.png)
Estd 4.22.2023
In today's competitive SaaS landscape, direct customer acquisition isn't the only path to scaling revenue. Many successful SaaS companies are unlocking substantial growth through white-label and OEM partnerships—strategic channels that can dramatically expand your market reach with less direct sales effort. These arrangements allow other businesses to rebrand your solution (white-label) or integrate your technology into their existing products (OEM).
However, pricing these deals presents unique challenges compared to standard subscription models. Get it right, and you've created a powerful revenue multiplier. Get it wrong, and you risk undervaluing your technology or pricing yourself out of valuable partnerships.
Understanding White-Label vs. OEM Models
Before diving into pricing, let's clarify the key differences between these partnership models:
White-Label Partnerships enable partners to rebrand and resell your software as their own product. The end-user experiences your technology but under the partner's brand. Examples include payment processors that banks offer under their own brand, or marketing automation platforms resold by agencies.
OEM (Original Equipment Manufacturer) Deals involve embedding your technology as a component within another product. Your solution enhances the partner's existing offering rather than standing alone. Think of analytics capabilities integrated into CRM platforms or security features embedded within larger enterprise software.
Each model requires distinct pricing approaches that align with the value delivered and the partner's business model.
Key Pricing Considerations for Licensing Deals
1. Value-Based vs. Cost-Plus Pricing
According to research from the Technology Services Industry Association (TSIA), SaaS companies that adopt value-based pricing for partnerships see 25% higher margins than those using cost-plus models. When setting your price points, focus on:
- The concrete business outcomes your solution delivers to end-users
- The revenue lift or cost reduction your partner will experience
- The competitive advantage your technology provides in their market
As Patrick Campbell, founder of ProfitWell, notes, "The most successful SaaS licensing deals align price with the concrete value delivered to both the partner and the end customer."
2. Tiered Pricing Structures
Nearly 85% of successful white-label and OEM arrangements utilize some form of tiered pricing, according to a 2022 Cloud Software Association report. Consider structuring tiers based on:
- Volume commitments: Adjusting pricing based on guaranteed minimum user or transaction volumes
- Feature access: Creating good/better/best package levels with corresponding price points
- Market segment access: Different pricing for partners serving SMB versus enterprise markets
3. Revenue Share vs. Fixed Fee Models
Your pricing structure should align with your partner's business model and risk tolerance:
Revenue sharing models (typically ranging from 15-40% of end-customer pricing) work well when:
- You want to align incentives for mutual growth
- The partner has established market reach
- You can confidently track end-user adoption and usage
Fixed fee arrangements provide predictability and often work better when:
- Usage tracking becomes complex
- Partners need price certainty for their own business modeling
- You seek guaranteed minimums regardless of partner sales performance
According to Forrester Research, hybrid models combining modest fixed fees with performance-based revenue sharing are gaining traction, growing from 23% of partnership deals in 2019 to 41% in 2023.
Pricing Strategies by Partnership Stage
Different pricing approaches make sense at different stages of partnership development:
Early Partnerships: The Land Strategy
When establishing initial partnerships, consider:
- Pilot pricing: Reduced rates for time-limited trials with clear success metrics
- Proof-of-concept discounting: Lower pricing in exchange for case study rights and reference privileges
- "Land and expand" models: Start with accessible entry points to secure the relationship
HubSpot's partnership strategy exemplifies this approach, often beginning with simplified integrations before expanding to comprehensive white-label arrangements as partnerships mature.
Mature Partnerships: The Expand Strategy
As partnerships prove successful:
- Volume-based incentives: Decreasing per-unit costs as volumes increase
- Additional capability pricing: Upselling advanced features or expanded access
- Enterprise agreements: Comprehensive deals covering multiple use cases
Salesforce's OEM program demonstrates this evolution, with partners often starting with basic CRM capabilities before adopting more advanced features with corresponding pricing adjustments.
Common Pricing Mistakes to Avoid
1. Undervaluing Your Intellectual Property
A Boston Consulting Group analysis found that SaaS companies frequently undervalue their technology by 30-50% in initial partnership discussions. Remember that your solution represents years of R&D and market validation. Your pricing should reflect this investment.
2. Neglecting Implementation and Support Costs
According to Gartner, ongoing support costs for white-label partnerships typically range from 15-25% of initial license revenue. Your pricing model must account for:
- Initial implementation and customization requirements
- Ongoing technical support (both for partners and potentially end-users)
- Documentation and enablement materials
- Regular updates and feature enhancements
3. Failing to Build in Price Optimization Mechanisms
Partnership agreements often span 2-5 years. Without proper price optimization mechanisms, you risk locking yourself into unfavorable terms as your costs or market position evolves.
Include provisions for:
- Annual pricing reviews based on predefined metrics
- Volume threshold adjustments as the partnership matures
- Inflation or cost-of-living adjustments
- Value-based price recalibration tied to measurable outcomes
Case Study: Twilio's White-Label Success
Twilio exemplifies effective OEM pricing strategies through its partnership program. Rather than selling exclusively to developers directly, Twilio created a partner program enabling other companies to embed their communication APIs.
Their tiered approach includes:
- Volume-based pricing that decreases as partners scale usage
- Feature-based differentiation with premium capabilities at higher price points
- Success-sharing models that align Twilio's growth with partner outcomes
This strategy helped Twilio expand from a communications API provider to powering communications for thousands of applications across multiple industries, contributing significantly to their growth to over $2.8 billion in annual revenue.
Conclusion: Building Sustainable Partnership Pricing
Effective pricing for white-label and OEM deals balances immediate revenue needs with long-term partnership value. The most successful licensing strategies share these characteristics:
- They clearly connect pricing to concrete value delivered
- They align incentives between both parties
- They include flexibility to evolve as partnerships mature
- They account for all costs, including implementation and ongoing support
- They provide clear paths to expand both features and volumes
As you develop your partnering strategy, remember that the most valuable agreements aren't one-time transactions but evolving relationships that can create substantial recurring revenue streams. Your pricing strategy should reflect this long-term perspective, allowing both your company and your partners to grow together.
By thoughtfully structuring your licensing deals with these principles in mind, you'll position your SaaS solution for expanded reach and sustainable growth through the powerful channels that white-label and OEM partnerships provide.