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Making Money with Saas @ Seattle Startup Day
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you make a living with SaaS decided to So, ’ve Jeff Lawson jeff@twilio.com @jeffiel
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Jeff Lawson speaks about how to figure out pricing for your SaaS product at Seattle 2.0 Startup Day 2010
Transcript of Making Money with Saas @ Seattle Startup Day
value created - some discount
= your price
simple, universal pricing formula
Businesses: mostly rationalMake Money
orSave Money
BOTTOM LINE
Consumer
OR
Business
ConsumersAreNotRational
Businessesare PrettyRationalEvery decision driven two factors...
IncreaseRevenue
ReduceCosts
ORMeasurable Value
Whiten your teeth with Colgate Dental Proadvertisement
Xlearn more
No measurable value?Stick ads on it!
measurable value
business customersNeat!
have a framework for
so
Be Proudand put a price on
the value you’re generating
Start
Does my service generate value?
Back to the drawing board How Much Value?
YesNo
Cost Based Pricing
Margin =ProfitPrice
Profit = Price - Cost
Price = Cost / (1-m )
Price = Cost / (1-m )
Price = $10 / (1-0.5)
Target Margin: 50% (0.5)Costs: $10
= $20
What if your unit costs are basically zero?
Web Server Web Server
MySQL
$200 / mo
Value Based Pricing
Are they......saving money
by replacing a more expensive solution?
...saving money on efficiency because of you?
...generating more revenue because of you?
HOW MUCH?
HOW MUCH?
HOW MUCH?
Competitive Pricing
Red Herring, see previous slide.
$$$
Cost Based Value Based
Competition
sanity check:
do they converge?
IsIt?
Customer Feedback Loops
Split Testing
$1,000 / Mo + 0.001 / Msg$0 / Mo + 0.10 / Msg
Talk to potential customers, learn the value prop during private beta
(which can be free)
Start conservative, drop prices if needed
Raise prices if merited, but
don’t fool people :)
IsIt?
If you’re unsure, just make more pricing
options.
Maybe I need mustard instead
Figure out value generated
Test with Potential Customers
Free Private Beta
Go Public with a Price Tag
Adjust as necessary, ideally down.
