Additional revenue created through external API integration offers new growth opportunities for many application providers. However, this presents a new challenge for pricing features that are outside your core product. Our customers have approached this in a myriad of ways, depending on the business objective integration will solve.
For many software sectors integration is becoming table stakes, by offering a wide variety of use cases and low or no cost integration they gain market share. Other providers, whose suite of applications require deeper expertise, can charge a premium for sought after, complex integration scenarios. Offering API integration to 3rd party applications is a competitive advantage. To make this a reality for any organization, appropriately pricing the service sits at the top of the list.
We have seen our customers price their embedded integrations in three different tiers:
- Integrations included
- Integrations included in a tier
- Integrations as a stand-alone product offering
These organizations use integrations as a part of their product solely as a competitive differentiator. With many products, integrations are an expected aspect of the ecosystem they support. For example, most marketing automation systems (HubSpot, Marketo, Eloqua) include integrations to CRM systems in their pricing. Customers expect their data to be mirrored so that the stakeholders can access any data related to revenue at any moment. Since these integrations are expected to be naturally intertwined, pricing is based on capturing market share and increasing stickiness instead of a way to increase the average selling price.
INTEGRATION INCLUDED IN A TIER
The most common model we have seen is the pricing of integration as a feature in a tier. This pricing model allows for more immediate revenue opportunities by up-selling to current customers, creating an even stronger ROI for embedded integrations. This also provides a very strong feature lever to increase ASP in net new accounts. By offering tiered integrations, your sales and customer success teams can create new opportunities to add stickiness to the product as customers integrate into the systems they are already using.
INTEGRATION AS A STAND-ALONE PRODUCT OFFERING
This pricing structure serves to capture as much revenue for highly desired, and often equally, highly complex integration scenarios at scale. Pricing integration as a stand-alone product allows for even higher ASP in up-sell and cross-sell opportunities to your current customer base. They are often used to source net new opportunities that the organization could not previously support or support alone without service partners. For example, if your application only integrates with Salesforce and your support teams wants to be able to survey customers that submit Zendesk tickets, adding Zendesk and other IT service integrations can be used as a motivating up-sell opportunity.
No matter what pricing model you use, integration can be used as a strategic advantage to raise ASP and drive more stickiness to your product.
Interested in learning more about building out your integration strategy? Schedule a free consultation with our team.