Comments on: A Pricing Strategy for Your SaaS Offering http://www.saasblogs.com/business/a-pricing-strategy-for-your-saas-offering/ Understanding the "as a Service" Revolution Thu, 02 Feb 2012 05:34:07 +0000 hourly 1 http://wordpress.org/?v=3.2.1 By: Michael Pang http://www.saasblogs.com/business/a-pricing-strategy-for-your-saas-offering/#comment-187821 Michael Pang Thu, 05 Jan 2012 03:20:22 +0000 http://www.saasblogs.com/2008/01/07/a-pricing-strategy-for-your-saas-offering/#comment-187821 How can we get an idea of how much SaaS companies charge for enterprise? Everyone knows it's cheaper than proprietary but can you give some examples of SaaS pricing models that have been successful? They usually don't tell you the information on their website and require you to speak with their sales team before they divulge their pricing How can we get an idea of how much SaaS companies charge for enterprise? Everyone knows it’s cheaper than proprietary but can you give some examples of SaaS pricing models that have been successful? They usually don’t tell you the information on their website and require you to speak with their sales team before they divulge their pricing

]]> By: Melinda http://www.saasblogs.com/business/a-pricing-strategy-for-your-saas-offering/#comment-113139 Melinda Mon, 07 Jun 2010 09:51:55 +0000 http://www.saasblogs.com/2008/01/07/a-pricing-strategy-for-your-saas-offering/#comment-113139 Thank you for this article. I agree that creating a low barrier to entry by keeping the base product/service price low is effective. Thank you for this article.

I agree that creating a low barrier to entry by keeping the base product/service price low is effective.

]]> By: Mark Kromer http://www.saasblogs.com/business/a-pricing-strategy-for-your-saas-offering/#comment-109680 Mark Kromer Sun, 21 Mar 2010 23:47:16 +0000 http://www.saasblogs.com/2008/01/07/a-pricing-strategy-for-your-saas-offering/#comment-109680 Nice post, Sinclair, I think that the freemium model is a unique aspect of SaaS that I wish I could use more in my shrinkwrap software world. I'm linking to your post here: http://techprodo.com/wordpress/?p=292 Nice post, Sinclair, I think that the freemium model is a unique aspect of SaaS that I wish I could use more in my shrinkwrap software world. I’m linking to your post here: http://techprodo.com/wordpress/?p=292

]]> By: Anand Mohan http://www.saasblogs.com/business/a-pricing-strategy-for-your-saas-offering/#comment-80157 Anand Mohan Mon, 02 Feb 2009 16:58:29 +0000 http://www.saasblogs.com/2008/01/07/a-pricing-strategy-for-your-saas-offering/#comment-80157 Good Thought process. There should also be a way to divide the company by segments and have a pricing scheme for each segment. Also, I think, the margin curve will be wavy, when adopting the SaaS model. By the time we reach the maximum utilization of the infrastructure and start getting the max margins from the infrastructure, it will be time to upgrade/buy more to accomodate new customers. Virtualization can be of a great help here but still more investment will be required after sometime. Good Thought process. There should also be a way to divide the company by segments and have a pricing scheme for each segment. Also, I think, the margin curve will be wavy, when adopting the SaaS model. By the time we reach the maximum utilization of the infrastructure and start getting the max margins from the infrastructure, it will be time to upgrade/buy more to accomodate new customers. Virtualization can be of a great help here but still more investment will be required after sometime.

]]> By: Sinclair Schuller http://www.saasblogs.com/business/a-pricing-strategy-for-your-saas-offering/#comment-42571 Sinclair Schuller Wed, 23 Apr 2008 13:11:40 +0000 http://www.saasblogs.com/2008/01/07/a-pricing-strategy-for-your-saas-offering/#comment-42571 Mark, I'm not a believer that freemium is the model for enterprise focused apps. SaaS usage by medium to large enterprises ($50mm a year in revenue or greater) will continue to grow. The notion of companies that size relying on freemium offerings won't work because of reasons like SLA needs, perceived reliability, etc. Additionally, as we move forward in the world of SaaS, I anticipate that application complexity will grow significantly. We'll be seeing 3D rendering engines, photo editing software, etc. make their way into this medium to large enterprises. The incremental cost per user may make freemium prohibitive, which relies on low incremental cost increase per user (for the free users) making it recoverable as a marketing expense by paying users. Trials seem to fit complex B2B offerings much better. Mark,

I’m not a believer that freemium is the model for enterprise focused apps. SaaS usage by medium to large enterprises ($50mm a year in revenue or greater) will continue to grow. The notion of companies that size relying on freemium offerings won’t work because of reasons like SLA needs, perceived reliability, etc.

Additionally, as we move forward in the world of SaaS, I anticipate that application complexity will grow significantly. We’ll be seeing 3D rendering engines, photo editing software, etc. make their way into this medium to large enterprises. The incremental cost per user may make freemium prohibitive, which relies on low incremental cost increase per user (for the free users) making it recoverable as a marketing expense by paying users.

Trials seem to fit complex B2B offerings much better.

