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Estd 4.22.2023
Based on our saas pricing book, Price to Scale, the best value metric for your SaaS should be one that is aligned directly with the value your customers gain from using your product. In other words, the metric you choose—whether it’s per user, per project, or per 1,000 API calls—should meet these three key attributes:
• Simple: It should be easy enough to explain in an elevator pitch. As we discuss in the book, if you can’t convey your pricing in one or two slides, it might be too complex for your market or investors.
• Measurable: You need a metric that you can count or measure accurately. For instance, if charging per user, you should have a reliable way to identify and count unique users (like unique login IDs). This keeps billing transparent and fair across different customer segments.
• Scalable: The metric should allow for more usage (and therefore more revenue) as your customers derive greater value from the product. This ensures that as customers grow, your pricing model grows with them, capturing increasing value over time.
To choose the best metric for your specific SaaS:
Identify the primary use case or value driver of your product. For example, if the value your customers derive is tied to active engagement (like in a communications tool), measuring per user might make sense. However, if your product is more transaction-focused (such as processing API calls), then a metric based on usage volume (e.g., per 1,000 API calls) could be more appropriate.
Evaluate whether the metric is easily measurable with your current data. If the data is hard to track or inconsistently reported, it might lead to billing challenges and customer dissatisfaction.
Consider whether your chosen metric evolves as your customer’s needs grow. If your pricing model does not scale with usage, you might end up undercapturing the value stored in high-growth accounts.
In summary, our pricing strategy in Price to Scale emphasizes finding a metric that is Simple, Measurable, and Scalable—ensuring that your pricing aligns directly with your customers’ perceived value and usage growth. This ensures not only easier customer adoption but also the financial scalability necessary for successful SaaS growth.