Article · 16 min read

Value Metrics and Pricing Design for SaaS Companies

Dr. Ajay Sethi · SeedToScale (Accel India) Free Intermediate India

Before you meter anything you have to pick what to meter. Sethi's frequency versus importance grid, worked through with Clevertap, is the clearest method we have seen for finding the unit that grows with the customer's value rather than with your cost.

  • A value metric is the quantitative anchor that best correlates with the outcome customers actually care about.
  • Look for the highest frequency activity tied to an important customer goal, with a consistent usage pattern.
  • Do not price the highest frequency activity high, consider subsidising it, or a competitor undercuts you there.
  • The monetization sweet spot is medium frequency, medium importance activities, and good design shows up as 20 percent plus expansion from existing customers.
Open on seedtoscale.com ↗

It answers 3 questions

  1. I have no idea what to charge. How do I pick a first price?
  2. What is a value metric and why does everyone say it matters more than the number?
  3. How does usage-based pricing actually work in practice, and should I move to it?

Read with it

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  2. The bounding method for a first price (cost to serve as the floor, cost of a heavy power user as the ceiling) plus the advice... Andreessen Horowitz Essay · long read The Price Is Right: And for Early-Stage SaaS Companies, It Needs to Be Steven Sinofsky
  3. Maps tiers to how adoption actually spreads (casual user, professional, team, organisation) rather than to a feature matrix,... Andreessen Horowitz Article · long read Bottom Up Pricing & Packaging: Let the User Journey Be Your Guide Jennifer Li and Martin Casado
  4. Seven hybrid pricing patterns with named companies (GitHub, Shopify, Intercom, Zapier), plus Poyar's point that the enemy is... Growth Unhinged Newsletter · 12 min read The state of usage-based pricing in SaaS Kyle Poyar
  5. The implementation half. Poyar's framing that moving from subscriptions to usage is as big a shift as moving from on-prem to... Growth Unhinged Newsletter · 15 min read Usage-based pricing 2.0 Kyle Poyar
  6. Video · 18 min How To Price For B2B | Startup School Tom Blomfield
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