saas no big deal pragmktg webinar
TRANSCRIPT
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7/31/2019 SaaS No Big Deal PragMktg Webinar
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Software Pricing Partners, IncAll Rights Reserved
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Pricing a SaaS ProductPricing a SaaS Product
WhatWhats the Big Deal?s the Big Deal?
Barbara Nelson - [email protected] Jim Geisman - [email protected]
Slides and other resources available at www.pragmaticmarketing.com/request
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7/31/2019 SaaS No Big Deal PragMktg Webinar
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Software Pricing Partners, IncAll Rights Reserved
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IntroductionIntroduction
MarketShareMarketShare
Unique focus since 1987 Pricing software and systems
Address client problems Slow sales cycles Money left on table Chaotic / confusing pricing Entry into new markets / segments
Results Improve financial performance Strengthen competitive position Foundation for future growth
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Software Pricing Partners, IncAll Rights Reserved
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IntroductionIntroduction
License LandscapeLicense Landscape
Types of licenses Usage / transaction Capacity Time-based
Time-based license Perpetual Annual, multi-year Subscription (less-than-annual)
On premise Hosted (SaaScription)
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Software Pricing Partners, IncAll Rights Reserved
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IntroductionIntroduction
Where WeWhere Were Headingre Heading
Perpetual
SW
M&S
Subscription
SubValueAdd
SW
M&S
SaaScription
SaaS
ValueAdd
SubValueAdd
SW
M&S
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7/31/2019 SaaS No Big Deal PragMktg Webinar
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Software Pricing Partners, IncAll Rights Reserved
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TopicsTopics
Value, Pricing and Payment
SaaS Value and Pricing Pricing and the Product CEO
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Software Pricing Partners, IncAll Rights Reserved
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Value, Pricing and PaymentValue, Pricing and Payment
Product Functionality Delivers ValueProduct Functionality Delivers Value
Time to Value
Value ($)
Currentsolutions
Faster
Cheaper
Better
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Software Pricing Partners, IncAll Rights Reserved
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Value, Pricing and PaymentValue, Pricing and Payment
Value and Payment StreamsValue and Payment Streams
Perpetual Payment Stream
0%
20%
40%
60%
80%
100%
120%
1 2 3 4 5Year
Annu
alFee
(%P
erpetualLicense)
License / RTU
M & S
Value Delivery Stream
0%
20%
40%
60%
80%
100%
120%
1 2 3 4 5Year
%Value
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Software Pricing Partners, IncAll Rights Reserved
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Value, Pricing and PaymentValue, Pricing and Payment
Some AssumptionsSome Assumptions
Pricing tied to customer value delivered Quantify hard dollar value Value impact on revenue, cost Understand cost to realize value
Cost and risks fit with value to be delivered Have done basic pricing
Metric, packaging Price structure Price levels, discounts
Basic pricing is solid
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Software Pricing Partners, IncAll Rights Reserved
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Value, Pricing and PaymentValue, Pricing and Payment
Subscription vs. PerpetualSubscription vs. Perpetual
Perpetual license fees Up-front license + annual M&S Payment stream (example)
$1000 (license) + 4 x $250 (M&S @ 25%) 5-year total = $2000
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Software Pricing Partners, IncAll Rights Reserved
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Value, Pricing and PaymentValue, Pricing and Payment
Subscription vs. PerpetualSubscription vs. Perpetual
Perpetual license fees Up-front license + annual M&S Payment stream (example)
$1000 (license) + 4 x $250 (M&S @ 25%) 5-year total = $2000
Subscription license fee
Annual fees includes license + M&S Payment stream
Equal payments 5-year total = ???
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Software Pricing Partners, IncAll Rights Reserved
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Value, Pricing and PaymentValue, Pricing and Payment
Subscription Value and PricingSubscription Value and Pricing
Subscription benefit / drawback
Put price on value-add Absolute amount Percent of perpetual
Subscription license fee equivalent
Perpetual license fees 5-year total = $2000 Plus subscription value-add
Keep payingReduced risk
Must upgradePayment flexibilityDrawback*Benefit
* Prospects disqualify themselves.Not a pricing consideration.
