Unlocking Growth: The Buyer and Seller Benefits of Ramp Deals
June 14, 2023 12:48 PM
In the the SaaS industry, sellers are exploring creative strategies to drive growth, attract new customers, and retain existing ones. An increasingly popular way to boost conversion rates and create revenue predictability is offering a ramped deal.
What is a ramp deal?
A ramp deal involves gradually increasing a subscription fee over a defined period of time, offering benefits to both the buyer and seller. In this post, we will explore the benefits of ramp deals, how they can drive growth, and why they are worth considering.
What are the seller benefits of a ramp deal?
As a seller, Ramp deals provide the ability to offer customers an introductory price at the start of their subscription to attract them as a customer. Getting the product or service in the hands of the buyer, unlocks the ability to garner feedback and unlock growth. Ramp deals also help sellers with the following:
Reduced Barrier to Entry: Ramp deals can help attract new customers who may be hesitant to commit to a higher upfront cost. This lower entry point reduces the financial commitment upfront, conserving cash and making it more affordable for businesses, startups or cost-conscious customers with budget constraints.
Increased Conversion Rates: By providing customers with a gradual increase in pricing over time, sellers have the opportunity to build trust and credibility. The incremental approach gives customers the opportunity to experience the product’s value, impact, and ROI before making a commitment to higher pricing tiers. As a result, prospects are more likely to convert into paying or higher paying customers as they recognize the benefits and impact the product or service has on their business.
Stronger Customer Relationships & Customer Retention: Ramp deals provide an opportunity to establish a stronger seller/buyer relationship from the start.
How? By offering a lower initial price, sellers demonstrate their commitment to the customer’s success and their willingness to work with customers as they grow and evolve. The collaborative approach helps build trust and fosters a partnership mindset. It’s a competitive market and ramp deals can be a powerful differentiator. The flexibility and responsiveness to customer needs, positions the product as customer-centric and the seller as adaptable.
Improved Cash flow and Revenue Predictability: Ramp deals offer advantages in terms of cash flow and revenue predictability. Instead of relying on upfront payments, ramp deals distribute revenue over a defined period. The forecastable and predictable revenue stream also helps with resource allocation and more accurate forecasting. This can help make more accurate and informed decisions around scaling.
Upselling and Cross Selling Opportunities: By structuring plans with incremental steps, ramp deals create opportunities for upsells and cross-sells. As buyers progress through tiers, sellers can introduce additional features and functionality that align with the buyers needs. The ability to upsell advanced versions or introduce products that might be complementary in the first ramp period, allows sellers to generate additional revenue streams and capitalize on buyer growth.
What are the buyer benefits of a ramp deal?
Lower Initial Cost: A ramp deal allows buyers to start using a product or service at a lower initial cost compared to traditional, flat fee pricing models. It reduces the buyers financial commitment upfront, making it more affordable for a larger set of customers.
Risk Mitigation & Value Validation: With the ability to “try before you buy", buyers can try a product or service to experience the value firsthand. The less risk associated with a deal means cost conscious buyers, who are more risk averse, can determine the value of the product for their business with little to no risk. This mitigates the risk of investing a significant amount upfront in a solution that might not meet a buyer's need or expectations.
Scalability: The incremental pricing structure ensures that Buyers only pay for additional value as it’s required, making it a flexible option for businesses experiencing growth, evolving requirements, or a changing market. The pricing transparency of a ramp deal makes it easy for growing buyers to understand and plan for.
Budget Planning: Buyers can better budget for future price increases. The gradual, transparent price increase allows buyers to anticipate future costs making it easier to budget for a product or service. Price increases don’t come as a surprise to the buyer. If a buyer budgets for the price increase and realizes value, there is less likelihood of churn.
Upgrade Flexibility: Buyers still have the option to upgrade or add on additional features. This flexibility allows buyers to adopt additional features as their needs evolve. buyer's can assess the value gained from the initial ramp and make informed decisions about upgrades and add ons.
How to get started with ramp deals
Ramp deals have emerged as a compelling pricing strategy for SaaS companies. They are mutually beneficial and help both the buyer and seller drive growth. By gradually increasing a subscription fee over time, raps deals strike a balance between buyer affordability and seller profitability.
The real challenge with ramp deals is on the finance side. Figuring our how to bill, and collect the increased payments, without a ton of manual intervention, is what will make or break your ramp deal success.
Cacheflow enables SaaS sellers to configure ramp quotes with custom term lengths, with the back-end engine to automatically remind, bill and collect the payments. If you want to see what this could look like for your company, book a product tour below!