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Why most SAAS products aren't offering "pay per use" pricing options?


#21

I completely agree than building a marketplace is complicated. I have started researching the end user side of it, to check if there could be demand or not.

The alternative to what I’m describing could be something similar to Appsumo.

The difference would be than it Appsumo, you depend on the offers that Appsumo provides. In my idea, you could be able to choose all available products any time you wanted.


#22

Same reason why some “desktop” software products don’t offer a 30-days trial.

There’s two kinds of software products in both SaaS and traditional “desktop” software (and people who have lots of experience selling traditional desktop software like myself or @Andy know this very very well)

Ongoing” products - calendars, email tools, project management, antiviruses, system utilities etc.

One-time” - image watermarking, file-undelete, USB-restore or, ahem, wedding planners

See, the “one-time” guys want some income as well. That’s why a file-undelete app costs $40, just like a calendar app. And the file-undelete app does not offer free trial. While the calendar one does

PS. Some SaaSes do offer a pay-as-you-go model. For instance, I use a SEO tool called “link dtox” which searches for “bad links” to your website. Obviously, I’m not an SEO agency, so I don’t need a subscription, I pay for it twice a year

PPS I love the idea of a marketplace, @CescVilanova , sounds brilliant.


#23

Great insights @jitbit, thanks!

I think the question is if there are enough products that can be used “one-time” but that are being priced only in a subscription base.

In those cases, subscription makes sense for the company and some of their customers (people using the product continuously).

But, would the company make more money if customers interested in “one-time” could purchase the product in the mentioned per use format?

What I’m realizing now is that if that was true, the company would eventually add that pricing option in their own website, so my site would be loosing relevance over time.

Again, all of this is assuming that there are actually enough SAAS products with “one time” customers interested on them.


#24

Thanks, @CescVilanova , and while you’re totally making sense, there’ a trick - most SaaSes offer a trial period. If people need the app “just once” - they use the trial and then never convert to “paid subscription”.

But you’re right. There’s TONS of “onetime” SaaS apps that don’t offer a “pay-as-you-go” while they REALLY SHOULD. Like Qualaroo for example (I’m sure you heard of them). So I think there’s future here… Go to a couple of conferences (Microconf being one of them) and build relations with a couple of saas-vendors, launch a website and post to reddit/HN/producthunt/saasclub etc, I’m sure there’s potential to be upvoted through the roof.

PS. this just occurred to me while I was typing: a “blackhat-ish” MVP for this type of product would be to register a paid account for a couple of expremely popular Saases (like say ahrefs) and resell access to these accounts as pay-as-u-go. It’s a kinda grey area, but good enought for an MVP to get you starte for the first couple of weekd…

PPS. Consider me in, I’d be happy to enlist my saas-helpdesk to your marketplace;)


#25

Thanks, @CescVilanova , and while you’re totally making sense, there’ a trick - most SaaSes offer a trial period. If people need the app “just once” - they use the trial and then never convert to “paid subscription”.

Qualaroo is one of the products I was thinking about :wink:

Maybe I want to use the product during 4-6-8 weeks a year, when, for example, I’m increasing my marketing push and getting feedback from new users is all what I need.

Maybe I want the features of the PRO version, but the free trial only gives me the basic stuff.

It’s tricky because I’m not sure how common is this need AND the reasoning behind it :smiley:

PS. this just occurred to me while I was typing: a “blackhat-ish” MVP for this type of product would be to register a paid account for a couple of expremely popular Saases (like say ahrefs) and resell access to these accounts as pay-as-u-go. It’s a kinda grey area, but good enought for an MVP to get you starte for the first couple of weekd…

This is really clever. I like it.

I think it’s also coherent with validating (or invalidating) the riskiest hypothesis of the idea, which is testing if there’s customer demand.

I will try to validate this right now, actually :wink:

Note: This is the only post I’ll write trying to sell something.

Anyone interested on a daily or weekly pass for Qualaroo Professional (you can see features included here)?

Weekly pass is $99.
Daily pass is $29.

If you’re interested, send me an email to [email protected] with the plan you’re interested in.

If you are interested in any other product other than Qualaroo, get in touch and we can talk about how pricing would be in that case.


#26

I’m not sure if my app might qualify as pay per use but basically I charge a % of sales generated by the app. So if there are no sales them there’s no fee. In practice though no one disables or pauses the app although I guess in theory they could.

I like the aspect of it that they don’t get charged unless it delivers value.


#27

It makes sense. The user only pays when he gets value. I think that some SAAS products, specially content creation tools that aren’t used regularly, could be priced this way (or at least offer that option).


#28

It’s good for the customer but not for the business.

As a business you need to know your customer LIfe-time value so you can adjust your user acquisition strategy. I’ve tried that with one of my products and doesn’t worth it. Pay per use work when the usage is very high and the overall costs are high, but not for consumer or small businesses oriented market. You need the user who will use the product often enough that he would get more value monthly than what he pays for, not on-off users…it’s not a good business model for a startup.

