The type of packaging and pricing model you deploy can either help or hinder the growth and profitability of your platform.
When packaging and pricing your SaaS platform, avoid these mistakes:
One size fits all pricing. Most companies will only use a percentage of your platform’s capabilities at the start. Forcing customers to buy all available functionality upfront will depress the price they might be willing to pay for platform functionality in the future, and it will prevent you from capturing those entry point use cases – which are essential to get traction in the market. I know those big deals look enticing… but the longer-term profitability of the business requires a land and expand sales, as well as packaging strategy.
There is no logical entry point or package. Per comments above. If you don’t have an entry point offer, that links to a concrete use case, that is easy to explain and demonstrate ROI, people may not know how to get started with you. Design your packaging and pricing to allow for the entry point sale (and make it sticky if you can) as well as the comprehensive platform sale.
You look so complex no one can figure out what you are. Some people know they need a swiss army knife and all of its tools, but most companies are seeking to eliminate one pain point at a time. Make sure they understand the core of what you do, the journey they could take with you over time, and provide them with a logical purchase path to get there. The way you structure and package your offering can reinforce this, or make it hard to understand.
You chose a pricing metric that makes it hard for customers to estimate their cost. Customers need the ability to project, roughly, what it will mean if they buy into your platform positioning and start to use your solution across their business. When you buy Saleforce.com, you know how many sales people are on your team, which package you need, and roughly how many others are going to need to access it over time. Customers need to have a reasonable ability to project their future usage and costs should they buy at one entry point and then expand usage across the business. Try not to use a metric or multiple metrics that are impossible to estimate. If it requires expert knowledge to estimate, then provide customers with the tool for estimation. As an example, Amazon Web Services has some fairly complex but completely transparent pricing. They provide tools to help customers estimate what their costs will be given a particular set of parameters and choices http://calculator.s3.amazonaws.com/index.html.
Make sure your SaaS platform is a platform.
It seems that everyone wants to be a SaaS “platform” these days. When the term platform fits, in my view it has these characteristics:
- A software application that can be used for multiple use cases (more than 2) across different types of users and departments within an enterprise.
- A software application that must be integrated with other data and/or applications, and/or systems to provide its full scope of benefits
- A software application that at some level, becomes a central tool or system of record for multiple types of users and/or departments within a company.
- A software application that started out with one use case, and then because of its configurability and flexibility, and because it was built to be a platform, can be used for a variety of additional purposes.
A platform by its nature is complex and typically serves the needs of multiple users and use cases within an organization. Aligning your packaging and pricing with how customers use and value the solution at different points in their adoption path is challenging – but the financial rewards are worth a thorough and analytical effort.
Wendy Wise
