Pros and cons of the feature based pricing model for SaaS applications

Users know what they want. When looking for a new SaaS application your potential customers typically compare different services and base their selection on two factors: price and features.

So, is the feature based pricing model always the best strategy? Well, it depends...

The feature based pricing model: from physical to digital

If you think about it, the feature based pricing model is not innovative.

You go and buy a computer: if you want the basic model you have one price, if you want a pro model you have another, higher price. The same goes for cars, household appliances, phones and even package holidays: the more you pay, the more you get.

It is not surprising that this model is so popular in the SaaS business: customers are already used to it, it is very clear and software vendors can easily create different pricing plans.

In the feature based pricing model, vendors define different pricing tiers according to the features available in each tier and customers are charged for the features they use. Plain and simple.

However, all that glitters is not gold and this model is not right for any business. As always, vendors should never choose a pricing model just because it is common: they should choose it because it is the right one for their applications.

Pros and cons of the feature-based pricing model

Pros

Encourage upgrades

Customers pay only for the features they are interested in, but they are encouraged to upgrade to get more features. Typically, the more they use the product, the more they are interested in new, advanced features.

Meet demands and expectations

Customers know exactly what they are paying for, so they will not expect to get more features in their plan.

Allow resources segmentations

If your product requires a great amount of resources to deliver certain features you do not want to unlock them to all your customers. In this way, customers that want to use these features will upgrade and pay more.

Cons

Balance

As a vendor, you need to create the right balance: you need to understand which features need to be in every tier and which features can be only in the top-plans. Do not forget that the basic plan is usually the access gate to your application: if that is not appealing, users will not even subscribe to the service.

Overbuilding

Vendors may be tempted to develop an infinite amount of features to justify the higher price of a plan. In the end, they may develop features that do not solve any problem and that are just useless for their customers.

Need for features

Developing new features is expensive and requires time. Moreover, sometimes your service simply does not need advanced features and customers might feel teased.

How you can implement a feature based pricing model in Cloudesire

The Cloudesire marketplace platform allows software vendors to easily implement different pricing models, including the feature based pricing model.

This is how you can implement the feature based pricing model on the Cloudesire marketplace:

Step 1: create your product plans from the configuration page

Step 2: set up the features for each plan

Step 3: save & publish on the marketplace

For more information about the "Plans" section take a look at this video.

 

 

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