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Estd 4.22.2023
Based on our SaaS pricing strategy book, Price to Scale, you should begin by aligning your pricing model with the way your product delivers value:
• First, ask whether your product is best viewed through the lens of being a capability (i.e., the set of features or modules provided) or if the key value comes from ongoing consumption. For example, if you’re offering a core set of functionalities that solve specific problems without dynamically scaling with use, a per-feature (capability) or tiered “Good-Better-Best” approach might be ideal. On the other hand, if your product’s value truly scales with how much customers use it, then a usage-based or even per-user model can be more apt.
• Next, consider the measurement:
– If you choose a consumption model, you need to determine what the key metric of usage is. This might involve deciding if usage is measured per seat, per API call, per data volume, or another unit that's directly tied to value.
– If you choose the capability model, you’re pricing based on distinct features or product modules. This approach can simplify decision-making for customers, as they see clear packages mapped to their needs and budget.
• Remember, our book emphasizes the importance of regularly evaluating and adjusting your pricing strategy to remain competitive as the market evolves. Whether you choose per-user, per-feature, or usage-based pricing, the key is to ensure that the pricing metric directly correlates with the value delivered to your customers.
In summary, decide on your pricing model by assessing whether your product primarily delivers value through its inherent capabilities or its scalable use, then select the model (per-user, per feature, or usage-based) that most closely aligns with that value proposition. This strategic alignment is crucial for creating a pricing structure that not only attracts the right customer segments but also allows your revenue to scale over time.