B2B · Saas

What's the future of SaaS pricing?

Vineet Sahni Senior Consultant - Advisory Services at EY

May 26th, 2016

Looking for a strong POV on future of SaaS pricing.

Can anyone share a POV on future of SaaS pricing? What are the changes expected in pricing models for software as a service?

Want to think beyond the conventional value based model, cost based model, users, bundling, data usage etc.

Any thoughts are appreciated!

Eelco Wijk CCO at JMango360

May 31st, 2016

My most recent learning in B2B SaaS pricing: stay away from any free models! This works for B2C, but for B2B it decreases the value perception of your proposition to such a point that users will never want to convert back to becoming paying customers anymore.
To prove my point, we found out that we have almost no churn on users that pay from the start. Ofcourse, you can offers discounts, but in B2B you should stay away from 'free', even temporarily.

Dina Moskowitz

May 26th, 2016

So glad you are asking.  Please incorporate room/margin to compensate an indirect sales channel. Failing to do so will prohibit you from leveraging resellers and other multi-tier distribution channels.    As a growing marketplace of more than 200 SaaS applications that are growing their reseller programs, we've come across too many SaaS companies that don't incorporate this need for margin within their gotomarket strategy from the start.  Leveraging resellers is a very important component to your long term growth...they are your influencers, feet on the street, outside sales team (without the overhead!) and need to be fairly compensated.  

Vishwanath Ramdas Director Big Data, Digital

May 28th, 2016

Some thoughts on SAAS Pricing / one could say principles - Pricing should drive adoption and more users trying out the service - Price differential for basket of functionality, certain functionality can even be free [ Freemium] - More users should have reverse exponential discounts as more users are onboarded - Add-ons based pricing - Pricing should target balanced use of resources [ Mainly hardware ] - Classical happy hours pricing based on resources analytics [ UBER does this well ] - one could even have free tryout for functionality that are not getting adopted but where the SAAS provider sees potential for differentiation - Pricing should be easy and simple, with less accounting hooplas.. the process should not come in the way of business growth - Pricing should enable a markeplace, - multiple regions currencies - platform for other providers to have riders Vish Ramdas Executive in Technology Innovation & Ex-Founder of a Startup

Jagmeet Lamba Founder and CEO of Vetted (thevetted.com)

May 26th, 2016

I loved this podcast from the founder of Price Intelligently

http://nextviewventures.com/blog/traction-podcast-6-patrick-campbell-price-intelligently-google-pricing/

Aaron Schmookler Company Culture Engineer / Change Management Improv Trainer / Keynote Interactive Speaker

June 4th, 2016

The best discussions I've heard about pricing any service (and I think it would apply to SaaS) are happening on a podcast called "The Art of Value." 

Great stuff. Raised my prices.

Dina Moskowitz

June 5th, 2016

@Sachin, channel pricing strategies are not only for start-ups, they are for very well-established SaaS as well, who need to maintain their market share and ensure that they're keeping their outside sales force (reseller channel) engaged and incentivized to keep selling your product and not switch to your competitors. Therefore including the margin within your pricing plans up front prevents you from making what could be a very large mistake down the road.  Distribution is a critical component and value-add in nearly every industry.   Here's a tip - when you do your competitive analysis, take an extra look at what they're offering their resellers - from this knowledge you can build in enough margin to ensure that what you will eventually offer to reseller partners will be at least at par, and hopefully stronger.

Wayne Dinzey CEO DPD Software Ltd.

May 26th, 2016

You may want to bracce for "Transactional" billing. It is being tossed around by the subscription people but this is in itself a challenge but that is on the table. Wayne

Darrell Gardner Contract Program Manager ☁ Contract Project Manager ☁ IT Professional ☁ PMO In A Box Founder

May 31st, 2016

We do offer a free trial so folks can use and learn our tool.  That being said, I like the comments about keep it simple.  We had a consultant tell us our pricing model was too complex at the very begining, based upon user roles, we have since adopted a single user price to encompass all roles.

Sachin Naik

May 31st, 2016

Interesting discussion.

@Wayne - By transactional billing do you mean pay-per-transaction or pay-per-use? Can you quote some successful examples of this? I am wondering if this would be popular for a high frequency / volume of transactions?

@Dina - Great point. Question is, how much is good enough? Lets say a startup starts off with 50:50 revenue share that goes down to 70:30 in favor of the startup by year 3. Now in cases where the pricing is right for the market & the market is growing rapidly this might work out in the long term, of course in the short term it can be challenging for the startup to make any real money. So does a staggered revenue share model work? Should a startup only focus on market growth & customer acquisition rather than profitability by sharing so much revenue initially? What about competition and other market dynamics?

Elliot Tarabour Business Development at The Magis Group

May 31st, 2016

Look at things from the customer's POV. If you have a target market, does the app improve productivity or become a component for future sale.

Then calculate a value for the end user(s)

The only other advice is to keep it simple.