How SaaS Companies Price Their Products: Insights from an Industry Study

Abstract

Pricing is one of the business and product strategy elements to achieve both financial performance and competitive advantage. The transition towards the Software-as-a-Service model has unlocked new opportunities for pricing software products. Conflicting recommendations from existing studies and industry experts make it challenging for SaaS providers to design and implement the pricing of their services. SaaS providers have come a long way in adapting their pricing practices to the new paradigm that assumes the offering of service instead of selling software as a product. This paper explores how SaaS providers package and price their products by reviewing the pricing information of 220 SaaS providers. The study reveals that SaaS companies are relatively heterogeneous in the way they price their products and the pricing practices of SaaS providers within the same size and product type could differ sufficiently.

Do customer centricity and innovativeness mediate the relationship between total quality management and the corporate success of SaaS companies?

“…Additionally, some recent studies indicated that a greater understanding of customers is a foundation for building innovative capabilities to meet customer needs precisely (Kim et al, 2016;Osakwe, 2020). Since this study focuses on SaaS firms with innovative business philosophies, they are expected to emphasize innovativeness (Saltan and Smolander, 2020).…”

A Process Model of Product Strategy Development: A Case of a B2B SaaS Product

“…This shift from customer-specific software to standard software products, offered using the cloud-based service model, calls for increased attention to software product management (SPM) [17]. However, quite often, the way processes and practices in companies should be reconsidered is unclear, and companies struggle to cope with these challenges and cannot make the transition coherent and systematic [13]. Software process improvement is defined as "understanding existing processes and changing these processes to increase product quality and/or reduce costs and development time" [15].…”

“…Nowadays, productization is closely related to the cloud computing paradigm. Encouraged by the wide range of benefits, companies try to productize their solutions into SaaS solutions -one of the forms of cloud computing which is defined as "providing a standard software solution to customers as a service over the Internet" [4,13,18]. The fast pace of technological innovation forces product managers to make long-lasting and financially impactful decisions about their products in the face of relative uncertainty.…”