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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, outcome-based pricing—where you only get paid when customers achieve specific results—can be a viable approach if certain conditions are met.
Key points include:
• Directly Tying Price to Value: As discussed in our book, a pricing model that aligns fees closely with the value a customer derives can simplify adoption and clearly signal the value proposition. Outcome-based pricing is one way to make that connection, but it requires that the specific outcomes are measurable and directly linked to the product’s impact.
• Choosing the Right Metric: For outcome-based pricing to work, you must have clearly defined and quantifiable results. Our book emphasizes that the pricing metric should reflect real usage or benefits that customers receive. Without reliable and consistent measurement, the model may not capture true value, potentially leading to revenue shortfalls.
• Fit for the Product Type: Price to Scale cautions that models like usage-based pricing (and by extension, outcome-based pricing) should only be applied when they align with the product’s nature and customer behavior. For products that are bought primarily as a fixed capability rather than for frequent, measurable use, this approach may not suit the product’s lifecycle or customer expectations.
• Risk and Revenue Implications: Outcome-based pricing shifts risk to the provider. If the expected customer outcomes aren’t met due to factors outside the provider’s control, the company may struggle with cash flow. Therefore, it’s critical to ensure that both parties agree on what constitutes a successful outcome and to build in safeguards such as minimum fee guarantees or blended pricing models.
In summary, while outcome-based pricing can be a powerful strategy when it tightly reflects customer value and is applied to the right product types, it demands rigorous measurement of outcomes and a careful risk assessment. This balance is essential to ensuring that the pricing model supports both customer success and sustainable revenue growth.