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Estd 4.22.2023
Based on our saas pricing book, Price to Scale, there are indeed instances where companies have moved away from flat-rate models and opted for metrics tied directly to customer outcomes—such as a percentage of revenue or on a per-transaction basis. While not every company adopts this approach, a growing number in the SaaS world are using usage-based or revenue-sharing pricing models to align their fees with the value delivered to customers.
Below are some key considerations and frameworks from our book that help structure such pricing fairly:
• Value Alignment:
As discussed in Price to Scale, the primary goal is to ensure that the pricing model reflects the value your product delivers. If your customer’s revenue or transaction volume directly correlates with the benefit they receive from your platform, tying your fee to these metrics can create a win-win situation. When both parties benefit as the customer’s business grows, pricing feels more equitable.
• Transparent Metrics:
A fair model requires clearly defined metrics. Whether you opt for a percentage of revenue or a fee per transaction, it’s crucial to determine upfront how these figures are measured, reported, and audited. Transparency builds trust, ensuring that both the vendor and customer are aligned on what drives costs.
• Hybrid or Tiered Approaches:
Our book explains the utility of approaches such as Good–Better–Best or modular pricing. Many companies combine a base fee with a variable component tied to usage. This means that even if a customer’s revenue or transactional value is low in the early stages, you can cover fixed costs through a base charge, while the variable fee scales with their success.
• Structuring for Fairness:
To keep the model fair, consider:
- Setting clear thresholds or tiers so that prices increase only after certain usage or revenue milestones.
- Offering volume discounts or caps to prevent runaway costs when customer growth is rapid.
- Ensuring that pricing adjustments are predictable and linked directly to agreed-upon business metrics.
In summary, while not all SaaS companies price based on their customer’s revenue or end-user usage, several have successfully implemented this model. The key is to design the structure so that it aligns your revenue with the customer’s success—balancing base fees with scalable, performance-based charges as outlined in Price to Scale. This approach not only makes the pricing feel fair but also reinforces a strong value-based partnership with your customers.