Marketing for SaaS and Web Apps / Freemium / Pricing

Imagine a Web App where the customer is excited to pay you more to use it?

There is a great post on Sachin Rekhi's blog titled "Freemium Design Pattern: Scale Pricing with Customer Success." I left a comment on his post, but I thought it was relevant so I want to share it here as well. 

Sachin makes the strong case for creating pricing bundles or versions that are aligned with the customers' growth making it easier to "step-up" for the customers. Specifically, he said:

One variant of capacity-limited freemium tiering that is particularly effective for products targeted at the SMB market is to scale pricing with customer success. What I mean by this is providing various premium tiers of your product that will become appropriate for your customer as they are more successful in their own business. Typically this means tying the tiers with capacity-limits that either directly reflect or proxy the customer's growth in their own user base or revenue. 

What's nice about this model is that it appropriately segments your potential customers into pricing buckets by ability and often willingness to pay. Businesses that are just getting started, pre-revenue, or early in finding product\market fit can often leverage your product as part of the free tier or low priced tiers. This provides few barriers to adoption and get's them quickly onto your product. And as their business scales, they'll think twice about switching since they've already been successfully using your solution. On the other hand, larger businesses will pay against a higher tier appropriate for their level of success. 

I used that as a jumping off point and left the following comment:

Since B2B (Enterprise & SMB) SaaS is our specialty at Sixteen Ventures, we have a lot of experience in versioning, bundling, etc.. First, we work with our clients to ensure that they are solving a business problem for their target market. By doing that, we also help our clients realize that when they solve a real business problem, there is a real value put on that by the clients. This means it is very unlikely that SaaS vendors we work with are going to be in the game of competing on price... we don't want them to be the low-price leader. 

One of the main things we always tell our clients in an effort to ensure they are positioned in the minds of their target market correctly is to do what you suggest; reward their growth and success. The SaaS vendor doesn't want to punish the client's growth. They don't want to give the client any reason not to continue to use the product as their business grows. In fact, by showing the client that they understand their business and the increasing complexities as they grow, the SaaS vendor further cements in the client's mind that they are the subject matter experts.

So, while I agree in principal with what you said, we go a step further and that is to have our clients differentiate the pricing bundles or versions based on value-added features, services, etc. and to avoid "commodity" items like storage, CPU, or even users. Sometimes, for example, users are the key metric that is most aligned with the needs of the client, so it would be foolish to not use that, but often, metrics with little perceived value are used. 

By aligning the "step-up" between bundles or versions with the value perceived by the client, the SaaS vendor is in a great position and the client feels great about moving up. They don't feel forced or bullied which could create churn out, and churn is the bitter enemy of revenue. Also, being value-based allows vendors to charge more in many circumstances.