The SaaS pricing debate revisited

Over the last year, the SaaS and PaaS players have all been working on finding pricing models that work for their clients and businesses. 

While nobody seems to have nailed it just yet, some recent decisions by some really large players in the enterprise software game have shone a spotlight on what doesn’t work.   

It may not be obvious at first blush, but most small and medium sized companies that use software to power their online businesses need the same software features that big companies do.  They just don’t need the same amount of them as big companies do.   

The trap that awaits software marketers that miss this point is that by narrowing the product functionality to hit an affordable price point they produce a product that nobody wants.   

Just think of what would happen if a leading car maker offered an “entry-level” vehicle based on their top-of-the-line chassis.  However, to offer an entry-level price, they leave out the window glass, the transmission and the passenger seats.  Even though it contains most of components that are in the higher priced “enterprise” version, this “entry-level” product is doomed.  Software works the same way.   

The lesson?  Product plans that eliminate software functionality to arrive at an entry-level price won’t deliver new customers.  

Comments

[Jim Geisman]

There's no question that the needs of small companies in many areas are similar to large companies but the SMB need is for less of whatever-the-something-is.

Getting an entry-level package isn't simply a matter of stripping out functionality to hit a price point. The real trick is to strip out *value* relative to other offerings in the lineup - this may mean stripping out functionality but not necessarily.

If you want to use the car analogy, no windshield = no value. An entry level car might have fewer seats, less room, limited horsepower, or even limited speed which is exactly what car folks do. The functionality is the same but the value created by the driving/riding experience is not.

Bringing this back to a SaaS or PaaS offering, an entry level CRM system might limit the number of prospects or a platform service provider may limit transactions, bandwidth or storage it can handle. Functionality in both cases is the same but the value has been decreased to hit a price point.

If one is trying to find the right entry-level offering, think entry-level value instead. It doesn't make the task easier but the results are likely to be better.

[suvie]

Coming from over 15 years of billing and collections background, I have a good understanding of receivables management - - however, admittedly know little about "Medical Billing"....

As I am currently looking to acquire a Medical Billing company, I have concerns where the industry is or may go with never-ending changes the insurance world. Especially with the new Changing of the Guard - - Obama- - soon coming to office, I expect there will be many changes in many different areas.

More specifically, my question is to all of the BLOGGERS.... what are the downfalls that may soon come to the Medical Billing industry that can dramatically change the climate of the business (for example, what SUB PRIME ultimately did to the Mortgage industry). I am trying to further ensure this business is here to STAY and/or what risks there are with what may soon come down the pike interms of technology, Insurance carriers, government, etc...

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