Changing SaaS pricing model from 'per month' to 'technology fee' paid by end customer approach


4

We have a niche Saas product that is essentially a very specific ecommerce portal and management system to allow businesses to sell memberships to their customers. Currently, pricing is based on the number of memberships that the business manages on their account.. ie $30/month for 50 members or less and up from there.

We are considering allowing businesses to pass on the cost of our service directly to their customers, so a 'technology fee' of say 2% would be added to each invoice that goes through the system and then we would collect that fee at the end of every month. Essentially, the marketing angle would be that our service is FREE to businesses and the end customer pays the fee. This is the model for ticketing agencies like TicketMaster or ShowClix: you are buying $40 concert tickets + $7.50 in fees, so you really pay $47.50 for your tickets.

I think we would still allow the monthly fee that is charged directly to our customers, but allow the 'technology fee' percentage as an option. Most likely, the 'technology fee' option would end up bringing more revenue back to us because we would engineer it to charge about double if our businesses wanted to do it this way.

I don't love this option because it feels like a bait and switch to our customer's customer. However, I can see it being a really smart marketing move because the perception of the cost is different. I can see our businesses appreciating this model even if it means they end up spending more in the long run -- they could perceive of the service as 'free'. This would be the business' choice for how they want to pay the fee, so if they choose this 'technology fee' model they would be comfortable with passing on the costs like that.

I am also leery of making the pricing options too complex because it is just one more aspect of the service for prospective customers to understand. The monthly plan we have right now is nice and simple.

Anyway.. I would love to hear thoughts!?

Pricing Saas Fees

asked Aug 31 '12 at 00:27
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Simon
165 points

2 Answers


2

I respectfully disagree with Sachin for this specific business.

This business isn't about buying food, it's about supporting farmers by buying their food. Supporting slow-food, enjoying knowing where your food comes from, financially supporting local growers because we want them to exist and subsist. We know the farmers aren't getting rich, even though pound-for-pound the food is far more expensive and the quality is more varied (though when it's good, it's far better).

Therefore, saying to the customer "Hey, how about $2 to cover the credit card fees for the farmer" I think would work very well. No one who is already "overpaying" for food wants to dick over a farmer for $2.

In fact, if this were a food stand -- and those same customers do go to farmer's markets -- most of them are cash-only and people are happy to do it that way for the obvious reasons.

Therefore, I say do it. But don't make it complicated. Just show on the invoice how the customer is subsidizing the credit card fees and be done with it.

answered Aug 31 '12 at 12:04
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Jason
16,231 points
  • Thanks for the thoughts Jason! I have think about whether it is worth making our pricing model more complex to allow passing on the price of the service to their customers. I can see how this is an attractive model. – Simon 7 years ago

1

If the reseller businesses are white label, I wouldn't recommend that. Its better to talk businesses internally and charge money from them, not from their customers. Customers would be happy to see only one type of charge on their invoices.

One more thing: Unless shopping cart is yours and you don't allow offline/off-platform payments, controlling such invoicing isn't possible. And, if you only allow your own platform for payments, you can charge reseller businesses internally based on percentage.

answered Aug 31 '12 at 00:44
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Sachin Shekhar
260 points
  • Give me more details! How is it better to charge directly to the business? I understand that it feels better to do it that way, but why is it really better? – Simon 7 years ago
  • @Simon Because it can reduce sales of businesses which in turn will reduce yours. Customer's mind: I am already paying for a tech product/service, now why this tech fee? – Sachin Shekhar 7 years ago
  • I think that is a wise comment.. but on the other side.. the product that my businesses sell is highly valued by the end customer like a concert ticket. If the only way I am going to see Styx is to pay the $7.50 fee, I am still going to pay the fee. – Simon 7 years ago
  • @Simon If you've monopoly over your market, do whatever you want. But, remember your first competitor would win large amount of customers. – Sachin Shekhar 7 years ago

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Pricing Saas Fees