Pay per use software pricing

These licensing models all balance flexibility with predictability and work well for large consumers of software. The goal is to license and price software in a way that makes it easy for customers to do business with you.

But on the other hand, if you are waiting, it may be too late. Your email address will not be published. Building your software packages is step one. Distributing them is step two. Microsoft makes installing directly from the Web easy using ms-appinstaller.

Some people even look at per user pricing as one of the worst pricing models you can use. So, is per user pricing really as bad as some think? Or is it a missed opportunity for growth? Read on to find out. Just like the name suggests, per user pricing is when you charge a customer based on the number of users or seats they add to their subscription.

The more users the customer adds, the more they pay. Despite the negative reputation per user pricing gets, there are plenty of companies that use it. Each has its own price per user. Salesforce offers a lot of products and pricing options, but they stick to the per user pricing model for most of them. Notice the fine print. They cap the number of users you can have in the lowest priced plan to 10 users.

Similar to Salesforce, they offer multiple plans, each with a different price per user. The interesting thing about Asana though, is they have a free option. And that brings me to the next point—the downside of per user pricing.

At first glance, per user pricing might sound really tempting. The more users your customer adds to their account, the more money you get. Yay, expansion revenue! There are some important things to keep in mind before you go with per user pricing that might make you reconsider.

That would put you over the 15 user limit for a free account. But for the customer, it can be a little frustrating.

Even if you make it known that the price increase is going to happen like Asana does , the price shock is still there. This can understandably create some friction for customers. Take our dunning management tool Recover for instance. Our value metric for it is MRR. Now imagine if we were to use per user pricing for Recover instead. They could all just share the same password. The end result was that the products designed as a result of using this new design flow reached market much faster than before, leading to a measurable benefit to the enterprise.

The CAD administrator was in a bind as the usage far exceeded expectations. In the end, a new arrangement was reached that resulted in a lower price per unit time than was originally developed, but, an overall increase in spend to the CAD software design supplier. So, before you think of pay-per-use as just another license model and a way to throttle revenue by measuring usage differently, think of new ways to generate much more revenue by enabling new or faster ways for customers to achieve real business benefits.

If you can help them achieve those business objectives more effectively, then your value and revenue should increase accordingly. Any other ways you can think of that more ubiquitous software access might result in higher market-share capture or customer retention?

Can you think of other lessons learned from the case study? Learn more about how Revenera supports the full software licensing spectrum , including usage-based, trust but verify models that enable you to quickly alter software monetization models across products and tailor models for various market segments and geographies. Your email address will not be published. Building your software packages is step one. Distributing them is step two. Another added benefit of subscriptions is its ability to support customer retention.

Also, because many subscription-based pricing models already have dunning management incorporate — the process of paying for services is convenient. We all know that knee-jerk reaction that happens when the end-of-month invoice arrives higher than expected. Pay-per-use models can quickly spiral out of control— if someone ends up using the service more frequently than anticipated, they could be on the receiving end of quite a shock when the invoice arrives at the end of the month.

Having a straight-forward subscription fee can help preserve your relationship with clients by setting clear expectations for monthly, quarterly, or yearly spend and helping to reduce these unexpected surprises. When it comes to pricing your SaaS, having clear buyer personas and a deep understanding of how your target customers use your software is critical for success.

Many SaaS companies offer both PPU and subscription services in their pricing strategy, though as a standard, you should work toward converting PPU customers into subscribers in order to maximize your revenue potential. Interested in learning more about how a subscription management system can help grow your business revenue? Click here to download our ebook: 8 Essential Subscription Management Features.