Twilio - Monetizing SaaS - Jeff Lawson Cloudstock December 2010
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This document provides guidance on pricing SaaS products. It discusses measuring the value a product creates for customers and using that as the basis for pricing, rather than just costs. Value can be calculated based on money saved by replacing more expensive solutions or through increased efficiency or revenue gains. The document also covers testing pricing through customer feedback, split testing, starting conservatively and adjusting prices based on metrics. It suggests using segmentation based on quantities, features, support needs, industries or less attractive options.
Twilio - Monetizing SaaS - Jeff Lawson Cloudstock December 2010
- 1. you’ve decided to So, make a living with SaaS Je Lawson je @twilio.com @je el
- 2. simple, universal pricing formula value created - some discount = your price
- 3. measuring value created
- 4. Consumer OR Business
- 6. Businesses are Pretty Rational Every decision driven two factors...
- 7. Reduce Costs Measurable Value OR Increase Revenue
- 8. No measurable value? Stick ad s on it! X Whiten your teeth with Colgate Dental Pro learn more advertisement
- 9. so business customers Neat! have a framework for measurable value
- 10. be proud and put a price on your junk bits & pieces value generation
- 11. Start No Does my service Yes generate value? Back to the drawing How Much Value? board
- 13. Profit Margin = Price Profit = Price - Cost Price = Cost / (1-m )
- 14. Target Margin: 50% (0.5) Costs: $10 Price = $10 / (1-0.5) = $20 Price = Cost / (1-m )
- 15. What if your unit costs are basically zero? Web Server Web Server MySQL $150 / mo
- 17. Are they... ...saving money by replacing a more expensive solution? HOW MUCH? ...saving money on e ciency because of you? HOW MUCH? ...generating more revenue because of you? HOW MUCH?
- 18. Are they... ...saving money IC E by replacing a more expensive solution? HOW MUCH? PR U R = O ...saving money Y of you? t nHOW MUCH? on e ciency because u i sc o - d ...generating more revenue because of you? HOW MUCH?
- 19. Competitive Pricing Red Herring, see previous slide.
- 20. Cost Based Value Based sanity $$$ check: do they Competition converge?
- 21. Is It?
- 24. Split Testing
- 27. $1,000 / Mo + 0.001 / Msg
- 28. $1,000 Mo + + 0.001 / Msg $0 / / Mo 0.10 / Msg
- 29. $1,000 Mo + + 0.001 / Msg $0 / / Mo 0.10 / Msg
- 30. Talk to potential customers, learn the value prop during private beta (which can be free)
- 34. Raise prices if merited, but don’t fool people :) Start conservative, drop prices if needed
- 35. Is It?
- 36. If you’re unsure, just make more pricing options.
- 39. Maybe I need mustard instead
- 41. Quantities
- 42. Quantities
- 43. Features
- 44. Features
- 45. Support
- 46. Support
- 49. O er less attractive options (that clearly, only suckers would buy)
- 50. Price Anchoring
- 51. CHEAP! Price Anchoring CHEAP!
- 52. Figure out value generated Test with Potential Customers Free Private Beta Go Public with a Price Tag Adjust as necessary, ideally down Use price levers & anchoring to Segment
- 53. Je Lawson je @twilio.com @je el