2020 Guide to SaaS Pricing Models and Strategy

There has been a lot written about the various SaaS pricing models and in choosing the right strategy for your company. Each company must consider would best suit your corporate philosophy, identity and demographics. While the choice can be intimidating, this is an important decision, just like the business model which governs it and in turn governed by it. The appeal of SaaS is flat rate access versus copy and license purchases that constantly become obsolete. This is a more solid, organic lease of access rather than ownership of property.

As a result, you have to work within idealist constraints with your pricing system, yet still factor in your demographic and the identity and attitude of the service and company you put forward.

That being said, let us consider how these factors work in affecting your potential decision in 2020.

Limit on Price:

First, you have that expected price expectation to contend with. While prices can be high, you must have a price that far undercuts a traditional software model, so you have to put an upper bound cap on your price range right away.

Ads Revenue Deduction:

From here, it depends on what you’re doing with the software. First, are you using ads? If so, then you must deduct the projected revenue from your pricing unit immediately. This is because if you do not meet your revenue expectations with the pricing unit then ads must be cut out and the prices raised to match its internal price. When a model is not working, ads need to be the first thing to go, because customers do not honestly like them, but rather tolerate them.

Factoring the Overhead:

Following this, are you freemium? If so, then you need to factor in the overhead projection for your free users, calculate a difference with this overhead and ad revenue. Once more, ads need to be the first thing to go, but if they are the only thing offsetting your freemium overhead, and you are otherwise experiencing good conversion rates, then ads should not be abandoned.

Multi-Tier Subscriptions:

If you choose the path of subscription at some level, then you need to possibly sell more than one tier account. The best way is to use reasonable features disparity to accomplish this goal as it will spare the loss of freemium. You will probably need to use this at some point, so you may as well implement it from the start.

Per-Unit Cost:

Lastly, it is of importance that some services exist in a different universe altogether. Transaction interfaces for sales, transfers of resources and other mercantile SaaS establishments price per unit of transaction or percentage of transaction return. If your service sounds like it may be a mercantile system, you may just want to work out your per-unit cost based on the standard overhead and demographic comparison cascade. Hopefully now you know a little more about the dynamics of SaaS pricing models and will be able to make wiser decisions for it regarding your own.

Why SaaS is Important for Better Results

Software as a Service (SaaS) is method for delivering software that provides remote access to software as a web-based service. SaaS allows businesses, usually smaller businesses, to acquire the rights to use particular software by paying a monthly fee rather than purchasing the software and whatever hardware might be required for the software to perform.

The idea of using software as a service first popped up in the late 1990s in order to allow for the sharing of end-user licences in a way that reduced cost and also shifted server demands from the company to the software provider. One of the earliest examples of SaaS was SiteEasy which provided small-businesses with the software to develop their own websites. SaaS provides software users with subscription pricing, hosted delivery, and outsourced technical experts which not only save on costs but represent a more efficient and effective method of utilizing new technologies. Moreover, SaaS can ensure that users have cost-effective access to updates.

About RJ Frometa

Head Honcho, Editor in Chief and writer here on VENTS. I don't like walking on the beach, but I love playing the guitar and geeking out about music. I am also a movie maniac and 6 hours sleeper.

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