How Are They Going to Pay? SaaS Shops’ Thorniest Question
One of the great advantages of being a software development house, as opposed to being a hardware producer, is that it’s a simple matter to iterate on code. Hardware manufacturers may get to produce a new motherboard, chipset, or wi-fi card every six months at the most. Lead times are longer as soon as physical creation is in the equation. But software developers can—and do—push updates pretty much as soon as they’re tested and considered ready.
That seemingly obvious statement serves to highlight a large discrepancy in the workings of many SaaS developers: the software at the core of the offering is constantly improved, but the payment model offered to customers usually isn’t. Once the initial offering goes live with a set payment structure, it doesn’t change or is rarely revisited even as the software itself is augmented or improved. For SaaS startups that have accrued some paying clients and are just starting to scale, that’s an interesting dichotomy. As the company grows, does the old pricing model still add value to the business?
It’s easy to see why perhaps it wouldn’t. In the early days of the business, developers set price points and maybe created a payment tier or three by looking at the market in their vertical, comparing the competition’s offerings, and pitching their prices at what was considered a nice balance between competitiveness and profit.
Roll forward three years or more, and the landscape will be quite different. Most SaaS companies fold in the first three years, so not only will the competitive landscape have changed, but the scale of the business will be different too. With that growth (we hope growth is the case!), there are new challenges; required infrastructure, operational overheads, new bodies on the payroll, and questions about how perhaps to monetize new features as part of the offering(s).
Reconsidering pricing models is, therefore, a no-brainer. But in most cases, the considerations around where to set prices and how to charge customers have a significant “finger in the wind” element. Sure, there’s a great deal more data on which the decision can be made, but who’s to say that decisions taken today, based on the last few years’ performance, will still be valid (and profitable) in just a few months?
This is where a flexible pricing platform designed specifically around SaaS offerings proves invaluable. There are so many variations in how a company might charge for its service(s), that even combing through the viable alternatives would eat up significant time and energy. To address this issue, we at Tech HQ would like to point readers towards the Chargify platform as a way forward.
It’s surprising that few other payment platform providers offer their software developer customers a software developer’s approach to pricing and payments. Chargify is unique in that it lets companies develop payment policies by means of familiar processes: create, test, finesse, roll out, and repeat. That means SaaS vendors can look intelligently at the different models which might be implemented, test their potential on existing and predictive data, then refine, retest, and finally release.
As a specialist in recurring payments for SaaS creators, Chargify helps companies craft pricing strategies from the most straighforward to the highly complex. The company was one of the first to offer event-based pricing (charging based on anything from a single field commit and upwards) and its users can craft a unique Payment structure using a simple consumption-based price plan (in tiers or pay-as-you-use), and/or offering pre-paid plans with or without drawdown, any variation on event-based pricing, or a combination of any or all of these.
That almost sounds like SaaS vendors—perhaps spoiled for choice—now have even more options to wade through. The Chargify platform helps find the balance between predictability, value, costs, and revenues. It helps test and refine. With each iteration of a model, planners can project outcomes and create the perfect price structure.
The company is also unique in that it integrates these SaaS-dedicated abilities with the full payment stack, moving money from customer to provider, and handling all the complexities around recurring payments (like expiring credit cards, account signatory changes, and so on).
Naturally enough, it’s important to regard price models not as permanent but rather as a malleable factor in the overall part of the business plan. Chargify’s platform is the framework on which SaaS companies can constantly fine-tune their price plans, thus continuing to create the best value for development companies and their customers.
During this series of articles, we’ll be looking at some of the price models that can be implemented by Chargify, and looking at ways that they can achieve the fine balance between complexity and simplicity, competitiveness and profitability. We’ll also discuss issues like ensuring SaaS customers get sufficient predictability in what they’re charged, and how to build pricing structures that promote trust through transparency.
Check back in a few weeks for the next article, or if what you’ve read about Chargify’s product has whetted your appetite, head over to the company’s site to find out more.
1 December 2022
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29 November 2022