How should I price our SaaS for resellers?


3

Our product is a platform for organizing health related games. Our customers are corporate wellness coordinators, and the games are played in the context of their company. One of our strategies is to recruit independent wellness consultants as resellers of the product. We're getting some interest, but I have no idea really on how to price it for them.

80/20 split? 50/50? Any guidance on this issue? I'm open to all opinions and perspectives, but if you have experience with this, please indicate that.

Pricing Affiliate Resellers

asked May 8 '11 at 22:08
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Ryan B
86 points

5 Answers


4

We have these models for the health and fitness plus the Newsprint publishing industries.

50/50 is high, especially if the reseller also makes their money from your system. They are kind of getting a double benefit.

Things to consider:

  • Early adoption : Worth a lot to establish yourself, and maybe the first X who come on as resellers get a better deal.
  • Volume resold : The more thats in it for them the more they will resell it. You have to work out what the scale points are 20 resellers selling 50 each or 1000 resellers selling 100 each. If you can trend towards the second one then your in better shape but you may have natural limits you can achieve in 2 years to balance it back out.
  • What is the real value to the reseller : If the practicioners are going to use it to make their money anyway. If it ensures they continue with their clients and drives their clients to utilise them more then the resale amount isn't as important as the value you give them. Thus a lower resale value is fine if you can sell it as worthwhile to them.
  • Your costs of managing the softwasre and the resellers : They will take effort on their own along with the product. What roughly is your cost per 10 resellers? and what are 10 likely to bring in?
  • Can you survive with the 50/50? If you can then a higher adoption through greater interest might be worth it. It will also help keep out the competition as a barrier to entry.
  • Can you offer them a scaling factor? If they sign on heaps of clients are you more likely to give them more of a cut (gold, silver, bronze resellers). The Micorsoft Partner program does this fairly well (after many years of doing it less well). Is the added complexity of this actually going to give resellers more incentive or not?

Variables for the big spreadsheet you need to build:

  • Income variables
    • Number of resellers (low motivation, high motivation)
    • Number of clients per reseller (low motivation, high motivation)
    • Charge per unit. Are there scale and volume discounts, free and premiums to worry about?
  • Cost of your staff/rent etc
    • Cost of supporting X client
    • Cost of supporting Y Resellers.
    • Physical cost per unit (client per month I'm assuming).
Doing this won't give you the actual answer. BUT the process of going though the exercise yourself will crystalise it in your head far better ... so you can make an informed decision.

Good luck.

answered May 9 '11 at 12:30
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Robin Vessey
8,394 points
  • Sweet answer Rob! Good job laying this all out. I copied this. I wish I could give you more than one "up vote" – Joseph Barisonzi 9 years ago
  • Nice answer! Actually, a volume model is what we're considering now. 80/20 for X units, 60/40 for Y units, 50/50 for Z units. Part of the big problem here is that we're so early we don't have a sense of what our costs will be like. This helps guide my thinking though. – Ryan B 9 years ago

3

Well, that's a good question. We had a same question and to be honest we still don't know the right answer. If you go 50/50 you can get lot of resellers but it will reduce your income big time. (or not, depending on the product and customer costs). From other hand it is very good if you can go with 50/50 since that can bring lot of customers and resellers to spread a word out there.

We are now going on 80/20 and we will see how that will end up. Hope someone can help us all on this matter.

answered May 8 '11 at 22:22
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Mojsilo
594 points

1

Are you still handling the sales directly and sending them a commission, or do they bill the customer and then pay you for the service? In the later case you could actually offload some admin costs to them, and another alternative then might be to simply set a "wholesale price" you give them (this can be based on volume, status, etc) and let them set their own margin, with some recommendations and marketing materials from you. If they have a really strong relationship with their customers and they can double their margins, good for them!

This doesn't sidestep the question entirely since you still need to figure out what prices customers will pay and how you get enough of that, but it might be a way to give them more control over their business.

If you really don't know enough to make a good decision at this stage it might be worth trying a couple of different models to see how they work out, and watching the initial resellers a bit before bringing on more so you can adjust the terms.

answered May 29 '11 at 01:19
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Richardg
474 points

1

Price it so you make enough of a profit that going through the trouble of dealing with the reseller is worthwhile.

Only you know the costs per customer and all the information that you need to make that decision. =)

answered May 9 '11 at 04:52
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Kort Pleco
891 points

0

Another option is to hire sales people directly either for salary or for base plus commission. If you can make this work you will have people working for you who will be loyal to you alone and not to other products they are selling.

With all due respect to the many great resellers out there, some resellers don't care what they sell as long as they are selling enough stuff to make the revenue they need to survive. That's why some resellers add lots of vendors to their line card - it increases their chance of selling stuff. Even though it may not be your stuff.

answered May 9 '11 at 10:34
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Dave Feyereisen
963 points
  • We are building an internal sales department alongside our reseller program. We're early stage, so I'm doing the sales for now. Good suggestion though. – Ryan B 9 years ago

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