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Salesforce price hikes turning out to be crazy

by on30 August 2023

Customers moving to Microsoft and Hubspot

While Salesforce’s price hikes were cheered by the cocaine nose jobs of Wall Street, they might have been a blunder.

For those who came in late, SalesForce increased its prices on average of nine per cent on its customer relationship management products, including Sales Cloud, Service Cloud, Marketing Cloud, Industries, and Tableau.

On the company's second-quarter earnings call on today, analysts expect to hear that the price hike sparked a revenue bump, as customers rushed to renew contracts three weeks before the new prices went into effect starting 1 August.

However, this might not be the case as some cost-conscious customers who wouldn't have seriously entertained the idea of migrating off Salesforce are starting to consider it. Others might just be putting off their move.

This is not being helped by the aggressive sales teams from Microsoft targeting SalesForce with its own products with discounting, investments, credits. Salesforce's AI offerings are priced higher than competitors — especially Microsoft, which is adding AI functionality to some of its sales and service products at no additional costs.

Then, there is simple economics. Bernstein analyst Mark Moerdler warned that the potential revenue boost may not be worth it in the long term, especially when companies are tightening IT budgets in an uncertain economic environment.

"Any price raises could cause customer scrutiny and dissatisfaction," Moerdler wrote in a note published earlier this month, adding that clients could use it as "an opportunity to review usage."

Last modified on 30 August 2023
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