Sometimes an issue appears so easy once it is pointed out by someone else, and that is exactly what we are seeing right now regarding the pricing structure of SaaS providers. Josh Melick knows just about all there is to know when it comes to business and software and he has issued a stark warning to all companies about their pricing structures.
Josh uploaded an article on his own personal blog detailing the core issues which so many providers have, and they all center around the way in which they are pricing up their products. Almost all software providers will give customers the chance to pick from a range of structure options, and here is the main issue which businesses young and old are having.
One Off Price
The one off price option is often used by younger businesses with new software options which they want to get out as quickly as possible and get some buzz generated around the product. This is not a terrible idea in the short term but the reality is that it is going to cause lasting damage in the long term. In doing this you instantly forego the chance to make money off the client in the future and you also lose the chance to bring them on board with other bundles and packages which you may offer.
Josh’s piece mainly focuses on the dimensions which businesses offer on each pricing structure. Let’s say that business has three levels of pricing, which most offer, there are certain things which are offered on each level. For example most will focus on just one dimension, and that is the number of users which a client is allowed at each level, this is all well and good, but there is a lot missing.
The second dimension which some will add onto this is the number of usage, which as Josh points out, is critical. After all there is now point limiting a bronze package to 10 users if the client will only have 9, and they will be using the software 24/7. Even though adding usage makes sense, there is still a core component of the pricing structure which Josh talks about as being absolutely crucial to the success of a sale.
Making Time a Priority
The third dimension which Josh talks about is time, and just how important it is to limit each contract to a certain time frame. The main reason for this, although there are additional benefits, is that in doing so a business can then raise prices. The cost of running software and all of the intricacies which are involved are always rising, and so should the price of the software for clients. Instead of just springing this on a client, it can be well structured and thought out using a time limit on their purchase or their contract.
This is a critical article for anyone within software development to read and pay attention to.