PRODUCTHEAD: Traditional, SaaS, usage and surge pricing models

pyramid product #

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tl;dr

Match your product’s units to how your customer measures value

Changing your pricing model regularly needn’t be a bad thing — it just has to be done carefully

With usage-based pricing, help your customers to anticipate their likely costs

Care has to be taken to keep dynamic / surge pricing transparent

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every PRODUCTHEAD edition is online for you to refer back to

hello

Unless you’ve been living in a cave, you may have noticed that Apple has launched a augmented reality headset. And it did so to groans and laughs from the audience when its price of $3,499 was announced. There’s a word for that: spendy. At least we didn’t have live-streaming skydivers this time.

The writers and speakers I’ve pulled together for you this week are going to take you through different types of pricing. These will range from traditional software models with Rich Mironov, through software as a service with Janna Bastow, through to usage-based and dynamic pricing models with Kyle Poyar and Vishal Kapoor.

Some of these you’ll be familiar with either first-hand as a product manager or as a customer yourself. If you pay for your electricity by the amount you’ve used each month, then you’ll understand usage based pricing. And If you’ve ever been a customer of Uber after closing time on a Saturday night, you’ll understand demand or surge pricing.

Whatever type of pricing model you decide on for your product or service, the thing is that your customer (or your sales team) shouldn’t have to think too hard about the way you’re pricing it. Pricing should be uninteresting to them. That way the conversation can focus more on how the product brings value to the customer.

The way you price your product should seem fair, intuitive, and sufficiently simple to your customers. The last thing you want is for them to believe they’ve been short-changed.

Enjoy the talks and articles and I’ll be back with another topic for you next week.

Speak to you soon,

Jock

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what to think about this week

Software pricing demystified

You can spend as much as you want on developing a product, but no one cares how much you spend – they only care about it’s value. You can’t sell a product until it’s built and usable and the developers need paid to create the product, so how do software business make money if they are out of pocket before they even start? In this talk Rich gives you the key points to remember throughout your journey from startup to success.

Nobody cares how much it cost you to build

[Rich Mironov / Business of Software]

How to price a product – from one SaaS PM to another

They say money alone won’t make you happy, but more customers definitely will. Thing is, building a customer base big enough to sustain booming product-led growth requires getting a whole heap of sensitive cost shenanigans dead right.

That is to say: alongside having a great product and a proactive roadmap that can feed its development, you’ll also need to think pretty carefully about your pricing – both at launch and on a regular basis.

How do you set a product price that works?

[Janna Bastow / ProdPad]

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Usage-based pricing 2.0

While many of the most successful public and private SaaS companies were already usage-based, there wasn’t a clear playbook on the complexities of scaling a usage-based business. Yet pivoting from traditional subscriptions to usage-based can be just as big of a shift as making the leap from on-prem to SaaS.

Here’s the thing: I’ve learned a bunch more about usage-based pricing that I *wish* I had put in the playbook. Now I’m excited to share it with you.

If customers don’t use your product, you won’t get paid

[Kyle Poyar / OpenView Partners]

Getting started with dynamic product pricing

How can supply and demand affect the pricing of a product? In this week’s podcast, we had a conversation with Vishal Kapoor, Senior Director of Product at Shipt. He delved into the intricacies of dynamic product pricing strategies, the appropriate timing for implementing this approach, and shared valuable insights gained from his experience.

How to take pricing based on supply and demand to its logical extreme

[Vishal Kapoor / The Product Experience]

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I’m currently applying for loads of product manager jobs. I’ve received an offer from a sales-led company where the Product team reports in to Sales. Should I take the job?

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PRODUCTHEAD is a newsletter for product people of all varieties, and is lovingly crafted from a b0rken USB C connector.