What metrics do other successful SaaS companies in our industry use for pricing (e.g., per seat, per host, per data volume), and is there an industry norm we should stick to or an opportunity to differentiate by using a new metric?

Based on our saas pricing book, Price to Scale, many successful SaaS companies choose metrics that align closely with the value their customers derive from the product. Here are some key takeaways from the book regarding pricing metrics:

• Direct Value Alignment:
– Metrics such as per seat, per host, or per data volume are selected based on how clearly they reflect the customer’s usage and the value they receive.
– The idea is to choose a metric that can be easily measured and directly tied to outcomes, whether that’s the number of active users (per seat), the number of servers or hosts (per host), or the volume of data processed (per data volume).

• Cost Considerations:
– The book explains that when there are underlying infrastructure costs, such as storage or compute power, it can justify a metric tied directly to those costs (see Chapter 2 and Chapter 7 of Price to Scale).
– This ensures that your pricing not only covers costs but also scales efficiently with customer usage.

• Simplicity, Measurability, and Scalability:
– As detailed on page 249, any chosen metric should be simple enough to explain quickly, measurable enough to account for usage accurately, and scalable over time as the customer grows.
– This principle is fundamental in avoiding overly complicated structures that can hinder both sales conversations and operational efficiency.

• Industry Norms vs. Differentiation:
– While industry norms (e.g., per seat pricing for user-centric applications or per data volume for analytics platforms) offer a familiar framework and can reduce customer friction, there is indeed an opportunity for differentiation.
– If your product’s usage patterns or cost structure differ from the norm, Price to Scale encourages exploring new or hybrid metrics that better capture customer value. For instance, combining elements of per seat and usage-based models could offer a more tailored pricing mechanism.

In summary, successful SaaS companies use a range of pricing metrics that reflect their underlying cost structures and customer value propositions. Our book, Price to Scale, suggests that whether you stick with a typical industry norm or innovate with a new metric depends on ensuring the metric is simple, measurable, and scalable—ultimately aligning with the value your customers receive.