Switching from on-premises solutions to lower cost, less maintenance, pay-as-you-go SaaS alternatives has become a popular strategy for businesses, here in Australia and around the world, that are looking to enjoy the scalability and savings the latter model affords.
They’re part of a long-term global trend that will see the SaaS market worth an extraordinary $US10 trillion by 2030.
This doesn’t, however, mean SaaS vendors have a licence to print money. On the contrary. The market is crowded and differentiating one app from a slew of competitive offerings with broadly similar functionality is becoming an increasingly difficult proposition.
Implementing an attractive pricing strategy is one way vendors can differentiate their solution and up its appeal to customers. Get it right and they stand a better chance of attracting and retaining accounts and maximising their lifetime customer value.
Weighing the options
But determining whether you’re best off opting for flat rate or per user prices, a tiered or usage-based billing model, or some bespoke combination of the above, is no easy business.
Some customers like the simplicity of paying a fixed, recurring fee to access whatever features and functionality they need.
Others may perceive greater value in only paying for a handful of seats, particularly if the app in question is a specialist one that’s not in widespread use across their enterprise.
A tiered model enables vendors to offer multiple packages at different price points, with the latter determined by the features customers use, or the activity thresholds they reach.
Adopting a Fremium model can be an effective way for relative unknowns to build mind and market share, courtesy of the fact it allows customers the chance to try before they buy.
And then there’s the increasingly popular hybrid option, which sees customers paying a fixed rate for access and variable charges based on usage, a la utilities companies and telcos.
Working out the pricing model that works best for your business
Trial and error – experimenting with multiple models and seeing what sticks – is one way SaaS vendors on the expansion path can determine the best way to grow their customer base and revenue.
But chopping and changing the way you charge can be disruptive and disconcerting for customers, particularly if you make multiple changes in a short space of time.
Taking the time early on in your growth journey to research their requirements, pain points and willingness to pay can help you align your pricing structure with a value proposition that’s clear and compelling.
As part of that research process, you’ll need to familiarise yourself with the details of your competitors’ offerings and prices, to ensure yours are on par.
Irrespective of what pricing strategy you choose, making sure it’s clearly understood by customers is vital. Complex and confusing charges are a recipe for frustration and lost sales – the antithesis of what you’re trying to achieve.
Tools to make the task easy
Also vital: making sure customers are billed accurately and on time. Research shows consumers and commercial buyers alike have low to no tolerance for vendors that can’t get this business basic right – and they’re likely to dispense with their services if it happens more than once.
That’s why it pays to invest in market leading revenue management technology that
offers flexible quote-to-cash lifecycle support for whatever pricing model – or models – you deem right for your enterprise.
Ideally, the platform you choose will integrate seamlessly with whatever ERP system you use to power your business, as well as your CRM and other core solutions in your tech stack.
Select one which has the capacity to generate reports that provide visibility into every aspect of the purchasing journey and you’ll have at-your-fingertips access to insights which can be used to enhance your pricing strategy and optimise your customer service and experience.
Setting your SaaS business up for a seriously successful 2025
With businesses here in Australia and around the world continuing to adopt cloud-first strategies, the sky is the limit for SaaS vendors with premium offerings that are properly priced.
Capitalising on this opportunity is easier with the right foundation technology in place. Invest in a robust, scalable revenue management platform that will support your expansion in 2025 and beyond and you can be confident you’re giving your enterprise every chance of achieving its potential.
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With subscription-based software continuing to grow in popularity, getting your pricing right can supercharge sales and growth. Expert, Pricing Dynamic Business