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Software Pricing Partners, IncAll Rights Reserved
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TopicsTopics
Value, Pricing and Payment SaaS Value and Pricing Pricing and the Product CEO
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Software Pricing Partners, IncAll Rights Reserved
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SaaS Value & PricingSaaS Value & Pricing
SaaS vs. SubscriptionSaaS vs. Subscription
Subscription license fee Perpetual license fee Plus subscription value-add
SaaS license fee equivalent Subscription license fee Plus SaaS benefits
Less SaaS drawbacks How much is value-add worth?
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Software Pricing Partners, IncAll Rights Reserved
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SaaS Value & PricingSaaS Value & Pricing
Added Value From SaaSAdded Value From SaaS
Security
Risk of downtime
Off-site data
No / low need for internal ITPay as you use
Monthly payment
Low upfront cost
Web-delivered application
SaaS Benefits
SaaS Drawbacks
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Software Pricing Partners, IncAll Rights Reserved
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SaaS Value & PricingSaaS Value & Pricing
Added Value From SaaSAdded Value From SaaS
Security
Risk of downtime
Off-site data
No / low need for internal ITPay as you use
Monthly payment
Low upfront cost
Web-delivered application
SaaS Benefits
SaaS Drawbacks
What are your objectives?
More revenue? Retain customers?Which customers benefit?
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Software Pricing Partners, IncAll Rights Reserved
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SaaS Value & PricingSaaS Value & Pricing
Added Value From SaaSAdded Value From SaaS
Security
Integration
Flexibility
Low upfront costPay as you use
Monthly payment
Web-delivered application
No / low need for internal IT
SaaS Benefits
SaaS Drawbacks
No IT budget
Customer Types to Target
Price sensitive
Rapid deployment
Legacy apps
Risk averse
Need custom solution
Uncertain usage
Cashflow sensitive
Customer Types to Avoid
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Software Pricing Partners, IncAll Rights Reserved
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SaaS Value & PricingSaaS Value & Pricing
SaaS PricingSaaS Pricing
Maintenance
&Support
ReducedRisk
Subs
criptio
nPr
ice
ITInfrastructure
Web
deliveredapp
Various
Drawbacks
SaaS
criptio
nPrice
PerpetualP
rice
PaymentFlexibility
Software
License
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Software Pricing Partners, IncAll Rights Reserved
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SaaS Value & PricingSaaS Value & Pricing
SaaS Pricing ExampleSaaS Pricing Example
$1200/year
$100/month$6000SaaS
$500/year$2500Subscription
$1000 + $250/year$2000Perpetual
Payment Stream5 Year Value*
* Specific configuration. Numbers are illustrative
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Software Pricing Partners, IncAll Rights Reserved
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SaaS Value & PricingSaaS Value & Pricing
SaaS Price LevelsSaaS Price Levels
Normalize payment streams Configuration (e.g. # users) Time frame Value-add (subscription, SaaS delivery)
SaaS price level SW + M&S + layers of value-add
Calculate total annual or monthly price Determine quantity 1 price
Adjust to market
Develop discount schedule Unit or dollar volume
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7/31/2019 SaaS No Big Deal PragMktg Webinar
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Software Pricing Partners, IncAll Rights Reserved
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TopicsTopics
Value, Pricing and Payment SaaS Value & Pricing Pricing and the Product CEO
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7/31/2019 SaaS No Big Deal PragMktg Webinar
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Software Pricing Partners, IncAll Rights Reserved
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Pricing & the Product CEOPricing & the Product CEO
Pragmatic MarketingPragmatic Marketing FrameworkFramework
Pricing
Buy, Buildor Partner
OperationalMetrics
BusinessCase
Sales
Process
ProductPortfolio
MarketRequirements
Market
Sizing
MarketingPlan
ProductRoadmap
Customer
Acquisition
MarketResearch
MarketProblems
Distinctive
Competence
ProductPerformance
CustomerRetention
Positioning
LaunchPlan
ThoughtLeaders
Use Scenarios
Innovation
SuccessStories
Presentations& Demos
Win/LossAnalysis
Competitive
Write-Up
EventSupport
ChannelTraining
Collateral &Sales Tools
WhitePapers
UserPersonas
SpecialCalls
ReleaseMilestones
Answer
Desk
TechnologyAssessment
CompetitiveAnalysis
Lead
Generation
BuyerPersonas
MarketAnalysis
ProductStrategy
ProgramStrategy
ProductPlanning
QuantitativeAnalysis
ChannelSupport
SalesReadiness
Strategic
Tactical
Just anothertask?
