Ramp Pricing

What is Ramp Pricing?

Ramp pricing is a pricing strategy that enables businesses to acquire new customers and increase subscription levels with discounts or extended contracts. It’s a flexible way to negotiate better pricing on future orders while providing the vendor with larger orders, longer contracts, and more predictable cash flow.

Unlike most subscription-based pricing, ramp pricing lets customers “step up” or “step down” over time. It helps sellers make deals more fair for their customers, and it’s especially useful for companies that want to roll out a new product in phases or those with short-term budget constraints (such as seasonal businesses or fast-growing startups that just closed a Series A).

Although changing subscription tiers is relatively common, a ramp pricing feature in CPQ, subscription software, or billing makes the process automatic. Rather than force the customer to remember to upgrade (or downgrade) their subscription level periodically, ramp pricing takes care of it based on predetermined conditions.

Synonyms

• Ramp pricing model
• Pricing in a ramp deal
• SaaS ramp deal pricing

Why SaaS Businesses Use Ramp Pricing

Finding the perfect pricing model (or, in most cases, models) for a SaaS is like hitting a moving target. Different businesses and customers have different needs, and the ideal price point can vary wildly based on a multitude of factors.

That’s where the beauty of ramp pricing comes into play. It offers a flexible yet structured approach that can be incredibly beneficial for both SaaS vendors and their buyers.

Let’s break it down a bit more:

Ramp Deals and Incremental Price Changes

Ramp deals are an ingenious way to structure SaaS contracts. They either start with a lower or higher introductory price, acknowledging a buyer’s current and future needs.

Beginning with a lower price allows companies to secure new customers who might be hesitant to commit to the full price right out of the gate. It gives them a taste of the service at a lower cost, with the understanding that the price will increase over time.

For large enterprise contracts, software often requires a phased implementation approach. Offering ramp pricing while gradually rolling out the platform companywide gives buyers a more equitable deal, since they can gradually increase their pay as more users are onboarded.

For long-term customers, businesses can even use ramp pricing to reward loyalty. For example, reducing the price by 10% after the first year of a two-year contract could sweeten the deal.

Similarly, vendors could serve customers that would only need extensive usage for a short period of time with a ramp deal (e.g., a seasonal retail business).

The Benefits of Ramp Pricing

These incremental price changes are only part of what makes ramp pricing such an appealing strategy. It’s a win-win situation: customers get a fairer deal (and know it), while businesses secure predictable revenue for the future.

Whether or not it’s the main strategy, ramp pricing offers several key benefits that make it an excellent choice for many SaaS businesses:

• Faster sales process and lower CAC. Ramp pricing is a powerful tool for attracting new customers. When buyers can commit to a lower price upfront, it’s easier to sell the product (to a larger pool of potential customers) and lower customer acquisition costs.
• Scalable deals. Ramp pricing allows vendors to structure contracts more flexibly, based on both usage and commitment levels. This makes it easier to adjust without disrupting customer relationships or negotiation processes.
• Reduced churn. A discount at the beginning of the subscription can serve as a sort of “thank you” for the customer’s trust. As the price gradually increases, customers become accustomed to the service and see the value it brings to their business. Businesses can also invert this model, where the price decreases over time as a reward for the customer’s loyalty. This sense of receiving value for money over time can be a powerful factor in driving customer retention.
• Manageable subscription plans. Since price increases are built into the contract from the beginning, there’s no need for awkward conversations or negotiations down the line. Everyone knows what to expect, which reduces friction in the customer journey.
• Upselling and cross-selling opportunities. As buyers change their subscription tiers, sellers can offer more features and functions that match their needs. They could upsell advanced versions or introduce complementary products in the initial stage, which helps them generate more revenue and take advantage of buyer growth.

Attracting a New Customer: The Growing Startup

The versatility of ramp pricing makes it particularly appealing for growing startups.