For some products may work, but like I said, the usage cost should be very high otherwise it doesn’t worth it.

For ex, smaller and medium plans should have fixed tiers, but for the highest plan (that exceeds a limit) you can offer a custom pay-per-use pricing.


#29

The benefit of charging recurring is that you filter out all the people that may only use your app a little bit. Then you get loyal customers that use and love your service. This creates stability in your cashflow.


#30

These comments make total sense but my hypothesis is:

Is there a way to get extra revenue from people that are not interested in the subscription model, without affecting the customers that are already ok with paying every month?


#31

So you are saying to use both options. Again, this is all about volume of the transaction. If for example, someone wants to get with a one-time purchase a volume that costs for example, half the Life-time Value of the recurring user, it may be worth it in some cases…however, is not easier to get the yearly plan?

It’s not simpler just to pay for a month and that’s all? For lower amounts than the lowest plan gives you monthly I don’t think any business will bother to include.

Oh…I see you asked this as some kind of survey for a potential business. That’s the same thing as deals stuff. To make it work you need to get an enormous amount of sales to be worth it by the vendor. And why get a daily/weekly pass if they offer a 14 days trial???


#32

I think this forum will give you a biased opinion on this. Most bootstrappers build B2B SaaSes that need to have high ARPU. The people who want to just use the app every now and then and pay the minimum aren’t interesting, because there’s just not enough money involved. Also, wanting to save money like this may indicate a pathological customer.

What you are thinking might be more interesting to consumer-facing apps.

Also, extra revenue is only interesting if it exceeds the extra costs. For many SaaS apps, there’s extra hassle in taking in the new customers. They may need help in integrations, support for getting started smoothly etc. The costs are acceptable when it’s expected that the customer stays for several months/years, but not when he’s just turning around - so these businesses don’t want to encourage that type of behavior. I could also imagine this type of customers needing more support and attention in general as they hassle around with their accounts.

I’ve seen several SaaS apps offering one-time purchases, when it fits their business model. The price is usually the same as the monthly price, or a bit higher. So all you win is that the subscription doesn’t renew automatically.


#33

Thanks a lot for sharing your insights @kulmala :smiley:

I think this might be the key:

What you are thinking might be more interesting to consumer-facing apps.

Maybe what I’m thinking makes sense only for certain apps/products that, in a SAAS model, only appeal to professionals, but that, with a different pricing, could appeal to more general consumers.

For example, I’m mostly thinking about content creation apps like Animoto (http://animoto.com/).

In this case, Animoto only gets you access the top features if you pay a PRO subscription.

I don’t know. In theory, the idea makes sense, but right now I don’t feel there’s strong market demand, at least from the people in this forum.

PD: About the one-time purchases, it made me think about a variation on my initial idea: a place where customers can buy lifetime memberships to SAAS products at a discounted rate. Do you think it makes sense?


#34

I’m experimenting with a Pay As You Go based on feedbacks from people asking the same question as you do and I am regretting the decision immensely for the many points discussed here.

1st, there’s no such thing as a free CAC. Almost certainly there’s support and education and hand holding involved that eats into my time.

2nd, metered pricing introduces uncertainty for people who are a great fit for your product. Because you are now optimizing for the bottom scrapers (dangerously approaching pathological customers), you risk someone who’s willing to pay a fixed monthly price.

3rd, “but I only need it once a year or just this once”, because the LTV is so small and the CAC is unlimited, this will ultimately end up being a bad deal. Imagine someone has $1 of credits left and they are trying to use up tens of hours of your time trying to squeeze that little extra value. On top of that they threaten a full refund or a chargeback.

All in all, pay as you go type of plans are rarely seen in SaaS because for the reasons illustrated above, it doesn’t make sense. It makes a lot of sense for someone without deep pockets or a free loader, but I realize the hard way, when you strive to cater to everyone you end up serving no one.


#35

Where thismight work is if you can find the SaaS models that aren’t priced well, like animoto. As has been mentioned, most drive-by users are served by free trials or even just pay monthly and cancel.


#36

Yep. I use CM as well and I use the “per email” option (about $.01 per email).
This is perfect because we have a stale list of old customers (30K or so) that I want to “winnow down”.

And until I do that I will be sending only a few emails to all of them. Then I’ll narrow that to (hopefully!) 10K or so and then email each of them more regularly.

Copilot also has a pay as you go option that I like.

Anytime you can match Price to Benefit more closely, that’s helpful.
Just remember that usage based pricing may discourage usage.
It’s like going to a buffett.You pay one price and eat till you’re [over]full.

And we WANT to encourage our users to use a lot b/c our incremental costs are quite low.

But of course it depends on the product.


#38

BTW, they seem to be moving away from that toward only monthly subscriptions.