SaaS subscription models: performance-based VS. one-time pricing.
We know, finding the right digital solution for your leisure business’ needs is a big task to tackle. Where to start? There’s so many features and technicalities to take into account. And even once you’ve gone through that phase and found the software that has the perfect fit for your venue, your buying committee - or you, acting as a one-man committee - will have to make an important decision over one critical factor specifically: the pricing model.
But imagine this: You are looking to commit to renting a property for a recurring trip with the aim to get some wellness. Would you ever just look at the price of a property and decide based on its price alone? No. You look at all it has to offer. Does it have a nice private garden or maybe even a jacuzzi and daily room-cleaning, or does it have 2 windows, no air conditioning, and only a pre-and post-cleaning arrangement? Clearly, we never just look at the price because we tend to make conclusions on the wrong merits if we would. We neatly assess what is delivered to us, and based on our goals; we weigh the prices against whether we believe it is worth it or not. The same way you need to evaluate the pricing model when choosing your software service provider because pricing is not ‘just pricing’ - it’s so much more than that, and if you stick around, you’ll find out exactly what we mean.
The most common pricing models for current providers in our industry include
- the subscription model with a fixed price commitment for a pre-defined time period,
- performance-based pricing including variable fees (also called commissions)
- and one-off pricing that includes a fixed fee often for usage permission or licensing of software.
On the first note, one might think: “One-off fees and subscription fees are nice because then I can anticipate my costs. If I would pay commission continuously, they are probably more expensive in the long-term.” Our brains tend to jump to this conclusion automatically, but I suggest you think twice before making such an assumption: We will show you why hard-numbers are not what you should be focusing on when considering your SaaS provider and how you can be better-off with performance-based pricing models.
- Mutually beneficial focus
A mutually motivated partner in your growth journey will lead to the continuous improvement of the service you use because they will also want to push your sales and performance. It is in the software provider’s best interest to keep on rolling out features that serve you and having a close relationship that looks after your venue’s prosperity. They grow when you grow, and your challenges become their challenges: You sail together in one boat with the eye on the same horizon. What could be better than that?
With one-off payments, you have no guarantee of continuous involvement because, in the end, they have their money - what you do with the tools is up to you. Contrarily, a software service provider who charges you based on your performance is not only fairer (the more you earn thanks to their service, the larger margin you have to pay for its costs), but also entails an inherent mutual interest in your venue’s improved performance.
- Increased speed in adjustment to new circumstances
Closely connected to the previously mentioned advantage, in a performance-based model, you also have the guarantee that you are not alone with the efforts needed to adapt to changing circumstances. In fact, many costs that would come on top if you had a one-off purchase and need additional services due to an external influence will be covered within the commission.
- Guaranteed transparency
As mentioned before, a performance-based software service provider also benefits from you out-performing yourself. This means they certainly have to prove and ensure that their solution is working. Demonstrating how this performance is achieved and calculated makes such solutions and their support extraordinarily transparent.
And not to forget, one-time fees or licensing fees are often traps as they are...
- Static in a dynamic environment
Often, when purchasing the rights to use the software via one-off payment, you buy-in to the software state at that specific moment. This means your purchase does not always include or guarantee all future features or continuous development in your favour.
- Wrongly estimating value
You need to decide how much value you place in the service you receive without even experiencing it before - often, this does not reflect the true value.
Take movie productions, for instance: when producing a movie, the producers can’t know how successful it will be - they spent millions of Euros investing without knowing if they will break even or, if they are really lucky, make some profit. Don’t take that risk - don’t be the traditional movie producer who doesn’t know if they are jumping into an empty pool. Be more like the maker of House of Cards, who used continuous contextual data and insights to predict and achieve its potential!
But don’t worry! One-off purchases can certainly be good for other purposes:
- Upgrades & Add-ons to your existing relationship!
One-time services that can be added to your subscription when you need them. Examples could be an additional promotion or marketing campaign. At Convious, for example, we have offered to our partners Black Friday and Christmas campaigns which are not included within their usual partnership agreement plans- this way, they can make use of our services for a small fee only when they need to, but without committing to them at times when they do not want them.
So what is the moral of this story?
For specialised services that you might need for a short time period or only at a certain moment in time, one-off payments can be a great way to go, in order to ensure you do not commit beyond your capabilities. However, when looking for software solutions to utilise for long-term growth, it always makes sense to sign into a partnership where all actors have the same goals down the road and one where everyone involved will have its best interest at heart, collaborating as true partners in achieving a common objective.
Are you interested in finding out how to make your SaaS solution Success as a Service with the right pricing model?
Book a chat with one of our experts and get the information you are looking for!