage Intelligence Reporting) service include:
- Price / value re-alignment. Sage appears to be saying that product portfolio evolution and enhancements, which are giving greater value to customers, now need to be reflected in the pricing.
- Continued investment for more improvements needs to be paid for. The price rise can help Sage to invest in the technologies that can enable more product / service improvements in the future.
According to recent media reports, the kind of product enhancements that could be delivering enough extra value to Sage One customers to justify a 50% price increase could include the increased quality of statements that could help businesses to get paid quicker.
According to Sage however, one key element of their service that sets them apart from competitors (the 24hr telephone and email support provided all UK customers) comes at no extra cost.
Evidence of Sage Investing.
One area where there is clear, recent evidence of Sage investing in the future of a product is in its acquisition of cloud human-capital-management provider Fairsail in order to upgrade its ‘Sage People’ service. Farsail’s more famous customers are reported to include Aveva, Paddy Power Betfair and Trainline. ®, and the integration of Fairsail’s technology into the ‘Sage People’ service could, therefore, provide significant product improvements.
Ironically, an article posted on the Sage One blog from a week ago (around the time of the letters informing customers of the price hike) gives customers advice on “Raising prices: 5 steps to take that won’t lose you customers”. As well as suggesting that offering new features could help justify an acceptable price rise (as in the case of Sage One), advice includes “plan meticulously” and “raise the issue in advance”. The article states that a price rise is more acceptable to customers if they know that are getting something extra in return and if an honest approach is taken in informing them.
If FSB figures are anything to go by, Sage One customers could (like one in five small firms) have expected an increase of 44% for the price of service from April.
What Does This Mean For Your Business?
April may be the time for many price increases but for many businesses, a price rise of 50% with no immediate, perceived increase in value received may be viewed as excessive. The saving grace for Sage, in this case, may be that it is not easy for businesses to switch accounting systems, and that the monthly costs at £15 are still relatively low. This also serves an example to businesses that clear and regular communication of the ‘value’ that services / improved services offer to customers can go some way to softening the blow of any price rises.