These businesses may not have the capital to invest in expensive software subscriptions right off the bat. But as they scale and their revenue grows, they can gradually afford (and will need) higher subscription tiers.

By offering growing companies a low entry price, SaaS companies can lock in customers who will likely prove highly valuable over time. Sometimes, ramp deals turn into a business’s most valuable customers.

In that sense, the ramp pricing strategy creates a huge opportunity to increase customer lifetime value (CLV) and forge a strong relationship — they’ll appreciate that they could access the service at a deal when they first started out.

How to Implement Ramp Pricing in Subscription Billing

Understanding the advantages of ramp pricing is the first step. Implementing ramp pricing using a subscription platform is straightforward.

Follow these steps:

Step 1: Navigate to the Customer Account

Begin by clicking onto the specific customer account for which you want to add a ramp pricing subscription. If it’s a new account, you’ll need to specify the customer’s details and subscription plan(s).

After entering the account, you’ll need to find the section where you can modify or add subscriptions.

Step 2: Select the Ramp Priced Plan

In CPQ and subscription billing, you’ll already have preset rules created by a company admin Select the ramp pricing plan you want to apply, such as an introductory price that changes after a predetermined time period. For example, it could be a 10% discount for the first year of a three-year contract.

If there are no predetermined rules, you will have to access the backend to create them or ask an admin to take care of the pricing rules for you.

Step 3: Default Ramp Pricing Schedule

After choosing a ramp pricing plan, the subscription software will automatically use the ramp pricing schedule from that plan and bill the customer accordingly. This takes out the guesswork and makes the process straightforward.

Step 4: Edit the Ramp Pricing Schedule (If Needed)

Mot all customers will fit neatly into predefined plans. If you need to modify the ramp pricing schedule for a particular customer, simply click on the link that leads you to edit the pricing.

If you don’t have permission to make pricing changes on your own, you may need to receive authorization first.

Step 5: Customize the Pricing Schedule

Upon navigating to the pricing edit page, you will find the edit options on the side. Here, you can adjust the price changes per the customer’s requirements.

Step 6: Apply Changes

After you’re done tweaking the pricing schedule, click ‘Apply’ Once you do this, the updates you made will reflect in the schedule.

This visual confirmation is a good way to double-check that the changes align with your and the customer’s expectations.

Step 7: Save the Changes

Lastly, don’t forget to save the edit form. Once you click save, the changes will officially take effect.

From there, the subscription is good to go, and the software will automatically bill your customer according to the new ramp pricing schedule. 

Ramp Pricing Technology

Ramp pricing is available in CPQ, subscription software, and billing automation. In some cases (like the DealHub platform), one tool may take care of all these processes.

Subscription Management

Subscription management software handles recurring billing, subscription plans, prepaid and post-paid billing, trial periods, flexible payment options, and everything else an organization needs to manage SaaS subscribers.

It also deals with customer churn management (like automated upsells and cross-sells) and customer notifications.

In subscription management, ramp pricing is often an easy-to-implement feature available by default.

Configure, Price, Quote (CPQ)

CPQ software approaches ramp deals a bit differently since it’s designed specifically to handle complex pricing and product configurations, which are two sales processes. In CPQ, users create an incremental order commitment (IOC) or recurring order to define the ramp pricing structure and pricing rules for customers.

Customers have different options for setting up an IOC. They can choose to order a fixed quantity every month for a specific time or commit to a specified number of user licenses for multiple years through a long-term contract.

CPQ software is great for companies that customize their product or service for every customer, need to configure complex products, or offer bundled services that require prices and discounts to be calculated automatically.

Billing Software

Billing software handles billing, invoicing, payment processing, and recurring payments for subscriptions. Using an automated billing platform, organizations can set up a subscription agreement for their customers, manage customer payments and invoices, and ensure information is up to date.

When integrated with CPQ and subscription tools, it can automatically bill based on contracted ramp pricing (set in CPQ) and provide an audit trail of subscription orders.

People Also Ask