SaaS Pricing for Prosperity SaaS Pricing for Prosperity

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Transcript of SaaS Pricing for Prosperity SaaS Pricing for Prosperity

  • 1. SaaS Pricing for Prosperity Pricing and Packaging... ...Get the Growth You Need... ...Achieve the Success You Want Webinar Sponsored by OpSource MarketShare, Inc. Wayland, MA 01778 Tel: (508) 647-0330 www.softwarepricing.com 2008 MarketShare, Inc.
  • 2. Introduction MarketShare Unique focus since 1987 Pricing computer software Practice areas Value-Driven Pricing Value-Based Selling Strategic Discounting Results Improved financial performance More value from products & services Increased sales effectiveness 2008 MarketShare, Inc. 2
  • 3. Introduction SaaS Adoption is Growing Figure 1: SaaS Application Adoption (Worldwide) 2008-2010 - % Companies deploying Source: Saugatuck Technology - SaaS Survey Research 2008 www.saugatuck.com 2008 MarketShare, Inc. 3
  • 4. Introduction SaaS is High Growth Opportunity Source: 2007 Operating Metrics Survey, OPEXEngine LLC www.opexengine.com 2008 MarketShare, Inc. 4
  • 5. Introduction Valuation Related to Growth Rate Source: Q1 2008 Software Industry Equity Report, Software Equity Group LLC www.softwareequity.com 2008 MarketShare, Inc. 5
  • 6. Agenda Why were here Define the offer Attract new customers Encourage unit growth Stimulate upgrade growth Wrap-up 2008 MarketShare, Inc. 6
  • 7. Why We're Here Growth Means Prosperity "The way to make money in the stock market is to buy a stock and sell it when it goes up. If it's not going to go up, don't buy it! - Will Rogers 2008 MarketShare, Inc. 7
  • 8. Why We're Here Growth Means Prosperity "The way to make money in SaaS is to start a company and sell it when it goes up. If it's not going to go up, don't start it! 2008 MarketShare, Inc. 8
  • 9. Why We're Here Growth Requirements Attract more customers Sell more units Get more upgrades 2008 MarketShare, Inc. 9
  • 10. Why We're Here Revenue Sources New Customers # New Customers x $ / Customer + = Growth revenue Unit Growth # Customers x New $ / Customer Upgrade Growth Existing Customers # Customers x $ / Customer = Base revenue 2008 MarketShare, Inc. 10
  • 11. Why We're Here Revenue Growth Profile Revenues $50.0 Revenue ($M) $40.0 $30.0 $20.0 $10.0 $0.0 1 2 3 4 5 Number of Years Existing Customers Upgrade Growth Unit Growth New Customers 2008 MarketShare, Inc. 11
  • 12. Why We're Here Driving Revenue Growth Define the offer Focused app, meet need Attract new customers Easy to try, buy, use Entry-level product(s) Encourage unit growth Fair deal Beachhead configuration Breadth of appeal Receptivity / contagion Stimulate upgrade growth Value step Bite-sized add-ons Attach rate 2008 MarketShare, Inc. 12
  • 13. Agenda Why were here Define the offer Attract new customers Encourage unit growth Stimulate upgrade growth Wrap-up 2008 MarketShare, Inc. 13
  • 14. Define the Offer More Than Product Only Product Must be attractive Easy to use Apparent depth Promise of a future Services User support Implementation Other Ecosystem Reliability Scalability 2008 MarketShare, Inc. 14
  • 15. Agenda Why were here Define the offer Attract new customers Encourage unit growth Stimulate upgrade growth Wrap-up 2008 MarketShare, Inc. 15
  • 16. Attract New Customers Its Not Just Price First impressions count Easy-to-understand offering TCO estimate Clear pricing Pricing message Attractive entry-level products How much value? At what price? Free vs. Fee Sharp drop off from fee Fee means skin in the game Impulse- vs. considered-buy price point 2008 MarketShare, Inc. 16
  • 17. Attract New Customers Price Level and Value Range Customer economics Substitutes Monetize Value - Example Competition More development output 1-2% more output Typical project 12 FTEs @ $100K/developer x 18 mos $12-24K/year $12- Shorter time-to-benefit Shave 2-4 weeks off 18 month project 2- Price Typical project (above) $1.8M $30-65K/year $30-