One of the biggest mistakes SaaS vendors make, aside from thinking the only way to make money with SaaS is through subscriptions, is that they tightly-couple the pricing strategy to the underlying revenue model. This is in part due to the fact that in legacy software the revenue model and pricing strategy are both arbitrary (though hopefully market-driven) and exist in the sales or accounting departments, not in the product itself. In SaaS, this is not the case.
Pricing Strategy
Pricing is part of marketing which is part of your overall business strategy. It should not be something that you take lightly or just some arbitrary numbers thrown on a "pricing page." Pricing should reflect your market position (or what you want that to be). All of your marketing should push your value proposition and when it comes time to make the purchase, the price should be aligned with that value-prop.
We can help you with pricing if you are:
- Adopting the "Freemium Model"
- Looking for x% gross margins
- Trying to get your investment in product development back in x Years
- Basing it on what your competitors have done
- Trying to meet the financial projections you gave investors
- Going to market with the lowest price
- Or finally... just pulling numbers out of the sky
If any of these are true, contact us today!
Revenue Modeling
The Seven Revenue Streams that make up the Revenue Model in SaaS must be built into the underlying application. Whether all seven will be leveraged at go-to-market, they must be considered early during the architecture phase. If this is not done, money will be left on the table and additional money will eventually be spent to re-architect the system to support these additional revenue streams.
Examples of Revenue Modeling:
- Recurring Revenue generation
- Customer-facing Pricing (Freemium, Bundling, etc.)
- Distribution Strategies (Ecosystem, App Stores, channels, white label, etc.)
- Back-end Revenue Streams (float, discounts, revenue share, etc.)
- Advertising-based Models
By examining the market and the value-proposition of the product, we help determine where the SaaS product is lacking in its commercialization efforts and help determine where to monetize within the application, beyond the application, through channels, etc.
In a process we call Architecting for Revenue, we apply our proprietary SaaS Revenue Matrix to the technical architecture of the product to ensure all 7 Revenue Streams available to a SaaS vendor are fully exploited. It is critical to know this early in the product development life-cycle since the product must be built to support these commercialization methods.
Download the 7 Revenue Streams Slides (PDF)
Ready to get started? Contact us Right Now!