Does your SaaS application fit into the per active user pricing model?

One of the best things of SaaS applications is that software vendors can track and measure how customers use their application. As a result, ISVs can define pricing models that are related to the actual usage of services, such as the usage based or per active user pricing models.

Successful services like Slack are making the Active User based pricing model popular, but does your SaaS application fit into this pricing model?

What is the per active user pricing model?

An increasing number of SaaS services structure their prices according to the number of user accounts who log in to their application at least once during the billing period.

It is different from the user based pricing model because customers pay only for the number of users who actually use the application during a given period of time and not for the number of users associated to their account.

This model fits well if you are targeting large companies and you are trying to persuade them to commit to an annual subscription. Where smaller organizations might take the risk of paying the subscription for an application not knowing whether its employees will use it or not, large organizations usually are not willing to pay a subscription for hundreds of employees that might not even use the software once.

Moreover, this model helps to get around the two main risks of the user-based pricing model: account sharing and churn. 

Pros and cons of the per active user model

Pros

Only active users are billed

Customers are billed only when employees actually use the service. In this way, companies feel like they are not wasting money and for vendors it is easier to persuade them to commit for longer billing periods.

Encourages the adoption

Since company pay only for active users, they are not scared to adopt the solution for the entire company: if employees do not use the service, they will not have to pay for empty seats.

All you can use

Customers do not have limitations in terms of features, requests or accounts. In this way, they are free to use the service: the more they use it, the more the risk of churn lowers.

Cons

Hard to predict revenues

It is hard for software vendors to predict revenues and required resources, because they should forecast the percentage of users who are active in a given month.

Appealing for large companies

Even if this model is appealing for large organizations it may not be appealing for SMEs with small teams. Vendors should come up with other incentives if they want to target smaller businesses.

How you can implement a per active user pricing model in Cloudesire

The Cloudesire marketplace platform allows software vendors to easily implement different pricing models, including the per active user pricing model.

This is how you can implement the per active user pricing model:

Step 1: create the "active users" pay-per-use metric from the product configuration page

Step 2: define the price for the "active users" metric for each product plan

Step 3: save & publish on the marketplace

For more information about the "Metrics" feature for syndicated apps take a look at this video. For more information about the "Metrics" feature for deployed apps, take a look at this video. To learn how to add prices to your custom metrics, take a look at this video.

 

 

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