For SaaS pricing, what are strategies to segment pricing into free, medium business and enterprise? (Ex: Free tiers, fair use, creative commons)

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JASON LEMKIN

A few thoughts:

First, force your pricing to increase per edition, per # of users — not decrease.  True solutions get more expensive as they get more “enterprise” because they provide more value.  Tools get cheaper in bulk discounts.  You want to be a solution.  Challenge yourself and your company to earn higher pricing for an enterprise edition.

Second, focus your time on your organic ratio of customer sizes.  If your customer breakdown is say 20/60/20 by revenue — 20% freemium, 60% mid-market, 20% BigCos — then focus 60% of your time on mid-market, and split some extra time on the other two.  Too many start-ups focus their time on the segments they wish they were in, not the ones they are already naturally succeeding in.

Third, experiment (of course) — but don’t try to be something you aren’t. Most freemium tools need years to become true enterprise solutions (e.g., Box, Dropbox, etc.).  Most true enterprise solutions are too complex and require too much business process change to make it as freemium solutions too.  If you really can do it all — Free, Small, Medium and Large — with the same core product, do it of course.  In the time ratios described above.  But don’t force it if after even $500k, and certainly $1m, in ARR, a segment just has no real customers.  Focus on what’s working.

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Published on December 31, 2015
  • I`m always a bit hesitant when it comes to increase by #users. I think each user can be a great testimonial / advocate. So if there is a choice I`d always first look for alternative features / settings when it comes to scaling towards an enterprise edition.

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