Price management is key to delivering a profitable SaaS business model.
Do you understand how your customers use, purchase and interact with your product? Marketing and Product teams must understand the value your software is creating for customers and how to incorporate this value into new product offerings to drive recurring revenue and minimise churn.
We help you assess the correct pricing mechanism for your business e.g. per user pricing, usage or transaction based pricing, customised pricing based on product features and other bespoke models.
The key levers in any SaaS business model are :
- CAC ( Customer acquisition Costs)
- MRR ( Monthly Recurring Revenue)
- Churn Rate
- Daily Active Users
- LTV (Customer Lifetime Value)
- Cash Flow
Successful SaaS Business Models have total clarity on these metrics.
These metrics should be supported by a well defined pricing waterfall. The price waterfall is a simple tool which details how much net revenue a company really captures in each transaction. A simple price waterfall will highlight the revenue leakage from your list price after discounts, promotions and other incentives are factored in. This analysis will also identify your most profitable customer segments.
A typical price waterfall includes:
- List price features and options
- Volume/Term/Program Discount
- Invoice Price
- Promotions
- Referral Incentives/Rebates
- Technical support
- Payment Terms
- Pocket Price
- Standard Costs
- Other Costs
- Pocket Margin
A clearly understood pricing waterfall will drive profitable sales volume and incentivise the salesforce to Upsell and Xsell your software offering.
Please feel free to call us if you would like an inependent review of your pricing model.