Aligning your pricing with product value will be a hugely determining factor for your users stickiness. They signed up to your product because of the value it offers, and they’ll stay if they’re paying for what they’re getting out of it.
Usage-based pricing is becoming increasingly popular amongst SaaS companies. According to the report 2021 State of Usage-Based Pricing, 45% of surveyed SaaS companies applied this type pricing strategy in 2021, 18% up from the previous year.
Usage-based pricing means the monthly or annual costs are directly related to a customers’ use of a product, or the number of transactions facilitated through the product. In essence, the more a customer is using the product, the more they will pay.
HubSpot, one of the leading leading SaaS CRM platforms, has successfully adopted usage-based pricing:
Customers started using your product because it offers value. Usage-based pricing as a tried-and-tested method ensures your customers stick.
Price can be a deciding factor whether or not a user will renew and stay with you.
The aim is to align pricing with product value to make sure customers are paying for what they need the product for.
As your customer’s business grows, so will their usage of your product and with that also recurring subscription cost, leading to increased revenue over time.
One of the key questions to ask yourself when implementing usage-based pricing is what your value metric is. Value metrics are specific to each business and can vary. For example, “marketing contacts” is the value metric applied by HubSpot’s pricing strategy.
How to identify your value metric?
- Look at your value proposition canvas for your ideal customer and define their Job-To-Be-Done. Why are your customers using your product priomarily for?
- Break down their Job-To-Be-Done into individual parts.
- Define and answer each of the parts:
(A) Is it aligning with my customers’ needs?
(B) Is it scalable?
(C) Has it appeal? As in, has it a strong-enough value to my ideal customers as part of my acquisition and retention efforts?
(D) Can value and pricing be aligned to scale sensibly in the way that the customer is happy to pay more as their usage increases?
- Can you answer to any of the above questions to the parts with “yes,” your next move should be running a survey to your customers. I sugest using Maximum Difference Scaling (MaxDiff) questions, your customers are being asked to pick or rate on a scale the most and least appealing part – or product feature.