SaaS companies are abandoning flat-rate pricing for dynamic models like airlines use, billing by features, volume, or API calls instead. Pricing agility directly drives revenue growth, and companies that don't iterate fast enough risk losing money and market share to competitors who do.
Chapters
Why is pricing agility so important? I personally believe that pricing agility equates directly to revenue agility, and agility equates directly to growth, revenue growth. It used to be that pricing in B2B software was far more boring and far more static than, let's say, something like airfare, where pricing is incredibly dynamic and always has been, or telecoms, where pricing can be incredibly dynamic and usage-based and consumption-based. But for a long time, SaaS was just seats, right? Flat rate pricing and seat-based pricing. And that is undergoing a massive inflection right now. Like the number of companies that are still doing flat rate or seat-based pricing has declined precipitously in the last 12 months. And it's being replaced by companies who are adopting hybrid pricing models, which means they're billing customers off of different metrics. Maybe it's, or different sort of concepts. It could be feature gates, it could be volume tiers, it could be, API requests, it could be credits burned down. There's so much hybridity that the market is now adopting around pricing. And because there's hybridity and because there are real underlying inference costs and much less predictably high gross margins, companies must become more agile. They can no longer accept, oh, it's been 2 years, maybe we should think about pricing again. If that's the mindset that they are still in, they will A, leave a lot of money on the table, and they will B, sacrifice the strength of any product market they've achieved to faster-moving competitors.
