you’ve decided to
So,


make a living
   with
        SaaS
  Jeff Lawson
jeff@twilio.com
    @jeffiel
simple, universal pricing formula




   value created
- some discount
    = your price
Consumer
           OR              B




                Business
Consumers
Are
Not
Rational
Businesses
are
Pretty
Rational
Every decision driven
two factors...
Reduce
            Costs
Measurable Value
       OR
Increase
Revenue
No measurable value?
                     Stick ad
                             s                           on it!



    ...
so
business customers
                          Neat!
   have a framework for



 measurable
   value
Be Proud
and put a price on
 the value you’re
   generating
Start




           No         Does my service    Yes
                      generate value?




Back to the drawing
     ...
Cost Based Pricing
Profit
Margin =
         Price
Profit = Price - Cost

Price = Cost / (1-m )
Target Margin:   50% (0.5)
        Costs:   $10

        Price = $10 / (1-0.5)
             = $20
Price = Cost / (1-m )
What if your unit costs are basically zero?




          Web Server   Web Server


                   MySQL



         $...
Value Based Pricing
Are they...
         ...saving money
by replacing a more expensive solution?  
              HOW MUCH?
         ...saving ...
Competitive Pricing

Red Herring, see previous slide.
Cost Based         Value Based
                                    sanity
             $$$
                               ...
Is
It?
Customer Feedback Loops
Split Testing
$1,000 Mo + + 0.001 / Msg
  $0 / / Mo 0.10 / Msg
Talk to potential
customers,
learn the value prop
during private beta
(which can be free)
Raise prices if
               merited, but
                don’t fool
                people :)



Start conservative,
dr...
Is
It?
If you’re unsure, just
 make more pricing
       options.
Maybe I need
mustard instead
Figure out value generated

 Test with Potential Customers

       Free Private Beta

   Go Public with a Price Tag

Adjus...
Jeff Lawson
jeff@twilio.com
    @jeffiel
Making Money with Saas @ Seattle Startup Day
Making Money with Saas @ Seattle Startup Day
Making Money with Saas @ Seattle Startup Day
Making Money with Saas @ Seattle Startup Day
Making Money with Saas @ Seattle Startup Day
Making Money with Saas @ Seattle Startup Day
Upcoming SlideShare
Loading in...5
×

Making Money with Saas @ Seattle Startup Day

11,125
-1

Published on

Jeff Lawson speaks about how to figure out pricing for your SaaS product at Seattle 2.0 Startup Day 2010

Published in: Technology

Making Money with Saas @ Seattle Startup Day

  1. you’ve decided to So, make a living with SaaS Jeff Lawson jeff@twilio.com @jeffiel
  2. simple, universal pricing formula value created - some discount = your price
  3. Consumer OR B Business
  4. Consumers Are Not Rational
  5. Businesses are Pretty Rational Every decision driven two factors...
  6. Reduce Costs Measurable Value OR Increase Revenue
  7. No measurable value? Stick ad s on it! X Whiten your teeth with Colgate Dental Pro learn more advertisement
  8. so business customers Neat! have a framework for measurable value
  9. Be Proud and put a price on the value you’re generating
  10. Start No Does my service Yes generate value? Back to the drawing How Much Value? board
  11. Cost Based Pricing
  12. Profit Margin = Price Profit = Price - Cost Price = Cost / (1-m )
  13. Target Margin: 50% (0.5) Costs: $10 Price = $10 / (1-0.5) = $20 Price = Cost / (1-m )
  14. What if your unit costs are basically zero? Web Server Web Server MySQL $200 / mo
  15. Value Based Pricing
  16. Are they... ...saving money by replacing a more expensive solution?   HOW MUCH? ...saving money on efficiency because of you?   HOW MUCH? ...generating more revenue because of you? HOW MUCH?
  17. Competitive Pricing Red Herring, see previous slide.
  18. Cost Based Value Based sanity $$$ check: do they Competition converge?
  19. Is It?
  20. Customer Feedback Loops
  21. Split Testing
  22. $1,000 Mo + + 0.001 / Msg $0 / / Mo 0.10 / Msg
  23. Talk to potential customers, learn the value prop during private beta (which can be free)
  24. Raise prices if merited, but don’t fool people :) Start conservative, drop prices if needed
  25. Is It?
  26. If you’re unsure, just make more pricing options.
  27. Maybe I need mustard instead
  28. Figure out value generated Test with Potential Customers Free Private Beta Go Public with a Price Tag Adjust as necessary, ideally down.
  29. Jeff Lawson jeff@twilio.com @jeffiel
  1. A particular slide catching your eye?

    Clipping is a handy way to collect important slides you want to go back to later.

×