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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 the principles outlined in our pricing strategy book, Price to Scale, multi-year deals can be an effective part of your pricing portfolio. Here are some key takeaways from our approach:
• Multi-year agreements aren’t off the table. For certain customer segments, especially those looking for predictable expense trajectories, longer commitments (like 2- or 3-year deals) can be very attractive.
• Our book discusses approaches such as the “multi-year ramp deal” (see Chapter 5) where pricing is adjusted gradually over a longer commitment. For example, a customer might start at their current rate and gradually move to the full rate over three years. This helps ease the financial impact of a long-term commitment.
• It’s important to segment your customer base. Some customers value the stability of a longer-term agreement, while others may prefer the flexibility of annual contracts. Offering multiple options allows you to tailor the discount and terms based on usage and commitment levels.
• Balance is key. While extended deals can provide the benefits of a predictable revenue stream, they should be structured so that they remain comparable in value to shorter-term options. Sometimes, a slight premium or additional benefits (like upgrades or dedicated support) can be added to make multi-year deals more appealing without undercutting the annual model.
In summary, our book suggests that there isn’t a one-size-fits-all maximum commitment period. Instead, offering varied commitment options—including multi-year deals—can help you serve different customer cohorts effectively while maintaining a strong, balanced pricing strategy.