Develop Your AppExchange Pricing Strategy

Learning Objectives

After completing this unit, you’ll be able to:

Discuss your app’s customer base and product category.
Describe the components of an AppExchange pricing strategy.
Evaluate key points when pricing your app relative to Salesforce pricing.

This module assumes that you’re both an AppExchange partner with an app ready to list and that you’re familiar with AppExchange onboarding. This module is also part of the Grow Your Business as an AppExchange Partner trail. Complete the whole trail to deepen your knowledge of AppExchange processes.

The Future Is Bright for Cloudy Health

Life is busy at Salesforce partner Get Cloudy Consulting. Their first app for AppExchange, Cloudy Health, is ready for market. It integrates employee health data with transit and weather data to help companies plan work schedules—pretty cool, right? Cloudy Health’s revenue forecasts look strong. Cloudy Health integrates seamlessly with the Salesforce Platform and will be distributed on AppExchange as a managed package.

People walking to work in the rain with umbrellas with the San Francisco skyline in the background

Get Cloudy’s Marketing Manager Leung Chan is excited to jump into the AppExchange publishing tool and create her app listing.

But before she begins, Leung has some serious homework to do. In order to market Cloudy Health to meet the company-wide revenue goals—and to attract and retain the right customer mix–Leung must price her app right. So it’s time to get strategic!

Understand Your Offering

Before Get Cloudy’s engineering team began coding their app, they started with a business problem. Several Get Cloudy customers in the construction industry had trouble completing projects on time. Why? Ever-changing weather, employee health concerns, managing multiple job sites, and so on.

Get Cloudy built an app to solve this business issue. Cloudy Health helps companies efficiently track environmental issues, projects, and employee assignments using the most accurate data from different sources.

In designing your app, you probably asked yourself the following business critical questions like Leung and her team did.

What am I solving?
Who am I solving for?
What am I building?
How do I price it?

Leung has easy answers from her business plan for the first three questions.

The Cloudy Health app:

Integrates weather and transit data with employee and project data to keep companies in business, rain or shine
Targets businesses in the construction and manufacturing industries
Installable as a managed package with fundamental elements like project management and employee data storage built on the Salesforce Platform

To answer the final question about pricing, Leung prepares her pricing strategy.

Create Your Pricing Strategy

Get Cloudy Consulting’s Leung Chan at her desk with chess pieces and charts floating around her head

As a marketing specialist, Leung knows that having a clear business strategy creates vision and direction not only for her products, but the whole team–marketing, sales, engineering. Shaping the right pricing strategy ensures that all Get Cloudy teams have clear goals and the same mission for Cloudy Health.

Leung’s pricing strategy contains three key components.

Opportunity Analysis
Monetization Strategy
Relative Pricing

Let’s look at each of these components in detail.

Opportunity Analysis

An opportunity analysis is a qualitative evaluation of relevant business questions. It identifies market needs and economic factors that affect your app, and considers your app’s customers, competitors, and pricing expectations.

To perform her analysis, Leung answers these questions across four categories.

Question	Business Purpose
Product
How valuable is this app to your core products and overall business growth?	Understand how your app and product fits into your overall company strategy.
Does this app remove friction for your current customers?	Ensure that your app satisfies a customer pain point.
Are you providing support or outsourcing?	Consider the cost of providing support and make sure that your pricing strategy can cover these costs.
Existing Customers
What is the urgency to have this app integrated into customers’ Salesforce installations?	Make sure that your project plans can be completed on time and on budget.
What qualitative feedback have you received?	Ensure that your app matches your customers’ business needs.
What’s a fair price? At what price is your app too expensive?	Price your app to retain existing customers and attract new ones.
New Customers
How many new customers must you attract?	Grow your business.
Competitors
How are competitors pricing their similar apps?	Price your app competitively to build your own customer base, and potentially lure customers from other apps to your product.
What pricing models are your competitors using?	Evaluate if the competitor app pricing models are technically possible for your business, and if their monetization strategies work for your business.

With those questions answered, Leung extends her analysis: she knows her customers, and now she thinks like her customers. After all, customers typically evaluate other apps before choosing one to buy.

Leung asks herself questions like these.

How did my customer address their business problems before choosing my app?
What alternative products did my customer consider before choosing my app?

Interview Existing Customers

If you have existing customers, interview them. Consider asking them:

What would you consider a fair price to pay for our app?
At what price would you feel our app is too expensive?

Search for New Customers

If you’re looking for new customers, search AppExchange for similar products and review their listings. View your competitor app’s category and other apps in that category.

Leung summarizes her findings.

Since Cloudy Health is a new offering for Get Cloudy consulting, Leung is targeting new customers.
The manufacturing and construction businesses that Leung interviewed primarily use Service Cloud.
There are similar apps on AppExchange, but none that do everything that Cloudy Health does.
Competitor apps are priced on a per user or per org basis, charged monthly. Competitor prices range from $15 per user to $200 per org per month.

Monetization Strategy

Next, Leung turns to her favorite statement, “Show me the money.” In order to continue making great products and innovating new features you also must monetize your app. The goal is to get your price low enough to meet your subscriber targets, but high enough to make a profit. Monetization is so important that it’s explored in detail in the next unit.

Pricing Relative to Salesforce

Get Cloudy Consulting’s Leung Chan holding an apple and an orange

The final component of Leung’s pricing strategy is pricing relative to Salesforce. Think about it this way: When a customer on AppExchange sees your app’s price, they instinctively calculate two value-to-cost ratios.

What value do I get with my Salesforce installation for what price?
What value does this new app provide for what additional cost?

To figure out relative pricing, Leung does some research. She reads up on Salesforce Einstein 1, Salesforce editions, and add-on products.

Leung really wants to talk to someone about AppExchange, Service Cloud pricing, and apps in this market space, so she logs a support case in the Salesforce Partner Community.

Log in to the Salesforce Partner Community.
Click the question icon (A) and then click Log a Case for Help.

The Salesforce Partner Community homepage with a highlight on a question icon (A)

Select Partner Program Support. Note: If you don’t see the Salesforce Partner Program Support tile, use the org picker to select the org that’s associated with your Salesforce partnership account.
For product, enter and select Partner Community & AppExchange.
For topic, enter and select AppExchange Listing Approval Process.
Provide any other required details and then click Create Case.

Most of the customers Leung interviewed earlier will install Cloudy Health into their existing Service Cloud-enabled Salesforce orgs. Leung notes that the majority of these customers use Enterprise Edition.

Service Cloud Pricing with Essentials, Professional, Enterprise, and Unlimited tiers at $25, $75, $150, and $300

Enterprise Edition Service Cloud customers pay US$150 per user per month (billed annually). Leung jots down a quick table of possible Cloudy Health prices relative to Salesforce:

Pricing, as a Percent of Service Cloud Enterprise Edition	Cloudy Health Pricing Options
10%	$15
20%	$30
30%	$45
40%	$60
50%	$75

Get Cloudy Consulting could charge customers recurring, tiered amounts to use a range of the app’s features.

Leung compares this quick table to the competitor data she gathered in her opportunity analysis. She believes that her customers would want to pay between 10% and 30% additional for her app over what they pay for Salesforce products. That means customers would pay $15 to $45 per org per month. Cloudy Health will offer tiered pricing that positions their app in the middle of competitor apps. We discuss pricing tiers in the next unit.

What’s Next for Cloudy Health?

Leung has done her research–and then some! She understands her app, her competitors, and her customers much better, and she’s formed some initial ideas on pricing. Continue reading to learn about how Leung turns her strategy into a detailed pricing plan.