Salesforce will hike up prices for several of its cloud and marketing tools next month for the first time since 2016.
The impacted solutions include its Service, Sales, and Marketing Cloud platforms, alongside Tableau and Industries.
On average, the total price increase – across these products – is nine percent.
However, Salesforce has so far only revealed the new prices of its Service and Sales Cloud platforms – as shared below:
- Salesforce Professional Edition from US$ 75 to US$ 80 (up $5)
- Salesforce Enterprise Edition from US$ 150 to US$ 165 (up $15)
- Salesforce Unlimited Edition from US$ 300 to $330 (up $30)
While the move will displease customers, it comes at a time when Salesforce – and its competitors – and pumping more money into augmenting their solutions with generative AI (GenAI).
Giving his take on LinkedIn, Daniel Newman, CEO of the Futurum Group, stated:
In #SaaS, continued innovation and development comes at a cost. Salesforce has frozen prices for some time. My take is the #AI investment required to stay competitive will drive price and capabilities for CRM.
Indeed, over the past seven years, Salesforce has invested over $20BN in R&D, driving new features and offerings without raising its prices.
The Contact Center Genie is an excellent example, as is its now fully-integrated Lightning Platform, embedded Einstein AI, Flows, native Slack apps, DevOps Center, and more.
Much of this spending came during the pandemic boom when Salesforce grew at an almighty pace.
Yet, the market climate is now trickier as businesses strive to optimize their cloud costs. Indeed, the CRM vendor reported its slowest revenue growth in 13 years last quarter.
Couple that with the need for Salesforce to invest in GenAI and cement its status as the leader in CRM – as 2022 IDC research underlines – something seemingly had to give.
Nevertheless, Adam Mansfield, Microsoft, Salesforce & ServiceNow Practice Lead at UpperEdge, is not convinced now is the right time to raise prices.
“I can tell you that this is not going to land well,” he noted on LinkedIn. “Especially with those customers that are not receiving the full value from the products they have been paying for (i.e., not seeing the benefit from the thousands of new features and new releases) to date.
Also, until the AI innovations prove to be of value, I am not sure Salesforce pointing to them as justification for the price increase is going to resonate either.
Nonetheless, in the short-term at least, Salesforce may experience a boost – with its stock price lifting four percent on the announcement.
Also, expect Salesforce to report healthier earnings results in the next quarter, which ends in July.
After all, the move may help to push through slow deals before any pricing changes come into play.
That said, Salesforce noted that price increases will also impact existing customers who want to purchase new clouds.
Hopefully, many of these customers will have price protections in place. Yet, even with these, businesses can anticipate more challenging renewal negotiations soon.
