Deciding on API Integration Pricing

By Brian Busch in API Industry Trends, GTM Posted Dec 1, 2020

How do you decide if that new feature is something you can charge extra for?

Try it and ‘see what the market will bear’? Hand it to the analysts in the strategy and pricing group to do their spreadsheet magic? Fortunately, the internet is filled with conflicting advice on pricing and packaging for digital products, so the answer must be out there somewhere…

API integration pricing

We say that tongue in cheek because we’re going to add our advice to the pile. Jokes aside, at Cloud Elements we get asked all the time how to price integrations. And we’ve laid out the decision framework we walk through with customers in our Simplified Guide to Marketing and Selling Integrations.

What’s the Business Case, Again?

At Cloud Elements, we often partner with digital products teams that have decided they need to make a strategic investment in integrations for their users. They may already have built one or two integrations themselves and know that continuing to build in-house doesn’t scale for either the number of integrations demanded by users or they don’t want the development team to spend hours becoming experts in complex applications like NetSuite or SAP

Given the level of time and investment the Product and Engineering teams will make in integrations, executives often look to the Product Manager to produce a business case that justifies the investment. To preview what’s in the Simplified Guide, we usually offer three starting points:

  • Indirect Revenue: An indirect revenue strategy offers integrations free-of-charge to all customers in an effort to gain more competitive wins (differentiation), reduce churn (customer success), drive customer usage of your platform (revenue growth), and offer faster time-to-value (via ease and flexibility).
  • Upsell or Premium Tier: Customers opt to pay extra for access to integrations. We’ve seen it all, from companies that charge 25% of the annual subscription fee for one integration (props to them) to those who include integrations with other features in premium tiers. In all cases, customer-facing teams need to be able to explain the value of the features in the premium tier(s).
  • Standalone Product: In this scenario, the integration experience may be offered as a new product line that complements other products and needs a sufficient level of marketing and support resources. As with any product line, leadership is honed in on profitability and self-sufficiency (at least after a reasonable ramp time).

Questions to Turn Your Plans Into Happy Customers

Any product launch or go-to-market push is by definition cross-functional. The business needs Product and Engineering to deliver the right functionality and the GTM teams (marketing, sales, success, services, etc.) to bring up integrations at the right time and in the right way with customers.

Once you’ve got the right people in the room, aligning on your GTM plans for integrations often means answering a few key questions:

  • What’s the business opportunity that’s driving this investment from P&E? 
    • Maybe it’s a strategic push into new customer segments (moving up-market?) or new geographies (falla portuguese?). Or perhaps sweeping changes in your sector (read: digital transformation) have you pushing back against new entrants or exploring new opportunities that were unavailable only a few years ago (who would have thought that card payments processor American Express would start offering integrated payments services usually done by banks?)
  • Are you solving the problem, or helping the user to solve the problem?
    • This is roughly asking what the desired user experience is. Are you productizing self-serve integrations that users can configure themselves or providing tooling and services in addition to your API that support work the customer would ultimately do? The answer to this question is the north star for your GTM efforts.
  • What support resources are available, and when should customers engage the PS team?
    • This question pushes teams to think about their offering holistically and to define the boundaries of what the experience should be, especially the how/when/what around engaging with the services team. 

Of course, there are more pieces to creating a cohesive integration GTM. Learn what else you need to consider and other talking points for aligning stakeholders in the Simplified Guide.

download this guid to learn how to build a flawless integration strategy in 6 steps