The presentation for a session I delivered internally to our team at WUZZUF about picking the suitable pricing strategy and techniques for a SaaS product startup
14. Usage Based
⊸ Also known as Pay as You
Go.
⊸ If you use more of the
service, your bill goes up;
use less, and your spend
decreases.
⊸ Example: Chargify
Usage rate
Price
15. Usage Based
• Price scales alongside
usage
• Reduces barriers to use
• Accounts for "heavy user
costs"
• Disconnects value from the
product
• Harder to predict revenue
• Harder to predict customer
costs
17. Tiered Pricing
⊸ The most popular model used in SaaS
⊸ Offer multiple "packages", with different
combinations of features offered at different
price points
⊸ Example: WUZZUF
18.
19. Tiered Pricing
• Appeal to multiple personas
• Leave less money on the
table
• Clear upselling route
• Potentially confusing
• Appeals to too many people
• "Heavy user risk"
23. Per User Pricing
• Simple
• Revenue scales with
adoption
• Predictable revenue
generation
• It limits adoption
• It makes it easy to churn
• It doesn't reflect the real
value
25. Per Active User Pricing
⊸ A variant of the Per User Pricing
⊸ Encouraging customers to sign-up as many
users as possible, with the safeguard that
only active users will actually be billed for.
⊸ Example: Slack, Microsoft TFS
26.
27. Per Active User Pricing
• Customers only pay for
active users
• Reduces the risk of
widespread adoption
• Doesn't work so well for
SMBs
29. Per Feature Pricing
⊸ Separates out different pricing tiers
according to the functionality available in
each
⊸ Higher priced packages = Greater number
of available features
⊸ Example: Evernote
30.
31. Per Feature Pricing
• Strong upgrade incentive
• Compensate for delivery-
heavy
• Difficult to get right
• Leaves a bad taste
33. Freemium Model
⊸ Offering a free-to-use product, supplemented by
additional paid packages
⊸ Typically used as part of a tiered pricing strategy: the
regular paid packages are supplemented with a free,
entry-level tier.
35. Freemium Model
• It's a foot in the door
• Viral potential
• A real revenue killer
• It's easier to churn on a free
package
• It can devalue your core
service
42. Setting a high initial price for a new product,
before slowly lowering the price over time
Why would success in SaaS?
Answer: Tech. Adoption Lifecycle
Price Skimming
44. Maintaining high prices, in order to convey a sense
of quality, exclusivity or luxury
Example: WUZZUF ReDirect
Prestige Pricing
45. “What’s the difference between an $8,000 Rolex and a
$40 Seiko watch?
The Seiko is a better time piece. It’s far more accurate. The
difference is your ability to sell”
Prestige Pricing
47. Offering the product for free, for a limited time, you
provide a quick foot-in-the-door
typically time-limited (the most common length is 30 days), but it's also possible to
restrict it by usage
Free Trial Pricing
48. Adding a target profit margin to the costs (say,
20%), and setting that as the price for your product
Cost Plus Pricing
100
20 120
Total Cost Profit Margin Price
49. Using the perceived value of the product as the
benchmark for price setting, instead of costs,
competitors or target margins
Value Based Pricing
51. Pricing depends on offerings of other businesses
This may not yield maximum benefits to your brand as you
may tend to ignore nuances of your own product
Competitor Based Pricing
53. a phenomenon where people tend to have a change in
preference between two options when presented
with a third option that is asymmetrically
dominated
Decoy Pricing
56. References
⊸ The Ultimate Guide To SaaS Pricing Models, Strategies & Psychological Hacks by
Ryan Law, cobloom
⊸ SaaS Startup Strategy | Three SaaS Sales Models by Joel York, Chaotic Flow
⊸ Picking a pricing strategy for your product by Des Traynor, Co-Founder & CSO,
Intercom
⊸ An Enormous Guide to Pricing Psychology by Nick Kolenda
⊸ The Pricing Strategy Guideline Framework for SaaS Vendors by Marco Spruit &
Nizar Abdat The Research Gate
A software licensing and delivery model in which software is licensed on a subscription basis and is centrally hosted. It is sometimes referred to as "on-demand software“. SaaS is typically accessed by users using a thin client via a web browser. SaaS has become a common delivery model for many business applications
Food ordering: home-delivery or dine-in. Eating methods: Fork and knife or bread
With 43% of organizations implementing or increasing their investment in SaaS, adoption rates will continue to grow for the foreseeable future.
When deployed correctly, SaaS promises decreased infrastructure, speed of implementation, and comparable customer experience. It can also save on upfront costs
Examples: Salesforce, Google Apps, Dropbox, AWS
IaaS (Infrastructure as a Service), as the name suggests, provides you the computing infrastructure, physical or (quite often) virtual machines and other resources like virtual-machine disk image library, block and file-based storage, firewalls, load balancers, IP addresses, virtual local area networks etc.
Examples: Amazon EC2, Windows Azure, Rackspace, Google Compute Engine.
PaaS (Platform as a Service), as the name suggests, provides you computing platforms which typically includes operating system, programming language execution environment, database, web server etc.
Examples: AWS Elastic Beanstalk, Windows Azure, Heroku, Force.com, Google App Engine, Apache Stratos.
While in SaaS (Software as a Service) model you are provided with access to application software often referred to as "on-demand software". You don't have to worry about the installation, setup and running of the application. Service provider will do that for you. You just have to pay and use it through some client.
Examples: Google Apps, Microsoft Office 365.
IaaS (Infrastructure as a Service), as the name suggests, provides you the computing infrastructure, physical or (quite often) virtual machines and other resources like virtual-machine disk image library, block and file-based storage, firewalls, load balancers, IP addresses, virtual local area networks etc.
Examples: Amazon EC2, Windows Azure, Rackspace, Google Compute Engine.
PaaS (Platform as a Service), as the name suggests, provides you computing platforms which typically includes operating system, programming language execution environment, database, web server etc.
Examples: AWS Elastic Beanstalk, Windows Azure, Heroku, Force.com, Google App Engine, Apache Stratos.
While in SaaS (Software as a Service) model you are provided with access to application software often referred to as "on-demand software". You don't have to worry about the installation, setup and running of the application. Service provider will do that for you. You just have to pay and use it through some client.
Examples: Google Apps, Microsoft Office 365.