How to come up with the right pricing model

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.

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