Did you hear about the glorious event called Royal Rumble moving to pay-per-view like Wrestler Mania, SummerSlam, and Survivor Series, when did these all guys visited San Francisco and innovate to be pay-per-view?
Tech entrepreneur innovated to be pay-per-something for more than a decade. In the PC era, there was a huge tussle about the license to use software and charge premium. It is worth a thought that everything should be pay-per-something.
SaaS industry pay per starts for users, report, data access, data store, data analyze, click, process, month, week, day and this can be as vast as the thought run in our mind. The latest breed of software comes with the most innovative pay per to attract users and start a subscription. The easier you have the cost of ownership, the better are conversations.
It is gauged by ARR, and your company or software is weighed on annual recurring revenue. The better ARR will lead to better valuation of the firm. It is important for today’s breed of entrepreneur to be in line with the rush of recurring revenue and innovate the accusation of the customer and control your customer success to have better success year on year. The lesser the churn it saves the customer for next year.
So how should you plan recurring revenue and on top of this?
Let’s discuss some benchmark to ease today’s tech entrepreneur. Innovate your way of pricing and be an inventor in your own way.
Single fixed fee or Flat Rate Pricing—Royal Rumble didn’t miss on this
Royal Rumble still didn’t get away from flat-rate pricing. The plan is to charge around $9 to $10 per month and give full access without compromise.
For enterprise business Tech Entrepreneurs charge a Flat Rate or a Single Fixed fee. Such firms are also traditional business doers who believe in making a customer happy and have a fixed fee in mind then fluctuating pricing.
It is easier for the customer too since they need to budget in line with a fixed price.
Such pricing is quite ideal for firms who use traditional ERP or Financial software. With a fixed price, all features may access anytime having no restriction on the number of projects done or the time they clicked a feature.
Pros of such pricing are:
· Easier to sell
· Easier to communicate
Cons of such pricing are:
· One-shot either you win a customer or no
· Difficult to fit the same price for different enterprise
Pay on usage or usage-based pricing – Royal Rumble innovated
Such pricing is the best example would be email marketing tools, where they charge based on the number of emails sent per month or the number of contacts you dump in their CRM to send emails. Use more than pay more. Let’s say if it’s thanksgiving season and your product is a great fit for that season. You would like to send more emails and grab better attention to get more sales.
IaaS or Infrastructure as a service is more common with such a pricing strategy. Increasingly though, SaaS companies are finding fresh ways to adapt the model, like CRM with several templates and sequence, or payable software that charge based on per payable event.
Pros of such pricing are:
· Price scales along with the usage, power users will pay more and beginner users will pay less.
· Easier customer acquisition since no barrier to pay flat
Cons of such pricing are:
· Product value goes down
· Hard to predict revenue and customer costs
Modular or Tiered Pricing Strategy
The traditional way of selling software was with a strategy of pricing it modular. Windows did with home and professional edition. ERPs were priced based on modules. System software was priced editions wise. Modular is not new. Most of the time the tech entrepreneurs use it as a basic price and then price per user.
Say you have an HR system on the cloud, Performance Management System can be a module to buy with a limited number of users and as you increase users, the price will increase further.
Hubspot freemium on cloud CRM SaaS. If you are started then you can immediately configure your CRM and start using it, further pricing starts with the module you want with a number of users.
Pros of such pricing ar :
· It appeals to multiple users
· It can ease you in upselling
Cons of such pricing are:
· Heave user risk
Pay per user
Most commonly used for office automation software or design software like Photoshop or illustrator. Office 365 comes with similar pricing. Pay per user is easy to understand and a no-brainer for CIO or CTO to budget.
Pros of such pricing are:
· Simple to understand
· Easy to predict the revenue
Cons of such pricing are:
· it does not reflect Value
· Limits adoption, as it tends to have one subscribed user for multiple users
Pay per active user
This is the offshoot of pay per user. There can be a situation where I use the system actively till the time project is active and stop being active when a project is delivered, but I can access all files in the cloud till since I am a non-active user to do it.
You find such pricing for engineering CAD software, where active pricing is when the project is in an active stage.
This eases the user company to buy since they directly connect it to the profit/cost center. It can give a sense of where it is used and for what.
Pros of such pricing are:
· Pay only for active user ease to close the deal
· Reduces the risk of the unused license which leads to churn
Cons of such pricing are:
· Doesn’t predict the revenue
There are some more pricing concepts like price per feature usage or price per minute usage. There is no end to this innovation. Entrepreneurs will keep on coming up with new pricing concepts to make sure there is the ease of acquisition and save them for the churn.
Royal Rumble used this concept finally since sometimes the match is of crucial players and fans want to just follow that event then overall Royal Rumble. Royal understood viewers had very little time on screen for the overall event. If they charge per view, it will get maximum for some event, which they might miss if they have one price for the entire event.
A time when we are selling minutes of bike usage to quality air produced by air-conditioning using IoT. Innovation will only help you reach maximum conversation and gain more business.