If our product has multiple modules or components, should we price each module separately (modular pricing) so customers pay for only what they use, or provide one combined price for the whole suite?

Based on our book, Price to Scale, there isn’t a one‐size‐fits-all answer. Instead, the choice between modular pricing and a bundled suite depends largely on your product’s structure, the distinct value provided by each component, and the specific needs of your customer segments.

Here are some key points drawn from our book:

• Two Main Approaches:
– Our book outlines two primary ways to package your product. The Good-Better-Best approach bundles selected features into tiered packages aimed at different customer segments.
– Alternatively, the modular approach assigns a distinct price to each module or feature. This lets customers pick and pay for only the modules they need.

• Customer Segmentation & Value Propositions:
– If your target customers have diverse use cases or varying willingness to pay (for instance, larger enterprises versus SMBs), modular pricing allows you to cater precisely to their needs.
– However, if you’re targeting a segment where deal velocity and simplicity are key, a bundled offering may be more attractive and easier to understand.

• Testing Your Hypotheses:
– Regardless of the pricing structure you start with, our book emphasizes the importance of validating your packaging hypothesis with real customer segments. We discuss testing package-to-segment fit and iterating on both the product bundling and pricing based on market response.

• Transparency and Complexity:
– Modular pricing can provide clarity by letting buyers see exactly which features they’re paying for, but it can also introduce complexity in sales discussions and pricing communication.
– Bundling simplifies the decision, as customers evaluate one combined price, though they might end up paying for features they don’t fully use.

In summary, decide based on how well each approach aligns with your customers’ purchase behaviors and the perceived value of each module. If flexibility and granular value capture are critical, modular pricing might be the way to go. Otherwise, a well-structured bundled package can streamline the buying process. As discussed in our saas pricing book, Price to Scale, testing and validating your packaging with target segments is key to determining the optimal strategy for your product.