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Frameworks, core principles and top case studies for SaaS pricing, learnt and refined over 28+ years of SaaS-monetization experience.
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Based on our saas pricing book, Price to Scale, you should only price based on the number of end-users if that metric is truly tied to the value your product delivers, rather than simply following a traditional per-administrative-user model. Here’s how to approach this:
• Direct Relevance to Value:
In the book, we explain that the key is to identify the true value metric. For example, in cases such as marketing automation for customer success, the value isn’t in the number of administrative users but in the number of actual customers reached. By focusing on the end-users (or customers) served, you’re aligning your pricing with the outcomes the customer cares about.
• Aligning Metrics with Customer Expectations:
The book stresses the importance of understanding what customers are accustomed to. If your clients have historically measured success by end-user engagement rather than internal usage (like agents logging in), then shifting the metric makes logical sense. This adjustment helps avoid “making the comparison too easy for the customer” by simply discounting traditional tiers and further defines your product’s unique value proposition.
• Practical Considerations for Implementation:
- Clearly articulate how end-user counts correlate to tangible benefits for your customer.
- Communicate the shift in your pricing model, for example, reclassifying plans (e.g., from “Pro” and “Elite” to terms that imply enhanced value).
- Benchmark against market standards — as discussed in our book, consider detailed case studies (like the Mixpanel pricing metric case study) that explore the trade-offs between traditional and usage-based (or customer-based) pricing.
• Summary Takeaway:
Pricing based on end-users requires ensuring that this metric more accurately captures the value your product provides. The goal is to charge based on outcomes, such as actual customer reach or support interactions, rather than on administrative or internal usage. This approach not only ensures you capture value more accurately but also supports flexible pricing that can adapt to different market segments.
In summary, as outlined in Price to Scale, make sure that if you’re basing pricing on end-users served, it truly reflects the value delivered to the customer, thereby aligning your pricing strategy with the real economic benefit provided by your product.