Consider Performance-Based Pricing

Rahkeem Morris
February 28, 2019

     Executives are getting wise to software vendors:

“They walk in and show these fancy screens and a bunch of charts claiming how much they’ll save you, and everything looks great! But then it’s a totally different experience once you buy it… nothing works as advertised.”

       This, from a top executive at a contracted services firm who’d been recently burned by a software vendor. He made it clear: He wasn’t going to get fooled again. He’s not alone - we’ve spoken to executives whose biggest fear is having their signatures on expensive contracts with tech companies whose products flopped. Making a bad purchase decision is seriously costly for executives’ reputations… especially in competitive industries.

How do you avoid paying for ineffective software?

      Let’s focus on why software companies so frequently are able to hoodwink well-meaning corporate executives. We believe at core is an incentive problem driven by pricing: Your software suppliers get paid whether or not they achieve the value they promised. Sure, you’ll withhold payment if the product doesn’t work. But what if it delivers a fraction of the value? After all, you’re on the hook for a yearlong contract, and there isn’t commitment to performance in the statement of work, is there? Plus, you’ve already gone through a lengthy customization and implementation period, briefed the Executive Team and your peers on this software’s many benefits - it’s really hard to pull the plug now. An alternative exists: What if your software partner put its revenue on the line? Priced its software so it only made money if it delivered as promised?

     SYRG offers every customer the option for “performance-based pricing”. Following an assessment of their operations, we estimate internally what we think our impact could be on their business. We share this assessment with our customers, and propose pricing models where we only make money as a share of the costs we help you reduce or profit we help you generate.

How SYRG Works

      SYRG helps union workplaces fill shifts according to their collective bargaining agreements. Customers come to us hoping to (1) address their overtime spend and/or (2) avoid understaffing. Based on each customer’s motivations for implementing SYRG, we offer pricing plans that include:

  • Pay per shift SYRG fills: This means SYRG only makes money if we successfully fill shifts, help customers avoid understaffing, and/or increase revenues.
  • Pay per hour of OT avoided: This means SYRG makes money if we successfully fill shifts at straight-time, keeping costs low

With regular pricing, you’ll pay regardless of whether the shift gets filled (and regardless of whether it’s straight time or overtime). With performance-based pricing, you’ll pay based on mutually agreed “success metrics,” based on what success is worth to your organization.

Why Performance-Based Pricing is Often Better for Operators

      Operators often lean towards performance-based pricing, as it makes intuitive sense: Why wouldn’t you want a software that you only have to pay when it makes you money? There are three additional reasons why operators choose performance-based software:

  1. Potential for no additional budget requirements: In many cases, buyers don’t need finance approval or room in the budget for software that prices based on performance.
  2. Zero money wasted: If it doesn’t work, then you don’t look bad... in fact, you look brilliant because you spent nothing. Consider performance-based pricing an insurance policy, where both you and your company are beneficiaries.
  3. Full alignment with your software providers: Want a software provider that feels more like a partner than an adversary? Get on the same page using performance-based pricing.

If you’re sick of software vendors who make money regardless of whether their software makes you money, consider performance-based pricing. And if you’re in the market for performance-based software that helps you fill shifts according to your CBA, consider SYRG:

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