💃 Salesforce is Raising Prices 🕺

Good morning, Salesforce Nerds! Salesforce announced a “price update” that is taking effect in August 2023.

Is this a greedy capitalist strategy?

A way to cover R&D costs for the influx of AI tool offerings?

Whether nefarious or necessary, Salesforce is increasing prices for their most popular solutions, including Sales and Service Cloud.

Let’s look at the most relevant recent events to get a glimpse into Salesforce’s strategy 👀.

Agenda for today includes

• Salesforce is Raising Prices - Let's Look at the Bigger Picture

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Salesforce is Raising Prices - Let's Look at the Bigger Picture

Today we will discuss-

✅ New Releases

✅ The Street

✅ “The best customers are your existing customers”

NEW RELEASES

Two letters.

AI. 🤖.

Salesforce has gone all-in on it, to the tune of $20,000,000,000 in R&D expense 😳!

And they do not intend for AI to be a loss-leader for them. It is a functional, value-add component that they will monetize 💰💰.

Also, the speed that they are shipping is incredible 🏎💨.

It’s one thing for the many start-ups to build AI tools for B2C or SMB applications. It is a completely different game for the largest CRM company in the world to build AI tools for a their customer-base.

When your customers are Wal-Mart, Toyota, Uber, Spotify, and other titans in their industry, your products better be tight 💯.

But this new price increase isn’t the only new revenue Salesforce is counting on to cover expenses plus scrape some profits.

They’ve already announced their AI Cloud pricing and it’s spendy 🤑!

But going back to the point of Salesforce developing AI tools that their customers expect to add “fair-value,” or more, in return, the risk that Salesforce is taking on is being buffered by R&D costs.

Takeaway: Can you think of another big-tech company that is shipping enterprise-grade AI to their business customers? This doesn’t come cheap!

THE STREET

Wall Street is insatiable 😈.

If you are under your forecast, they want more 😈. If you meet it, they want more 😈. If you exceed it, they want more 😈.

Salesforce, post-pandemic, was seen as under-performing. After a few years of languishing, activist investors swooped in for some easy meat 🥩.

As far as Street performance, the activist investors have been great for the company, effectively holding the company accountable to make better decisions, under threat of taking coveted Board seats.

Look no further than the 2023Q1 Earnings Call as validation that the activist investors have been effective.

But The Street wants more, more, more 😈.

And don’t think the timing of Salesforce’s price increase is random. They are gearing up for the next earnings call, likely to take place in August.

We called it in Q1, and we’re calling it for Q2 - Q2 will be a great earnings call. Salesforce will tout their AI GTM motions and the forecasted revenue growth due to the upcoming price increase.

Takeaway: Salesforce has had a stellar 2023 from The Street’s perspective. They will look to continue the amazing investor news up through their next earnings call, including the impacts that this 9% price increase will produce.

“THE BEST CUSTOMERS ARE YOUR EXISTING CUSTOMERS”

If you were told that you could make an additional $200,000,000 per year just by raising the price on your existing customers, what would you do 😅?

Salesforce said hell yes 😈!

Salesforce has 3 major releases per year, and is on the vanguard of enterprise AI solutions for their business customers. So, it’s not like they’re taking and not giving 🤷.

In fact, Salesforce has been very lax on their price increases.

Did you know there is built-in price increases in your contracts with Salesforce that they never enforce 👀?

Takeaway: When you’re as embedded into your customer’s business as Salesforce is, a lil price increase is an easy lever to pull to crank up the revenue. Salesforce has been historically lax on price increases, but with thirsty investors, they’ve decided to cash-in on some of their relationship equity, which should produce an additional $200MM ARR 🤑!

Daily Principle

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