saas no big deal pragmktg webinar

7/31/2019 SaaS No Big Deal PragMktg Webinar

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Software Pricing Partners, IncAll Rights Reserved

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Pricing a SaaS ProductPricing a SaaS Product

WhatWhats the Big Deal?s the Big Deal?

Barbara Nelson - [email protected] Jim Geisman - [email protected]

Slides and other resources available at www.pragmaticmarketing.com/request


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IntroductionIntroduction

MarketShareMarketShare

Unique focus since 1987 Pricing software and systems

Address client problems Slow sales cycles Money left on table Chaotic / confusing pricing Entry into new markets / segments

Results Improve financial performance Strengthen competitive position Foundation for future growth


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License LandscapeLicense Landscape

Types of licenses Usage / transaction Capacity Time-based

Time-based license Perpetual Annual, multi-year Subscription (less-than-annual)

On premise Hosted (SaaScription)


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Where WeWhere Were Headingre Heading

Perpetual

SW

M&S

Subscription

SubValueAdd

SW

M&S

SaaScription

SaaS

ValueAdd

SubValueAdd

SW

M&S


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TopicsTopics

Value, Pricing and Payment

SaaS Value and Pricing Pricing and the Product CEO


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Value, Pricing and PaymentValue, Pricing and Payment

Product Functionality Delivers ValueProduct Functionality Delivers Value

Time to Value

Value ($)

Currentsolutions

Faster

Cheaper

Better


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Value and Payment StreamsValue and Payment Streams

Perpetual Payment Stream

0%

20%

40%

60%

80%

100%

120%

1 2 3 4 5Year

Annu

alFee

(%P

erpetualLicense)

License / RTU

M & S

Value Delivery Stream

0%

20%

40%

60%

80%

100%

120%

1 2 3 4 5Year

%Value


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Some AssumptionsSome Assumptions

Pricing tied to customer value delivered Quantify hard dollar value Value impact on revenue, cost Understand cost to realize value

Cost and risks fit with value to be delivered Have done basic pricing

Metric, packaging Price structure Price levels, discounts

Basic pricing is solid


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Subscription vs. PerpetualSubscription vs. Perpetual

Perpetual license fees Up-front license + annual M&S Payment stream (example)

$1000 (license) + 4 x $250 (M&S @ 25%) 5-year total = $2000


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Subscription vs. PerpetualSubscription vs. Perpetual

Perpetual license fees Up-front license + annual M&S Payment stream (example)

$1000 (license) + 4 x $250 (M&S @ 25%) 5-year total = $2000

Subscription license fee

Annual fees includes license + M&S Payment stream

Equal payments 5-year total = ???


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Subscription Value and PricingSubscription Value and Pricing

Subscription benefit / drawback

Put price on value-add Absolute amount Percent of perpetual

Subscription license fee equivalent

Perpetual license fees 5-year total = $2000 Plus subscription value-add

Keep payingReduced risk

Must upgradePayment flexibilityDrawback*Benefit

* Prospects disqualify themselves.Not a pricing consideration.


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TopicsTopics

Value, Pricing and Payment SaaS Value and Pricing Pricing and the Product CEO


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SaaS Value & PricingSaaS Value & Pricing

SaaS vs. SubscriptionSaaS vs. Subscription

Subscription license fee Perpetual license fee Plus subscription value-add

SaaS license fee equivalent Subscription license fee Plus SaaS benefits

Less SaaS drawbacks How much is value-add worth?


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Added Value From SaaSAdded Value From SaaS

Security

Risk of downtime

Off-site data

No / low need for internal ITPay as you use

Monthly payment

Low upfront cost

Web-delivered application

SaaS Benefits

SaaS Drawbacks


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- 1 5 -



Security

Risk of downtime

Off-site data

No / low need for internal ITPay as you use

Monthly payment

Low upfront cost


SaaS Benefits

SaaS Drawbacks

What are your objectives?

More revenue? Retain customers?Which customers benefit?


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Security

Integration

Flexibility

Low upfront costPay as you use

Monthly payment


No / low need for internal IT

SaaS Benefits

SaaS Drawbacks

No IT budget

Customer Types to Target

Price sensitive

Rapid deployment

Legacy apps

Risk averse

Need custom solution

Uncertain usage

Cashflow sensitive

Customer Types to Avoid


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SaaS PricingSaaS Pricing

Maintenance

&Support

ReducedRisk

Subs

criptio

nPr

ice

ITInfrastructure

Web

deliveredapp

Various

Drawbacks

SaaS

criptio

nPrice

PerpetualP

rice

PaymentFlexibility

Software

License


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SaaS Pricing ExampleSaaS Pricing Example

$1200/year

$100/month$6000SaaS

$500/year$2500Subscription

$1000 + $250/year$2000Perpetual

Payment Stream5 Year Value*

* Specific configuration. Numbers are illustrative


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SaaS Price LevelsSaaS Price Levels

Normalize payment streams Configuration (e.g. # users) Time frame Value-add (subscription, SaaS delivery)

