Outcome-based pricing is a hot topic in the AI industry, but will customers actually want it?

Outcome-based pricing strategies are gaining attention in B2B software, but industry veterans caution against viewing this pricing model as a transformative solution.

The current landscape: Outcome-based pricing is emerging as a prominent trend in AI-powered B2B solutions, particularly in customer service and sales automation tools.

• Major vendors like Salesforce, Zendesk, Intercom, and Gorgias are implementing charges of $1-$3 per resolved customer interaction
• Traditional pricing models, such as per-seat licensing for CRM systems and per-transaction fees for payment processors, remain industry standards
• Companies like HubSpot and Salesforce maintain conventional pricing structures for their core CRM offerings

Market realities: Real-world implementation of outcome-based pricing reveals significant practical challenges.

• One SaaStr Fund portfolio company saw a customer with outcome-based pricing exceeding $1 million annually switch to a fixed contract
• Rapidly declining AI operational costs raise questions about the long-term viability of outcome-based pricing models
• Market expectations and established pricing norms continue to influence buying decisions

Strategic considerations: The focus on innovative pricing models may be misplaced when compared to product development priorities.

• Venture capitalists view outcome-based pricing as a way to expand total addressable market (TAM) and increase budgets
• Founders and executives often see it as an opportunity to grow deal sizes
• Industry experience suggests that following established pricing models typically creates the least friction in sales processes

Industry precedents: Existing pricing models in various B2B sectors have evolved based on market acceptance and practical considerations.

• Payment processing companies universally adopt per-transaction pricing because it’s an established industry standard
• CRM vendors typically use per-seat pricing because it aligns with customer expectations and budgeting processes
• Successfully implemented pricing models often reflect industry norms rather than revolutionary approaches

Market adoption reality check: The enthusiasm for outcome-based pricing may outpace its practical applications and long-term sustainability.

• Customers may initially experiment with outcome-based pricing but often revert to traditional fixed contracts for predictability
• The model’s success depends heavily on customer acceptance and willingness to adopt new payment structures
• Product quality and value proposition remain more critical to success than pricing innovation

Looking beyond the hype: While outcome-based pricing presents interesting opportunities in specific AI applications, its broader impact on B2B software pricing may be more limited than current discussions suggest, with successful implementation likely confined to sectors where it aligns naturally with existing business models and customer expectations.