In a post on the Chargebee Blog, Sadhana Balaji writes:
Even though it’s inherently necessary to build your pricing on a value metric, Patrick Campbell, the CEO and co-founder of Price Intelligently, argued that picking the right value metric is crucial for a revenue model’s success.
Imagine two SaaS companies that each have 100 customers. The first charges on a per seat per month schema, but there’s little need for more than one seat for each customer. The other sells the exact same product but charges along a metric of particular usage in the app with a bare minimum per month charge. The former has an artificial ceiling on the MRR potentially gained from their customers. The latter’s MRR will grow as their customers grow and/or use the product more. I’d much rather be in company number 2.
~ Patrick Campbell
He has done a splendid job at condensing the function of a good value metric into three succinct points:
- It should be easy for the customer to understand
- It should align with the value the customer receives
- It should grow with the customer’s usage
Many product designers only think about the product, neglecting the fact that so many good products fail because they didn’t have the right business model to help them succeed. The post above has great examples on value-based pricing, which might feel riskier at points, but it’s definitely the model I would hope to employ as much as possible. Read the full post on the Chargebee blog.