SaaS price level SW + M&S + layers of value-add

Calculate total annual or monthly price Determine quantity 1 price

Adjust to market

Develop discount schedule Unit or dollar volume


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TopicsTopics

Value, Pricing and Payment SaaS Value & Pricing Pricing and the Product CEO


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Pricing & the Product CEOPricing & the Product CEO

Pragmatic MarketingPragmatic Marketing FrameworkFramework

Pricing

Buy, Buildor Partner

OperationalMetrics

BusinessCase

Sales

Process

ProductPortfolio

MarketRequirements

Market

Sizing

MarketingPlan

ProductRoadmap

Customer

Acquisition

MarketResearch

MarketProblems

Distinctive

Competence

ProductPerformance

CustomerRetention

Positioning

LaunchPlan

ThoughtLeaders

Use Scenarios

Innovation

SuccessStories

Presentations& Demos

Win/LossAnalysis

Competitive

Write-Up

EventSupport

ChannelTraining

Collateral &Sales Tools

WhitePapers

UserPersonas

SpecialCalls

ReleaseMilestones

Answer

Desk

TechnologyAssessment

CompetitiveAnalysis

Lead

Generation

BuyerPersonas

MarketAnalysis

ProductStrategy

ProgramStrategy

ProductPlanning

QuantitativeAnalysis

ChannelSupport

SalesReadiness

Strategic

Tactical

Just anothertask?


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Pricing Needs Market FactsPricing Needs Market Facts

Pricing

Buy, Buildor Partner

OperationalMetrics

BusinessCase

Sales

Process

ProductPortfolio

MarketRequirements

Market

Sizing

MarketingPlan

ProductRoadmap

Customer

Acquisition

MarketResearch

MarketProblems

Distinctive

Competence

ProductPerformance

CustomerRetention

Positioning

LaunchPlan

ThoughtLeaders

Use Scenarios

Innovation

SuccessStories

Presentations& Demos

Win/LossAnalysis

Competitive

Write-Up

EventSupport

ChannelTraining

Collateral &Sales Tools

WhitePapers

UserPersonas

SpecialCalls

ReleaseMilestones

Answer

Desk

TechnologyAssessment

CompetitiveAnalysis

Lead

Generation

BuyerPersonas

MarketAnalysis

ProductStrategy

ProgramStrategy

ProductPlanning

QuantitativeAnalysis

ChannelSupport

SalesReadiness

Strategic

Tactical


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UnderstandUnderstand Customer View of ValueCustomer View of Value

Value elements Hard dollar (net)

Revenue increases, cost savings Soft dollar

Prevent revenue erosion, cost avoidance Reduce risk

Pricing influencers Elements Amount Timing Likelihood / risk


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Scale Value With CustomerScale Value With Customer

+++

+++

+++

+++

++++++

+++

+++

+++

+++

+++

+++

+++

++++++

+++

+++

++

+++

+++

+++

+++

++

++++

++

+

+

+

+

+

+

+

Vertical markets Aligned with

customers business

Horizontal and verticalmarkets

Sometimes aligned

per loan +++

per patient +++

per user ++

per user ++

per user +++per property +++

Per user +

per student +++

per user ++

per customer +++

per user +++

per user +++

per patient +++

per employee +++

per user +

per user ++

per claim +++

per bill +++

Per gallon of fuel +++

per patient +++

per shareholder +++

per user +++

per employee +++

per user +per ad +++

per property +++

per user +

per reservation +++

per employee +++

per member ++

per user +

per user +

per user +

per ad

per bill

per claim

per customer

per employeeper employee

per employee

Per gallon of fuel

per loan

per patient

per patient

per patient

per property

per propertyper reservation

per shareholder

per student

per member

per user

per user

per user

per user

per user

per userper user

per user

per user

per user

Per user

per user

per user

per user

per user


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Payment Streams Are ConvertiblePayment Streams Are Convertible

$-

$5.0

$10.0

$15.0

$20.0

$25.0

$30.0

$35.0

$40.0

$45.0

0 4 8 12 16 20

# Quarters

CumePaym

ents($K)

PerpetualSoftware Fee

Perp + M&S Fee


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Payment Streams Are ConvertiblePayment Streams Are Convertible

$-

$5.0

$10.0

$15.0

$20.0

$25.0

$30.0

$35.0

$40.0

$45.0

0 4 8 12 16 20

# Quarters

CumePayments($K)


Perp + M&S Fee

SaaS Breakeven


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Payment Streams Must Be ComparablePayment Streams Must Be Comparable

$-

$5.0

$10.0

$15.0

$20.0

$25.0

$30.0

$35.0

$40.0

$45.0

0 4 8 12 16 20

# Quarters

CumePayments($K)

SaaS SoftwarePLUS Hosting

Breakeven


Perp + M&S Fee

SaaS Software-OnlyBreakeven


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Time

$Value

Time

$

Value

Time

$Value


Include ValueInclude Value--Add in PriceAdd in Price

Perpetual Payments

SaaS Payments

Subscription Payments


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Barbara [email protected]

Jim [email protected]

Slides and other resources: www.pragmaticmarketing.com/request

saas no big deal pragmktg webinar

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