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Software Pricing Partners, IncAll Rights Reserved
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Pricing & the Product CEOPricing & the Product CEO
Pricing Needs Market FactsPricing Needs Market Facts
Pricing
Buy, Buildor Partner
OperationalMetrics
BusinessCase
Sales
Process
ProductPortfolio
MarketRequirements
Market
Sizing
MarketingPlan
ProductRoadmap
Customer
Acquisition
MarketResearch
MarketProblems
Distinctive
Competence
ProductPerformance
CustomerRetention
Positioning
LaunchPlan
ThoughtLeaders
Use Scenarios
Innovation
SuccessStories
Presentations& Demos
Win/LossAnalysis
Competitive
Write-Up
EventSupport
ChannelTraining
Collateral &Sales Tools
WhitePapers
UserPersonas
SpecialCalls
ReleaseMilestones
Answer
Desk
TechnologyAssessment
CompetitiveAnalysis
Lead
Generation
BuyerPersonas
MarketAnalysis
ProductStrategy
ProgramStrategy
ProductPlanning
QuantitativeAnalysis
ChannelSupport
SalesReadiness
Strategic
Tactical
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Software Pricing Partners, IncAll Rights Reserved
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Pricing & the Product CEOPricing & the Product CEO
UnderstandUnderstand Customer View of ValueCustomer View of Value
Value elements Hard dollar (net)
Revenue increases, cost savings Soft dollar
Prevent revenue erosion, cost avoidance Reduce risk
Pricing influencers Elements Amount Timing Likelihood / risk
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Software Pricing Partners, IncAll Rights Reserved
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Pricing & the Product CEOPricing & the Product CEO
Scale Value With CustomerScale Value With Customer
+++
+++
+++
+++
++++++
+++
+++
+++
+++
+++
+++
+++
++++++
+++
+++
++
+++
+++
+++
+++
++
++++
++
+
+
+
+
+
+
+
Vertical markets Aligned with
customers business
Horizontal and verticalmarkets
Sometimes aligned
per loan +++
per patient +++
per user ++
per user ++
per user +++per property +++
Per user +
per student +++
per user ++
per customer +++
per user +++
per user +++
per patient +++
per employee +++
per user +
per user ++
per claim +++
per bill +++
Per gallon of fuel +++
per patient +++
per shareholder +++
per user +++
per employee +++
per user +per ad +++
per property +++
per user +
per reservation +++
per employee +++
per member ++
per user +
per user +
per user +
per ad
per bill
per claim
per customer
per employeeper employee
per employee
Per gallon of fuel
per loan
per patient
per patient
per patient
per property
per propertyper reservation
per shareholder
per student
per member
per user
per user
per user
per user
per user
per userper user
per user
per user
per user
Per user
per user
per user
per user
per user
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Software Pricing Partners, IncAll Rights Reserved
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Pricing & the Product CEOPricing & the Product CEO
Payment Streams Are ConvertiblePayment Streams Are Convertible
$-
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
$40.0
$45.0
0 4 8 12 16 20
# Quarters
CumePaym
ents($K)
PerpetualSoftware Fee
Perp + M&S Fee
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Software Pricing Partners, IncAll Rights Reserved
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Pricing & the Product CEOPricing & the Product CEO
Payment Streams Are ConvertiblePayment Streams Are Convertible
$-
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
$40.0
$45.0
0 4 8 12 16 20
# Quarters
CumePayments($K)
PerpetualSoftware Fee
Perp + M&S Fee
SaaS Breakeven
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Software Pricing Partners, IncAll Rights Reserved
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Pricing & the Product CEOPricing & the Product CEO
Payment Streams Must Be ComparablePayment Streams Must Be Comparable
$-
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
$40.0
$45.0
0 4 8 12 16 20
# Quarters
CumePayments($K)
SaaS SoftwarePLUS Hosting
Breakeven
PerpetualSoftware Fee
Perp + M&S Fee
SaaS Software-OnlyBreakeven
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Software Pricing Partners, IncAll Rights Reserved
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Time
$Value
Time
$
Value
Time
$Value
Pricing & the Product CEOPricing & the Product CEO
Include ValueInclude Value--Add in PriceAdd in Price
Perpetual Payments
SaaS Payments
Subscription Payments
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Software Pricing Partners, IncAll Rights Reserved
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Barbara [email protected]
Slides and other resources: www.pragmaticmarketing.com/request