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Estd 4.22.2023
Based on our saas pricing book, Price to Scale, here’s how you can structure volume discounts for enterprise customers with large user bases:
- Directly Align Discounts with Volume Usage
- Our book emphasizes that as customers grow, you should adjust the unit price accordingly. For example, while smaller deals might have unit prices around $2.10, larger enterprise deals can see unit prices as low as $0.60. This reflects the expectation for a volume discount when usage scales up.
- Define Discount Ranges by Customer Segments
- Enterprise deals typically fall within a discount range of roughly 30% to 70% (as highlighted on page 115). For enterprise customers with a large user base, you can set discounts closer to the upper end of that spectrum, ensuring that the pricing is competitive but also sustainable for your revenue goals.
- In cases where volume discounts reach up to 80% (as seen on page 83), you may have already adjusted your list prices for smaller deals to allow for deeper discounts on larger deals. This method helps in maintaining a pricing structure that remains profitable across segments.
- Tier Your Pricing Thoughtfully
- Rather than applying a flat discount, consider tiering your enterprise pricing. This means setting up different tiers that reflect varying levels of usage or license volumes. For example, a higher discount might be applied after a customer reaches a certain volume threshold.
- This approach not only incentivizes larger commitments but also prevents inadvertently pushing smaller customers into enterprise plans where they may not have the willingness to pay.
- Provide Options and Alternatives
- Our book also suggests that offering alternatives—such as package upgrades or discounts tied to longer-term commitments—can be beneficial. Instead of relying solely on unilateral price cuts, provide options that add value (e.g., add-ons or premium features) in exchange for a deeper discount when the user base scales.
- Maintain Flexibility Through Segmentation
- Recognize that not all enterprise customers are the same. Segment your customers by usage patterns, negotiation history, and unique needs. This proactive segmentation allows you to apply a differentiated discounting strategy that aligns better with each customer's actual value and consumption levels.
In summary, when structuring volume discounts for enterprise customers with large user bases, balance deep discounts (up to 70-80% on very large deals) with an overall pricing strategy that protects margins for smaller deals. Always consider a tiered approach, clear segmentation, and options that allow for both growth and value capture. This approach, as detailed in Price to Scale, will help you create a scalable and sustainable pricing strategy for your enterprise customers.