How to come up with the right pricing model

Are you an SAAS founder conjuring up an awesome pricing model that will get you a foot in the door and give you recurrent revenues for life?

Hold on! One of the biggest enemies of sales is a complex pricing model or a TCO that is too difficult to calculate by your buyers.

Spare a thought for your buying committee or the procurement manager who might not have been exposed to your new age pricing. Let’s look at scenarios:

1. You offer them a simple capex with a small annual maintenance. They get it.
2. Now you offer SAAS pricing – opex only – which is fixed + transparent. Maybe you charge a one time installation charge. Maybe they get that too.

Now if you offer capex + variable opex – chances are they get confused and distraught and angry that they can’t calculate the TCO simply and face a price-creep later. Chances are that they run towards the simpler pricing alternative – maybe from that better-known brand with more customer references and higher prices you had nearly defeated – but finally lost to due to complex TCO calculations.