What to Expect with Salesforce’s 2023 Price Increases

person holding red arrow signifying price increases

Salesforce announced on their website that they will be increasing list prices by an average of 9% across Sales Cloud, Service Cloud, Marketing Cloud, Industries and Tableau.

To justify the increases, Salesforce stated that their “last list price increase was seven years ago, and since then the company has delivered 22 new releases, thousands of new features—including recent generative AI innovations—and invested more than $20 billion in research and development,” implying that these price increases were more than due.

The price increases will also help Salesforce improve a key focus area from them – their margins and ultimately their profitability. Price increases, along with their recent cost cutting, will enable Salesforce to obtain profitability improvements and sustainable growth.

Salesforce knows there is limited additional expense with imposing a price increase beyond the expenses tied to the enhancements Salesforce cited. Also, Salesforce is banking on the fact that it is hard for customers to switch off their products and it will very likely lead to many customers deciding to pay the increased price.

Some specific price increases for Sales Cloud and Service cloud include:

  • Professional Edition list price will increase ~7% ($75 to $80 per user per month)
  • Enterprise Edition list price will increase 10% ($150 to $165 per user per month)
  • Unlimited Edition list price will increase 10% ($300 to $330 per user per month)

Similar list price increases are expected to go into effect for Industries, Marketing Cloud Engagement and Account Engagement, CRM Analytics and Tableau. As of now, there are no specific details of what these increases will actually look like.

Having worked with many Salesforce customers, I do not think this is going to land well with their customer base. This is especially the case for those customers that are not receiving the full value from the “thousands of new features” they have been paying for. Even citing AI as a reason to increase prices is a bit of a stretch until the AI innovations prove to be of value.

Here, I will discuss whether these price increases are justified based on Salesforce’s cited reasons, which customers are affected by the increases, and what this means in the coming months.

Are Salesforce’s Price Increases Justified?

Salesforce cited several reasons for increasing their prices, but how will these reasons resonate with customers? Salesforce hasn’t raised their prices in almost a decade, so it is not surprising that they are ready to increase prices solely because it has been a significant amount of time since the last increase.

The second and primary reason given for the price increases is tied to all the releases and new features that have come out in the past seven years, including the very recently adopted AI features in some of their products. A lot of customers are taking stock of their current utilization and recognizing that they are not using a lot of those new features.

When customers are already not seeing the value from their current product portfolio, increasing the price of those products likely won’t land well with the Salesforce customer base. This is not to say that Salesforce customers are not receiving value from their subscribed to products, but it is to say that if Salesforce is looking to hit customers with a meaningful price increase, they better be prepared for push back.

Which Salesforce Customers Will These Price Increases Affect?

In their announcement, Salesforce claimed that these price increases would affect new customers and existing customers purchasing new cloud products. For example, an existing customer that has never used Marketing Cloud would be affected by the price increases if they wanted to add Marketing Cloud products to their portfolio.

What will be interesting to see is whether Salesforce truly limits the list price increase to these specific customers. Based on some reports out there, it seems the price increases may also apply to existing customers already adopted and subscribed to products at renewal. It is important for all Salesforce customers to reach out to their Salesforce representative and get clarity on who these price increases will affect. For those Salesforce customers that already have Sales Cloud Unlimited and whose renewal is after July 31, 2023, for example, does their price automatically go up by 10% at renewal?

What will Salesforce Representatives Push in the Coming Weeks?

As part of Salesforce’s July 11th announcement, they indicated that the list price increases will take effect less than a month from the announcement itself. They essentially gave no time for their customers to properly prepare for these increases. For comparison, Microsoft gave customers about a 6 months’ notice for the price increases that took effect in March of 2022.

Salesforce also announced the increases on their website rather than directly communicating the news to new or prospective customers.

This abrupt timing is almost certainly not a coincidence on Salesforce’s part. It’s possible that Salesforce’s sales reps will use the August price increases to help motivate and push deals to close by the end of July, which is also the end of Salesforce’s Q2 FY24. Salesforce customers and prospective customers are going to get emails, voicemails and updated proposal decks that make mention of the “great opportunity” to take advantage of the proposed pricing and discounting on the table because it will increase come August if they are not able to pull the trigger and bring pen to paper by end of July.

Increasing the list pricing in August will also help Salesforce increase deal sizes for the remainder of FY24and leading up to their January 31, 2024, year end as well as beyond. Some analysts have suggested the price increases being rolled out may also be a way to pad Salesforce’s numbers for the next couple of years. By increasing the list pricing by around 9% on average, they will naturally capture that price increase and fee increase without any additional effort on their part.

How to Effectively Combat Salesforce’s Price Increases

Despite these price increases, the hope is that Salesforce customers have price protections in place that will help address these price changes and put themselves in the best position to ensure they effectively negotiate out the increases. It’s important to remember that these increases apply to the list price only, and if you properly prepares for your Salesforce negotiations, you should be able to overcome these price increases just by getting the proper discounting at the negotiation table.

UpperEdge advises Salesforce customers on how to unlock the most value from their Salesforce relationships while ensuring they have the proper pricing and commercial terms in place. Check out our Salesforce advisory services to learn how we can help.