I noticed the other day that Saasu have changed their pricing strategy – after comments from their customers, they determined that a much simple pricing structure was in order and delivered one. It seems there are two distinct strategies with SaaS pricing;

KISS

KISS (keep it simple stupid) as utilised by Saasu, aims to have the smallest number of offerings for users. The benefits is that it is a no-brainer for the customer to see what they get and what it’ll cost them. It’s a great option for a reasonably simple offering, one with out the complexities of different modules and the like.

BETE

BETE (be everything to everyone) is where the provider tries to keep everyone happy – they’ll tend to separate the pricing on each of the discreet components of the offering, sometime separate user charges depending on the number of seats, and even charge tiered traffic and storage fees. The advantage of BETE is that it allows the customer to tailor the offering to their own particular situation. Clearly the disadvantage is that it is much more complex, required a more robust back end charging module, and on many levels adds complexity to the decision making process.

Advice

To succeed in SaaS you need to sign people up quickly and keep them with you. A simple pricing structure that allows customers to make a very quick purchasing decision should be seen as preferable for all but the most complex and customised of SaaS offerings.

Ben Kepes

Ben Kepes is a technology evangelist, an investor, a commentator and a business adviser. Ben covers the convergence of technology, mobile, ubiquity and agility, all enabled by the Cloud. His areas of interest extend to enterprise software, software integration, financial/accounting software, platforms and infrastructure as well as articulating technology simply for everyday users.

2 Comments
  • Price too low and you’ll fill the userbase with high demand price driven customers. We found that the 1-3 user account sizes contributed to 80% of our support.

    When we lifted prices earlier, about 5% of customers dropped off, but these were mostly the smaller accounts. As a result we saw support load drop about 30-50%.

    Don’t just aim to ‘Get people onboard quickly’ as this can be a classic mistake. These low price customers can devour all your time, energy and resource.

    Re: To succeed in SaaS you need to sign people up quickly and keep them with you.
    Not necessarily true… You don’t have to ‘Sign up people quickly’ – rather you have to ‘sign up the right people’ over time.

    ie: Would you rather earn 10 mill from 1,000 customers that are loyal and will stay with you year after year? or 10 mill from 100,000 customers that are fickle, roll with the fads, and could leave you tomorrow with no revenue?

    The 1,000 userbase has an easier, more profitable model with lower support.

    The 100,000 userbase are demanding, require costly support and infrastructure, and if you’re just getting off the ground, ie: Twitter, the userbase has the ability to kill your reputation quickly if you can’t handle the load.

    Set your pricing so you end up with a ‘quality’ userbase and plenty of customers who ‘value’ your service.

    Scale naturally over time …

  • Ben,

    The general concepts you set forth above have some validity, but let’s be honest…SaaS pricing and billing is more complex than a simple KISS strategy. If you want to successfully monetize your SaaS solution, a creative, but user friendly (functionally friendly) pricing strategy is necessary.

    I am far from an expert on pricing for SaaS, but this is an extremely relevant and important topic; so, I would love to see you expand upon this in another post. There are companies that are now providing pricing solutions for SaaS providers. One such company is eVapt. There are a number of other companies similar to eVapt as well. Surveying these types of companies, learning about the pricing strategies they recommend, and/or comparing the companies and identifying the most useful for SaaS providers.

    If your up for it, it would be a great analysis that could help a lot of SaaS providers understand the available resources to help them with their pricing strategy and/or help them find “the best strategy.”

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