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The following is the pricing model I have formulated based on my experience.
Pre-requisites
1. Benchmark the Software (Application) correctly. This is essential to build a scalable and flexible pricing model. Benchmark the Service with a common criterion (for eg : Transaction)
2. Consolidate the efforts for developing the software (including resource costs) and annual maintenance costs
3. Identify the target market and market segments where you would pitch-in. For various market segments, you may have to adopt different pricing strategy.
4. Prepare your projections for SaaS for coming3 years
5. Finalize the hosting strategy. Are you going to host the application in your own data center? Are go for Collocation and build your own infrastructure there? Are you going with an IaaS Provider? Are you going to Cloud?
6. Consolidate the sales ,marketing and administration costs
SaaS Pricing
Consider that you deploy the application for X number of transactions in a specific hosted environment. The deployment will be targeting your business projections for upcoming3 years (driven by business strategy)
1. The hosting costs need to be further sliced into multiple heads (eg : Hardware costs, AMC, Hosting rentals, communication costs, license costs, resource costs etc). The cost of each head will be spread across3 years which will consider the inflation/conversion rates as well. Each of these cost heads will be further related and converted to a common unit on an annual basis (for eg : Rentals Per Core Per Annum)
2. The Service (Application) benchmarks will be used to deploy teh infrastructure.
3. Sum up the hosting costs , development costs, sales ,marketing and administration costs
4. Add your margins .% to% should be a good thing to do.
4. Divide (4) with number of common criterion (Eg : Transactions) that can be generated / serviced out of target SaaS environment. We will have Cost Per Transaction
5. Provide the per transaction price to the market
When developing your Value Pricing Strategy you can leverage a variety of SaaS Pricing Models. From transparent pricing on your pricing page to Enterprise pricing that’s quoted behind the scenes, you must know your options.
I put together this list of my best resources to help you get your SaaS Pricing Models right and grow your SaaS business.
SaaS Pricing Models Tactics and Design
