March 29, 2019

Easy Matrix To Optimize Your SaaS Pricing Mix

by Stijn Hendrikse

You can price based on cost (of service), value delivered or what the market bears.

Here is an easy model that I learned when doing Product Marketing for Microsoft Office. It still is very useful to think through your pricing model.

First, rank the capabilities (or "features") of your SaaS Product that generate value for your customers along two dimensions. How unique is each capability (vs. the competition and alternatives) and how to popular is it (how frequent is it needed/used)?  See the table at the bottom of this post for the example.

Analysis

Now plot these in a 10x10 matrix using these two Axis.

feature-popularity-vs-uniqueness

You'll have the following quadrants:

Freemium: Capabilities that are needed by many, but you don't have a competitive advantage. Consider making this part of your Freemium Plan.

Premium: Since these capabilities are both desired by many, and you have something special to offer, this is your Premium Upsell opportunity.

Add-On: If you have unique capabilities that a few customers really value, consider making these add-ons that you charge for separate. 

Noise: The rest? Don't talk about it and leave it out of your product pricing page. It's not going to help, just confuse.

Table used for the example

Feature Unique (1-10) Popular (1-10)
Audio Calls 1 10
Battery Life 4 7.5
BlueTooth 1.7 8
Dual SIM 9.5 1
Expandable Storage 3 2
Facial Recognition 10 7
Fingerprint 7 8.3
HD Photos 4.2 6.5
HD Video 6.3 6
Infrared Remote 9 2.5
Keyboard 4 2.8
NFC 7.5 1.5
Photos 3 8.7
SMS Texting 1.2 9
Video 5 7
Waterproof 7 8.7
WiFi 2 8.5
Wireless Charging 6.2 5.5

 

Finally, when do you use a Trial/Buy model vs. Freemium/Premium? They are not mutually exclusive. A trial program is ideal to let many people test drive your Premium SKU before you ask them to pay. It can get confusing to have Trial/Buy next to Freemium offerings so I recommend you pick one (or test).

Stijn Hendrikse

After 15 years of experience in the Software Marketing Industry, Stijn adopted the SaaS model to launch Kalungi, a SaaS Chief Marketing Officer blog where he shares best practices. This supports his work as a CMO Consultant with Chief Outsiders.

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