Salesforce raised prices on certain products by nine percent. For companies, this does not fit within the budget, which only became smaller with the poor economic situation from last year. Customers are, therefore, more likely to compare with competitor offerings and see that they are getting better value for money elsewhere.
In July, Salesforce announced price increases for Tableau, Sales Cloud, Service Cloud, Marketing Cloud and Industries. The new prices would be implemented just a month later and would be nine percent higher than before.
Hope for revenue increase rebounds
So, the price change was swift, but it was also unexpected. Stock markets have been presenting poor numbers for some time, and price hikes since the war in Ukraine are making companies make cuts. With most companies having long implemented price increases due to hardware shortages or increasing costs in areas such as personnel costs, Salesforce is catching on relatively late. So consumers might have expected a price hike earlier and, since it didn’t come, didn’t count on it now. Moreover, the company did not change its pricing policy in the previous seven years.
Among stock market analysts, the decision to raise prices provoked enthusiastic reactions. It was believed to have a favourable effect on the upcoming quarterly figures, as customers would renew current contracts en masse before the new prices were implemented.
Although the reactions were not all positive, other pundits expressed concerns about a possible loss of customers to competitors. That would follow because the price increases were not justified. The company itself gave no reason, and some speculate that the prices go up due to the large investments in AI functionalities Salesforce made.
Poor position in AI offerings
The lack of clarity sends Salesforce customers to competitor offerings. There, Microsoft emerges as an interesting party. For this tech giant, investments in AI run into the billions because the company want to assure itself of a close partnership with OpenAI.
By signing up OpenAI as a partner, Microsoft was at the forefront of integrating generative AI into its offerings, which can be used free of charge by customers. In addition, OpenAI’s products, such as ChatGPT and DALL-E carry name recognition.
Salesforce cannot compete. AI tools only became available much later and all come at an additional cost. Moreover, the company itself seems to be still searching within the AI industry. For example, the company has only just made solid investments in Hugging Face’s AI platform, and it will take time for the results of this investment to come.
Also read: Salesforce announces pricing of GPT features
Customers denounce poor guidance
Insider spoke to several parties about Salesforce’s position and found that HubSpot is also taking care of unsatisfied customers. In it, testimonies surfaced of customers not receiving proper support from Salesforce after purchasing its products. One consulting firm testified, “We have customers who come to us and say, ‘Look, we actually really like the product, but the problem is that we know there’s more in there that we can get value from, and we’re struggling to figure out where Salesforce can help us.'”
The CRM specialist has been criticized for its strong focus on sales. HubSpot offers products for these customers for the same purposes but emphasizes self-service in its offerings, which reduces costs for companies by not having to pay a HubSpot specialist all the time to make proper use of the products.
It looks like Salesforce is losing customers because of an excessive focus on AI technology while customers are trying to get the most out of the company’s tools. Customers pay a hefty price for that, which creates expectations about, for example, the guidance they receive. Raising prices again on that basis may be the last straw for customers who were already displeased.