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Estd 4.22.2023
Below is a detailed response:
While a purchasing power parity (PPP) approach can theoretically allow you to align prices with local incomes and cost of living, our book, Price to Scale, suggests that you weigh the complexity versus the benefit carefully — especially for a smaller SaaS company.
Key points from our saas pricing book include:
• Simplicity for speed: In Price to Scale, we emphasize frameworks such as Good-Better-Best packaging (see Chapter 2) that focus on segmenting customers by their core demands rather than by highly granular local economic factors. This approach has worked well for many SaaS companies, particularly when deal velocity and operational agility are crucial.
• Operational burden: Adjusting pricing for each country based on PPP can introduce a layer of operational complexity. As discussed in our book, while granular pricing models (such as usage-based or modular approaches) have their merits, they can also require significant resources to manage changes, localization, billing, and metric reporting consistently across markets. For a smaller company, this might prove to be more challenging than beneficial.
• Right-sizing the approach: Our book recommends tailoring your strategy according to your company’s scale and resources. If your customer base is relatively uniform or well-segmented by need (using frameworks like Good-Better-Best), adopting a simpler pricing scheme may allow you to be more agile while you refine your pricing strategy with increasing scale.
In summary, while a PPP approach can be innovative for bridging local affordability gaps, our guidance in Price to Scale suggests that for many smaller SaaS firms it might be overcomplicating the pricing model. Instead, focusing on clear, segmented packages that can gradually be refined as you scale may be a more practical strategy.