SaaS pricing is often a mystery for CTOs, CIOs, and other buyers of SaaS products. I had the opportunity to step on the other side of the SaaS market to speak with Rose Layton and Colin McCarthy, hosts of the SaaS Showdown podcast.
This was a special treat for me because SaaS Showdown is specifically for the buyers of SaaS products. In this conversation, we go behind the scenes to reveal the science behind SaaS company monetization (and how to negotiate your next SaaS renewal successfully).
We discuss how pricing models, negotiation strategies, and understanding customer willingness to pay can make or break a company’s profitability. We also delve into the different approaches for showing pricing/packaging online and the potential risks of using consumption-based pricing.
Additionally, we examine the services (SVCS) model for SaaS pricing and how understanding customer segments’ purchase criteria is crucial for pricing decisions. Tune in as we uncover the various factors that influence SaaS monetization and what it takes for companies to be successful in the long run.
Timestamped Outline
[01:32] “Monetization: The Neglected Growth Lever in SaaS”[06:19] “Software Business Models: Understanding Customer Value”
[13:26] “Maximizing Negotiations Beyond Price in Subscription Models”
[22:48] “SaaS pricing strategy: The Services (SVCS) Model Explained”
[25:43] “The Range of Willingness to Pay”
[31:26] “Pricing Software Features: The Dance Between Value and Customer Willingness to Pay”
[39:42] “Optimal Length of Free Trials”
[42:17] “Should Software Companies Publish Pricing Online?”
[47:01] “Contracts and Pricing: Navigating Tricky Terrain”
Potent Quotables
The Importance of Monetization for SaaS Companies:
“Monetization is a giant growth lever, but just tends generally to get ignored. And so it’s one of these things that, for whatever reason, looks like it’s more art than science. It’s both, but it definitely is more science than art.”
— Dan Balcauski
The Business Model of Software Companies:
“SaaS companies have really high gross margins compared to many other industries, but they’re worse than perpetual license software companies.”
— Dan Balcauski
The Dangers of Flashy Marketing Moves in Tech:
“Salesforce is well known for, I think, fairly flashy marketing moves. For instance, like the Salesforce Trailhead Lodge, which I thought was really obnoxious when it happened.'”
— Rose Layton
Negotiation Tactics:
“Never make a negotiation one dimensional is just a general rule of thumb in life. So if you focus only on price, I think you’re leaving a lot of different options on the table.”
— Dan Balcauski
The “Right” Price:
“It’s not always about coming up with the highest price. It’s about coming up with the right price for the right customer.”
— Dan Balcauski
Nonprofits need Enterprise features too:
“I’m struck by the idea that there’s some kind of assumption that some of these features are only targeted at enterprise customers…we work at small, mid-size nonprofits and care about those features too.”
— Rose Layton
The Changing Landscape of Demo Trials:
“Is it my imagination, or are those demos and those trials getting shorter and shorter? Because I’m sure they used to be like 30 days, then they went to 14. Now it’s like, you got 20 minutes, have a quick look around, and then you’re done.”
— Colin McCarthy
Showing Pricing Online:
“One of the things that is really frustrating when I am looking at new SaaS and trying to figure out how to solve a problem in our space is when companies don’t show pricing on their website.”
— Rose Layton
“Generally, what I’m fighting against is a lot of bad reasons for choosing not to publish pricing.”
— Dan Balcauski
Want more B2B SaaS pricing and packaging insights? Follow Dan on LinkedIn and Twitter.