McKinsey is shifting towards outcomes-based pricing, with a quarter of its fees now tied to client performance, driven by AI transformation projects.
Clients are seeking support for complex, multi-year projects, requiring deep implementation expertise across various business functions.
Per-seat pricing in SaaS prevails due to its predictability for budgeting and ease of understanding, despite criticisms of unfairness.
Usage-based pricing struggles in SaaS because usage doesn't always directly correlate with value, leading to ineffective metrics.
Companies stick with per-seat pricing because it aligns with headcount-based budgeting and allows for free product usage once a seat is purchased.
Why this matters: These shifts impact how businesses procure consulting services and software, emphasizing the need for models that align with value and predictability. The prevalence of AI in business strategy demands adaptable pricing and service models.
McKinsey's move towards outcomes-based pricing reflects a broader industry trend where AI disrupts traditional consulting models. This shift requires consultants to be genuine partners, sharing both risks and rewards with clients. The focus is now on deep implementation expertise and multi-year transformation projects rather than just strategic advice.
In the SaaS world, the per-seat pricing model continues to dominate due to its simplicity and predictability. Despite complaints of unfairness, it aligns with how businesses budget and allows users to freely use the software without worrying about micro-transactions. Alternative pricing models like usage-based or flat-rate often fall short because they either don't accurately reflect value or become unsustainable as companies scale. The enterprise pricing theater, where large customers negotiate significant discounts on per-seat licenses, further reinforces the model's entrenchment.
Actionable takeaways: Businesses should consider the predictability and alignment with value when choosing consulting services or SaaS pricing models. The rise of AI necessitates adaptable and performance-driven approaches.
Q: Why is McKinsey shifting to outcomes-based pricing?
To better align with client goals in complex AI transformation projects, sharing both risks and rewards.
Q: Why do SaaS companies still use per-seat pricing?
Because it provides predictability for budgeting and allows users to freely use the software without usage restrictions.
Q: What are the challenges with usage-based pricing in SaaS?
It's difficult to accurately correlate usage with value, leading to ineffective metrics and potential product limitations.
AI is driving a shift towards outcomes-based pricing in consulting, emphasizing partnership and shared success.
Per-seat pricing in SaaS persists due to its simplicity and predictability, despite criticisms of unfairness.
Consider predictability and alignment with value when choosing consulting services or SaaS pricing models.
The rise of AI necessitates adaptable and performance-driven approaches in both consulting and software pricing.
Do you think outcomes-based pricing will become the norm in consulting? Will SaaS companies ever move away from per-seat pricing? Share your thoughts in the comments below!
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