Marcus Webb will tell you that Northfield's first pricing model was technically correct and strategically wrong. It closed deals. It just closed the wrong deals at the wrong price for the wrong reasons.
Version one: per-seat, optimized to close
Northfield launched with per-seat pricing at $49/seat/month because that was what comparable tools charged and it was easy to explain. It closed 60 customers in the first six months.
"We were celebrating," Webb said. "Then we looked at the cohort data. The customers who churned fastest were the ones who bought the most seats upfront. We had the incentive structure backwards."
Version two: usage-based, optimized for expansion
The second model moved to usage-based pricing tied to the core workflow action. Expansion revenue improved. Close rate dropped 40% because procurement could not budget for variable spend.
Version three: platform tier plus usage
The right pricing model for us was not the smartest pricing model. It was the one that matched how our buyers made decisions.
- Fixed platform fee that procurement could budget as a line item.
- Usage-based component for the expansion motion that CS could manage.
- Annual commitment option that added 18% to ACV for customers who wanted price certainty.