LinkedIn’s Unlimited Pricing Strategy Leads to Price Hikes For Customers

LinkedIn is ubiquitous among our clients and its products are used in many of their recruiting and hiring processes. We recently observed LinkedIn pushing clients big and small towards unlimited purchasing models. While the vendor does make the initial switch look favorable, when renewal time comes along, clients are often blindsided by steep uplifts that negate its value.

In 2021, ClearEdge experienced an 89% surge in LinkedIn cases over the previous year, and of these, the most frequently purchased product set was the Recruiting Package (sometimes called Talent Solution Enterprise Program or Hiring Enterprise Program). This package consists of Recruiter Licenses, Job Slots, and Career Pages (other products are sometimes included in these bundles).

Two-thirds of these purchases include either an offer for transitioning to an unlimited purchasing model or a renewal of an existing unlimited agreement. This trend is notable because typically, across suppliers, unlimited agreements are reserved for large and/or fast-growing businesses that would benefit from paying a premium to ignore volume-based compliances and fees. What's different about LinkedIn is that they are pushing this purchasing model on clients of all sizes. For example, we reviewed a recruiting package renewal for a client with a single recruiting license. The client did not voice concern for monitoring growth, and yet, LinkedIn returned with an offer to transition to an unlimited purchasing model. This behavior suggests that LinkedIn’s sales reps are highly motivated to get clients on this purchasing model.

When the renewal of these unlimited agreements comes around, we have observed massive uplifts – 42% to 60% -- that take clients by surprise. These increases go way beyond client expectations and completely erase the benefits the clients derived from the unlimited purchasing model (unless significant usage growth is anticipated).

Broadly speaking, LinkedIn is behaving like a monopoly, and in some ways, it is, given its unique product set and the pervasive use of its services in the marketplace. Having scarce competition often leads to bad behavior, and we have observed the following examples of this from LinkedIn.

Poor Price Transparency

  • Proposals feature bundled pricing which prevents clients from understanding their current unit rates

  • LinkedIn claims to have a strict pricing structure based on volume tiers, but we find they rarely share this breakdown with clients

  • Annual price increases (typically June/July), which leave clients in the dark about future pricing

Separate Purchases

  • LinkedIn often simultaneously maintains multiple contracts with its clients. This means that as one deal concludes, clients have another LinkedIn contract expiring soon thereafter for a different product

  • We recommend clients consolidate purchases with a single vendor, if not to consolidate leverage, then at least to simplify the relationship

  • Since its acquisition by Microsoft in 2016, LinkedIn has maintained separate sales reps and selling cycles from its parent company. If clients were able to negotiate both simultaneously, it would likely be more difficult for LinkedIn to propose such drastic renewal uplifts vis a vis the Microsoft uplifts

Intra-term Annual Uplifts

  • Clients generally enter multi-year agreements to protect their annual run rate for a prolonged period by delaying renewal, but in most multi-year LinkedIn agreements, YoY increases occur between 4-5%

  • This practice increases the run rate of the exit year of a LinkedIn agreement, which puts clients at greater risk at renewal

Inflexible Negotiations

  • In one case, ClearEdge provided the client with a competitive price target based on a holistic review of their LinkedIn agreement

  • The supplier responded by refusing to improve its unit rates closer to our target, insisting that as purchases are priced based on its “programmatic“ pricing model, and claimed that it does not offer discretionary discounting to customers. Unit rates could only improve if the client increased volume to the next “tier of discounting,” which LinkedIn assigns, but does not typically share with customers. In other words, the client was told to “take it or leave it”

  • We also urged the client to push for renewal caps to protect their rates during negotiations, but LinkedIn refused this request too, saying it cannot offer client terms that define future pricing. Apparently, their policy is price renewals at “then-current rates”

Best Practices in LinkedIn Engagements

If currently purchasing the solution on a quantity basis, you should be prepared to receive an unlimited offer at the next renewal. No matter what your size or growth projections are, LinkedIn is eager to upgrade you.

In this scenario, clients are in a favorable leverage position. LinkedIn will use everything in its toolkit to make the unlimited upgrade appear attractive, but before you consider the benefits of the unlimited agreement, we recommend refusing to go this route without terms that define future pricing. There is immense risk posed by entering such an agreement without clear-cut renewal pricing terms. We have seen LinkedIn exploit this vulnerability in several unlimited renewals.

Clients must have an accurate roadmap for the scope of their LinkedIn usage to make an accurate assessment of the value posed by a transition to the unlimited format. Controlling this information is also essential, as LinkedIn will make its own growth projections, and price those projections into the offer. The value of an unlimited agreement increases when LinkedIn cannot accurately predict your roadmap.

Customers must also be prepared for the added burden of executing an effective unlimited renewal, and again, demand planning is essential. You need to get an early start, and ideally, monitor usage for the entire term of the agreement. Getting an accurate understanding of deployment means monitoring license transfers, terminations, duplicates, and any other events that could impact deployed quantities.

Furthermore, you must weigh the necessity of the recruiter license for each deployed user. Due to familiarity with the platform and enabled by an unlimited agreement, you may feel comfortable making unnecessary deployments, unaware of the impact this will have at renewal. Accurate monitoring will protect you from inflated usage, which is a major factor contributing to these severe renewal uplifts.

If renewing an existing unlimited agreement, achieving internal alignment is essential. Before entering any renewal talks, we urge clients to reach a consensus on their roadmap for the future. There may not be a business case for maintaining an unlimited agreement, but you can only determine that with an accurate forecast.

Finally, it is critical to control the conversation with LinkedIn because this helps set the starting point of negotiations. Often, we see LinkedIn come to clients with inflated demand projections and exaggerated benefits that clients have realized with this model. LinkedIn uses these “data points” to justify severe renewal uplifts. Effective monitoring, internal alignment, and information control will counteract these arguments and improve outcomes for clients.

The longer the runway, the better your chance for a successful deal with LinkedIn. Whether you are already purchasing an unlimited agreement, or your quantity-based agreement is coming up for renewal, the trends and risks identified here must be considered. For more information about negotiating with SaaS suppliers, read our blog, Top 10 “Gotchas” in SaaS Agreements and How to Mitigate Them, or contact your ClearEdge representative.

- Nate Hirsh is an Analyst II at ClearEdge, which is now part of Accenture.