3 Pricing Strategies for Product Integrations by Startups
Optimizing product integration pricing for startup success—balancing adoption and revenue.
As part of successfully launching integrations, startups must pick the right price point for each one. This decision can be difficult, but by carefully reviewing different pricing strategies, startups can more easily land on the best one for them, says Shensi Ding, CEO & co-founder of Merge.
Building product integrations—or any integration built between a product and third-party systems, typically through APIs—is a significant investment, especially for startups with limited engineering resources.
To ensure the investment pays off, startups need to land on the right approach for pricing their integrations.
This decision can be tricky. If a startup prices them at too high a level, they risk low adoption, while if the startup prices the integrations at too low a level (or if it comes included in the company’s subscription plans), they risk leaving money on the table.
There’s no one-size-fits-all approach to pricing product integrations, but there are generally three strategies startups can choose from.
1. Pricing Integrations for Free
Having integrations come with subscriptions at no additional charge seems like a bad idea.
Building just a single integration likely takes a startup’s engineers several sprints, from scoping the build to developing it to testing it to documenting it. Moreover, these integrations will inevitably break, forcing the startup’s engineers to monitor the integrations continually and fix the issues as soon as they arise.
All that to say, the costs of building and maintaining integrations can be extremely steep, and if integrations don’t offer additional revenue, then what’s the point?
Many startups, however, believe that the customer retention improvements associated with offering the integrations can effectively offset the time and resources that go into building and maintaining them.
Allwhere, an IT asset management platform for distributed teams, is an example of a startup that provides its HRIS integrations for “free.” Jimmy Jameson, allwhere’s Product Strategy and Operations Lead, explains that it’s because “Our integrations are a great way to get clients onboarded into our product quickly and experience a fast time to value, so we think our integrations will ultimately pay for themselves through improved customer retention.”
So, suppose customer retention is a pain point at a startup—like it is for many—and integrations offer significant value to their clients. In that case, they may want to try this strategy early on and see if it improves their customers’ propensity to renew.
2. Diverse Pricing for Integration Categories
Startups often offer integrations for multiple software categories to accommodate more use cases. For instance, a startup may offer HRIS integrations to help clients provision and deprovision users automatically, ticketing integrations to help clients sync tickets with their platform bidirectionally, file storage integrations to enable clients to sync documents to and from their product, and the clients’ other applications—and the list goes on.
This further complicates startups’ pricing decisions, forcing them to decide whether each category of integration deserves the same price point. And if not, they’ll need to decide how they price each category.
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A startup may decide to price the categories differently under the following conditions:
- Certain integrations are essential for the startup’s product to function—leading the startup to offer it for “free”—while the other(s) isn’t, leading them to charge for it.
- The cost of building and maintaining integration(s) in a certain category is higher than others—leading the startup to charge more for them. This can be the case when the integrations for that category are more difficult to build and maintain or if the startup isn’t outsourcing those integrations to a third-party tool.
- Larger companies use Specific integrations more often, and since larger companies generally have bigger budgets, they’ll likely be willing to spend more.
Siit, an internal helpdesk software for HR and IT teams, exemplifies the third scenario. They charge more for ticketing integrations than HRIS integrations (the latter is “free”).
According to their Co-Founder and CPO, Anthony Tobelaim, this is because “Larger companies tend to use one set of applications (e.g., ERP systems) over another (e.g., HRIS solutions).”
Causal, a financial planning tool, follows a similar strategy; they charge more for ERP integrations than HRIS integrations. Lukas Köbis, Causal’s Co-Founder, explains it’s because “Companies that use enterprise-grade accounting systems, like Netsuite, for instance, are often larger and have bigger budgets than, say, those that solely need HRIS integrations.”
3. Boosting Integration Volume in Tiers
Finally, startups can decide to offer additional integrations in more advanced plans to encourage clients and prospects to invest in those; this also allows the startup to directly offset the costs of providing more integrations.
This strategy can make sense in a number of scenarios:
- The startup’s integrations aren’t core to deriving value from their solution but are an added benefit.
- Clients and prospects routinely ask for several integrations; their appetite for integrating into your product can outweigh their additional investments in accessing them.
- The resource and time investments for building and maintaining each integration grow incrementally, if not exponentially, at the startup. The approach can help the startup recoup some of the added investment.
- When the startup’s competitors either aren’t offering the integrations the startup is thinking of adding to their higher-tiered plans or also offer them in their more advanced plans (i.e., clients and prospects have little reason to switch over to a rival based on how integrations are priced)
Causal, the financial planning tool mentioned earlier, incorporates this strategy: They provide one integration through their “Launch” plan and three integrations through their “Growth” plan. The company also allows clients to purchase more integrations a la carte.
Navigating the Integration Pricing Decision
A startup’s pricing decision is heavily context-dependent. Factors like how they build and maintain the integrations, the support and resources they can access from the third-party API, the perceived value and demand of each integration, and the types of organizations that’d use the integrations can all influence the price a startup should charge for each integration.
Therefore, while the strategies in this article can serve as a guide, each startup needs to do its due diligence to arrive at the right decision for its business. And from there, they can iterate.
How do you navigate integration pricing for your startup? Why do certain strategies work better? Let us know on Facebook, X, and LinkedIn. We’d love to hear from you!
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