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Metered pricing?

by Damex

I'm thinking of starting to charge for my SaaS app.

My initial idea is to use metered pricing because my users don't use the app often enough for a subscription model to make sense.

Do you guys use metered pricing? Is it working out for you and your customers?

Damex's avatarDamex
on June 6, 2019
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  1. 3

    It may work better for your customers, but frankly it will generate significantly less revenue for you than subscriptions - I would even say as much as 10x less. Customers also have significantly less drive to commit to using it if there isn't the associated cost / burden of a monthly charge - they will kick the can on implementation.

    There is a SaaS principle that you should charge as much for your product as your market can bear.

    That said, in particular products, it's a market expectation to use metering. For example, often customers will expect API services to work via metered usage or credits.

    adamski's avatar adamski
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    7 years ago
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    1. 1

      Thanks @adamski, there's definitely food for thought in your suggestions.

      I would prefer the subscription model because of the regular revenue. It's just the usage patterns of my app don't align very well with a subscription at the moment.

      Perhaps I should add a feature that would add value on a more regular basis.

      Damex's avatar Damex
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      7 years ago
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  2. 3

    There are a few questions you need answers to in order to decide if metered pricing is the correct model for your app:

    1. Who uses the app and who makes the purchasing decision? If the user and payer are different (it happens often in bigger companies), then it is simpler for the customer to pay a fixed monthly fee rather than a metered approach because the user doesn't need authorization to spend on every use.
    2. What does it cost you to scale the app on usage? If you sell Disk space, metered pricing is safe. You can price at "cost + added value" and be sure to never run in a situation where you are loosing money.

    For anything SaaS pricing related, Tomasz Tunguz of Redpoint Ventures has very well written analyses: https://tomtunguz.com/categories/pricing/

    smirolo's avatar smirolo
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    7 years ago
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    1. 1

      Thanks for your input @smirolo!

      Interesting questions. My ideal target customer is the payer but I'm not sure if that's the case with my actual users.

      I will look into it and also check out Tomasz's post on pricing.

      Damex's avatar Damex
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      7 years ago
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