]]> By: Mark Cunningham http://www.saasblogs.com/business/a-pricing-strategy-for-your-saas-offering/#comment-42032 Mark Cunningham Sat, 19 Apr 2008 21:32:53 +0000 http://www.saasblogs.com/2008/01/07/a-pricing-strategy-for-your-saas-offering/#comment-42032 I would be interested to hear why you are recommending to stay away from Freemium. I personally think the strategy you are suggested is a bit web 1.0. You mentioned demand curves in one of your follow-on comments.....I think the idea of a trial is a great way to reduce adoption. Especially if the trial is only 1 month. If it was a 1 year trial then it may work. Generally I like the freemium model much better and if you believe Chris Anderson free is the wave of the future. We aren't there yet in the enterprise world but are we going there? Probably. Mark I would be interested to hear why you are recommending to stay away from Freemium. I personally think the strategy you are suggested is a bit web 1.0. You mentioned demand curves in one of your follow-on comments…..I think the idea of a trial is a great way to reduce adoption. Especially if the trial is only 1 month. If it was a 1 year trial then it may work.

Generally I like the freemium model much better and if you believe Chris Anderson free is the wave of the future. We aren’t there yet in the enterprise world but are we going there? Probably.

Mark

]]> By: Tiago Matos http://www.saasblogs.com/business/a-pricing-strategy-for-your-saas-offering/#comment-30415 Tiago Matos Fri, 18 Jan 2008 16:40:55 +0000 http://www.saasblogs.com/2008/01/07/a-pricing-strategy-for-your-saas-offering/#comment-30415 I think creating a customer base for your main SaaS product is important, even if you created in a "low-cost" type situation, i agree in lowering the cost of the main product you can get a lot of customers from that strategy. I think creating a customer base for your main SaaS product is important, even if you created in a “low-cost” type situation, i agree in lowering the cost of the main product you can get a lot of customers from that strategy.

]]> By: En Avant » Blog Archive » SaaS pricing for enterprise customers http://www.saasblogs.com/business/a-pricing-strategy-for-your-saas-offering/#comment-30335 En Avant » Blog Archive » SaaS pricing for enterprise customers Thu, 17 Jan 2008 22:01:41 +0000 http://www.saasblogs.com/2008/01/07/a-pricing-strategy-for-your-saas-offering/#comment-30335 [...] Over on SassBlogs, Apprenda’s Sinclair Schuller has been written one or two articles recently about pricing strategies for Software as a Service. I’ve got another perspective, based on my experience as a corporate user of SaaS. The prevailing price model is a “one size fits all” approach, perhaps with some modular add-ons, but still based on the assumption that all your users users want all features that you have subscribed. This causes a) the cost competitiveness of SaaS to fall away rapidly as you add users, and b) bizarre ideas for cost saving. Two genuine suggestions I’ve heard are: [...] [...] Over on SassBlogs, Apprenda’s Sinclair Schuller has been written one or two articles recently about pricing strategies for Software as a Service. I’ve got another perspective, based on my experience as a corporate user of SaaS. The prevailing price model is a “one size fits all” approach, perhaps with some modular add-ons, but still based on the assumption that all your users users want all features that you have subscribed. This causes a) the cost competitiveness of SaaS to fall away rapidly as you add users, and b) bizarre ideas for cost saving. Two genuine suggestions I’ve heard are: [...]

]]> By: Sinclair Schuller http://www.saasblogs.com/business/a-pricing-strategy-for-your-saas-offering/#comment-29496 Sinclair Schuller Sat, 12 Jan 2008 04:06:53 +0000 http://www.saasblogs.com/2008/01/07/a-pricing-strategy-for-your-saas-offering/#comment-29496 Uri, Good point relating to environmental constrains (legal or otherwise). Clearly, that makes a significant difference in what is feasible. Lars, If you're at liberty to answer this, I think it would shed some light on one of your points: In your experience with Hummer Winblad's portfolio companies, do contract lengths have a drastic dampening effect on demand curves and/or sales pipeline close rates? I imagine that many customers are turned off by contracts of any sort when the SaaS medium promotes a low implementation cost and relatively low coupling. Uri,

Good point relating to environmental constrains (legal or otherwise). Clearly, that makes a significant difference in what is feasible.

Lars,

If you’re at liberty to answer this, I think it would shed some light on one of your points: In your experience with Hummer Winblad’s portfolio companies, do contract lengths have a drastic dampening effect on demand curves and/or sales pipeline close rates? I imagine that many customers are turned off by contracts of any sort when the SaaS medium promotes a low implementation cost and relatively low coupling.

]]> By: Lars Leckie http://www.saasblogs.com/business/a-pricing-strategy-for-your-saas-offering/#comment-29436 Lars Leckie Fri, 11 Jan 2008 22:29:03 +0000 http://www.saasblogs.com/2008/01/07/a-pricing-strategy-for-your-saas-offering/#comment-29436 There are a couple of factors that we discuss with our SaaS companies that I think are worth mentioning: 1) Set-up Fees - this speaks to the market adoption section in Sinclair's post. How much will implementation slow down the sales process. What is reasonable and how does this influence the monthly recurring prices? 2) Minimums - in many SaaS models there is a function of usage based pricing similar to usage tiers on cell phones. In these cases the vendor may choose to lower implementation fees to get higher minimums. 3) Contract Length - There are differing views on contract length and how that should influence pricing depending on the service offered. In some cases signing a three year deal will provide reasons to look at "investing in the customer" by lowering the starting prices. There are a couple of factors that we discuss with our SaaS companies that I think are worth mentioning:
1) Set-up Fees – this speaks to the market adoption section in Sinclair’s post. How much will implementation slow down the sales process. What is reasonable and how does this influence the monthly recurring prices?
2) Minimums – in many SaaS models there is a function of usage based pricing similar to usage tiers on cell phones. In these cases the vendor may choose to lower implementation fees to get higher minimums.
3) Contract Length – There are differing views on contract length and how that should influence pricing depending on the service offered. In some cases signing a three year deal will provide reasons to look at “investing in the customer” by lowering the starting prices.

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