From pricing chaos to a
game-changing exit.
BDNA rebuilt licensing, packaging and discount discipline, and stopped trading price for quarter-end volume.
After twelve years in business, BDNA concluded it was a content company, not a software company. Its home-grown monetization approach had gaps and inconsistencies that buyers had learned to read: wait until the last minute of the fourth quarter, and the terms improved. Customers agreed the value was there. When it came time to defend price, they asked for, and received, enormous concessions.
SPP ran a three-stage monetization engagement across licensing, packaging and pricing. BDNA moved content, professional services and data extractors onto a recurring subscription basis, built a licensing metric tied to the point where its customers actually perceive value, and replaced discretionary discounting with structure. Deals now land within a few points of the calculated net price.
about $5M.
to the pricing architecture.
holding the line on discounts.
Gaps and inconsistencies in a home-grown monetization approach taught buyers exactly when to buy. Salespeople could set aside core pricing rules near the end of a quarter to make their numbers, and the discretionary approvals that followed ran higher and less controlled than management realized.
Discretion had become the pricing model.
A content company,
priced like a software company.
After twelve years in business, BDNA made the realization that they were a content company, not a software company.
They saw this as a major barrier to monetizing their intellectual property and desired to get paid more fairly for the value they delivered to customers, struggling with how to capture this from the dynamic content they provided.
Based on gaps and inconsistencies in their home-grown monetization approach, buyers eventually learned that waiting until the last minute in the fourth quarter to purchase BDNA’s enterprise solutions would result in significantly better terms.
Discussions with customers clearly demonstrated that there was significant value being delivered. But when it came to defending prices, customers were asking for, and receiving, enormous price concessions.
Internally, there was a lack of consensus about what to do about it, so they reached out to us for help.
“Our pricing was all over the map.”
What was breaking
in the pricing.
BDNA had the following challenges as they embarked on the effort to fix their pricing:
Content that was
not getting paid for
BDNA wasn’t getting paid fairly for the value of their content.
A multitude of
licensing schemes
There were a multitude of licensing schemes.
Pricing nobody
could explain
Product pricing was perceived as too complicated by salespeople and customers.
Discounting
out of control
Discretionary discounting was out of control: salespeople had broad rights to ignore core pricing rules near end of quarter to make their numbers, obtaining enormous discretionary discount approvals.
A new self-perception
competing for focus
Their new perspective of themselves as a content company made it difficult to focus on addressing their other, equally important challenges.
What the Discover
stage identified.
SPP’s three-stage, comprehensive monetization engagement was completed for BDNA. At the end of Stage 1: Discover, we identified additional challenges that were addressed as part of this engagement:
The value sat
in the cleanup
Customers seemed to appreciate the content BDNA’s solution delivered, but not as much as they valued the cleanup and transformation of their data, making the journey to monetizing content more challenging.
Packaging customers
could not parse
Because of the complexity of packaging model, customers didn’t seem to fully understand what it was they had purchased.
Hardware versus software
versus devices
Customers perceived different value when counting hardware vs software vs devices.
Capacity they
did not need
Customers believed they were paying for capacity and/or capabilities they didn’t necessarily need.
Ancillary value
left uncaptured
Value from ancillary services and products including professional services and data extractors was not being captured.
Perpetual licensing
working against them
Perpetual licensing schemes were at odds with capturing full value.
Discounts deeper
than management knew
Discretionary discounts were much higher and more uncontrolled than management realized.
Land and expand
surprises
“Land and expand” sales strategies often resulted in surprises for the client which ultimately limited BDNA’s ability for expanded sales.
Proposals that
took too long
Proposal preparation and review was tedious despite use of configurators, calculators, and similar tools.
What the new monetization
model delivered.
That gain came from effectively managing sales and discounting.
Software Pricing Partners’ engagement with BDNA delivered significant and positive results, including:
Subscription instead
of perpetual
They effectively bundle and charge for their content, professional services and data extractors on a recurring subscription basis (term) instead of one-time upfront basis (perpetual) which enables them to capture full value from all of their products and services.
Discount leaks
closed
They eliminated egregious discretionary discounts, better protecting net prices (i.e. “revenue preservation”) and substantially increasing deal velocity.
A licensing metric
of their own
We created a licensing metric completely unique to BDNA’s offerings which linked more closely to the right value creation point as perceived by customers.
In 2017, two years after the engagement, Flexera acquired BDNA at a 20% exit premium attributed to the pricing architecture. The monetization architecture built during the engagement remained in operation through the transaction and the diligence that preceded it.
“Almost all of our deals now come in within a few points of our calculated net price, which is SO much better than before… Just look at the revenue preservation! It’s remarkable.”
BDNA on fixing pricing that was all over the map.
Walker White, BDNA President, on what the pricing looked like before the engagement and what changed once the new model reached the field.
Other architectures
that survived.
BambooHR
ARR grew 750% in three years and approached $250M, with the enterprise segment opened on the same pricing architecture.
Nearmap
Aerial imagery SaaS rebuilt licensing and packaging around a metric customers could predict. Close rates moved to near 50% within the first month of rollout.
OSIsoft
Acquired by AVEVA (Schneider Electric) for $5B. Pricing architecture survived PE-level diligence five years post-engagement.
BDNA is one of several architectures that stayed in operation through a sale process. If you are evaluating a software company’s pricing ahead of a transaction, this is how SPP works with PE firms and operating partners.
Looking for profitable growth?
If your quarter-end discounts are deeper than anyone signed off on, if customers cannot tell what they bought, or if the value you deliver is being given away in the terms, the same architecture work applies. Bring your version of the problem.