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Andy Brice
Successful Software

Doug Nebeker ("Doug")

Jonathan Matthews
Creator of DeepTrawl, CloudTrawl, and LeapDoc

Nicholas Hebb
BreezeTree Software

Bob Walsh
host, Startup Success Podcast author of The Web Startup Success Guide and Micro-ISV: From Vision To Reality

Patrick McKenzie
Bingo Card Creator

SaaS Pricing Rant

I'm sure I've talked of similar things before but a question someone asked (outside of here) made me think a bit..

SaaS has many benefits for us, the seller, not so many for the buyer. Certainly for me the biggest drawback (being tied into monthly payments, effectively renting) is too big compared to the primary benefit (not having to install or configure or "get it working", it should just be there and working in my browser)

If we accept that SaaS is effectively renting, then what's the big benefit of renting?

Say for example I need to do some DIY, building a shed or deck or something, then I might hire (rent) some power tools.


Because I need/want them, for a short term, and don't want to splash out buying stuff I'll only use maybe once every 2 or 3 years, right?

Yet many (most?) SaaS offerings are quite the opposite, expecting you to sign up for 6 months or a year, sometimes with prohibitive pricing to actively discourage anyone using one month at a time.

Heck, it's almost the industry standard to give a month or three months free, to get you hooked - but let's back up a bit...

Can you imagine hiring some power tools to build a shed, first month is free, but then each tool is $40 a month, as long as you hire them for 12 months at a time?


For most things I'd rather just buy it outright then keep renting and renting and renting and renting and...

Call me old fashioned but I really am resistant to anything SaaS. I see the word 'subscription" and there's the sound of squealing rubber, then the whine of a gearbox in reverse. I'm outta there.

So I'm just wondering, has anyone tried a pricing model aimed directly at the power-tool model?

Perhaps removing the need to register an account (OK, perhaps not) but making it very much a matter of 'Deposit $10 with Paypal, use it for a week" kind of thing?

Then, a few weeks later if you need it again? Stick $10 in the virtual slot again.

Instead most offerings seem to be more like "You want this? We got this! Just register an account, pay $50 a month, every month, forever, into that account - and save $10 a month if you pay yearly!"

If I'm going to use something every week or month for a year, for year after year, why on Earth would I want to RENT it?

So anyone here tried a dip in, dip out model?


Reluctantlyregistered Send private email
Wednesday, November 13, 2013
When Adobe introduced their "cloud" model (which is actually rental pricing for downloaded software) many people hated it, but some preferred it.

One reason I saw was that for some businesses a fixed cost per month is preferable to a larger expense every few years (on the assumption that you'll pay to upgrade once in a while).

For them, the predictability and regularity of the spending outweighs the fact that you might pay more in the long term.
Richie Hindle Send private email
Wednesday, November 13, 2013
I've been living in the same rented apartment for 2+ years, and will be staying here for the foreseeable future. By your logic, I should want to just buy the place out, but I don't want to do that. I would rather keep renting it and have the freedom to move away anytime I want, plus not have to deal with the taxes, maintenance, and other overhead that comes with owning a property.

Arguably, a lot of software does provide a service. Example: Basecamp. They provide the service of hosting all your data, emailing other people on your team whenever you post a comment, and so on. It makes sense to charge for an ongoing service in those cases, than to pay a one time price as if you were buying a tool from a hardware store.

As for the yearly price being less than monthly, that makes sense, as a lot of places offer you discounts for ordering in bulk, and buying yearly / 6 months is  ordering in bulk. But most SaaS services do offer a monthly price as well.
IdeaSkeer Send private email
Wednesday, November 13, 2013
I with you and a lot of business and users are reluctant to fixed cost.
The pay-me-forever it's a problem, but I can't see other way to sell a product that has to be maintained and produce cost to use (hosting, etc).
edddy Send private email
Wednesday, November 13, 2013
Don't underestimate the value of no installation and 'it just works' - most people f'ing hate their computers (and especially all those confusing update messages they get from everything from a Java to a mouse driver every time they turn on) and just want to get something done quickly and easily as possible.

If its a one off use then yes monthly SaaS is probably no good for either party, but most are in continual use. So with that in mind- perhaps the better analogy is your power, water, broadband and tv subscriptions.

(You *could* invest up front in your own power generation and water supply, but for most thats just not worth the trouble).
Ryan Wheeler Send private email
Wednesday, November 13, 2013
If you were running a construction company, you might pay a monthly fee to rent drills if the supplier also was going to take care of maintaining them, upgrading them for new drill technology, making backup drills, installing patches to the drill's OS, making sure the drills remained complaint with ever-changing drill regulations, etc.
GregT Send private email
Wednesday, November 13, 2013
There is another problem with SAAS as well. As customers become familiar with the "rental" process, they become confused about downloadable software, assuming that a one off purchase price of $29.95 (for example) is actually a recurring monthly fee. I've had enough customers ask me if my pricing is a recurring cost to update my purchase pages with this information.
Andrew Gibson Send private email
Wednesday, November 13, 2013
OP, that's a good essay and good points.

To make sense as a gear rental, Adobe Photoshop should be $10 a day  when I really need to complicated stuff, the rest of the time I'll just use Elements or Gimp, comparable to regular non-specialist tools we all have in the garage for day to day use.

So it's not a gear rental.

It's more like a rent-to-own furniture place. You rent, and after 3 years it would have been cheaper just to buy it! So they have a deal where after 5 years you own the sofa and TV, but you paid almost twice as much for it as you would buying it. However, very poor people like this set up because they don't have any credit at all and these stores are the only places that will give them some cheap furniture and let them pay month by month.

However with SAAS, there is no point where you own it forever, and these companies certainly are not extending credit to customers who can't even qualify for a credit card. Most on line companies these days don't even accept checks or cash in fact.

So what is it really comparable to? Maybe buying food?
Scott Send private email
Wednesday, November 13, 2013
Andrew, that is SO TRUE about people assuming everything is SAAS, at least for me. 

I now assume pricing for software is monthly and when I don't see something explicitly telling me this-is-a-one-time-fee-only-no-it-is-not-monthly-yes-we-really-mean-it I look all over the web page to be sure.  Especially when the download price is comparable to competitors monthly price!

As for SaaS compared to Download.  I am slowly coming around to see some benefits of SaaS, but I really do resent the idea of having to continually pay for something.  I prefer to buy once.  Then pay a smaller fee for maintenance if I want/need.

But I was on the phone with a client recently who needed to upgrade MS Office and we discussed the Office 365 "rental" price and he said he liked that because he felt that it meant MS had a stake in him.  It strengthened the business relationship so he felt more confident they would continue to upgrade and support the product. 

I had certainly never thought of it that way.

I am OK with the Office 365 pricing though because I have to upgrade Office every 3-4 years anyhow and it's essentially the same amount of dollars leaving my pocket.
Emily Jones Send private email
Wednesday, November 13, 2013
For the record, CampaignMonitor offers both subscription and per use pricing, and for us that was one of the reasons to choose them over MailChimp, Constant Contact and other alternatives whose names I'd rather not bother to recall, exactly because our email campaigns are infrequent.
Dmitry Leskov Send private email
Wednesday, November 13, 2013
Dmitry, that's exactly the kind of thing I'm talking about.

There's another service that's great for checking on the best keywords for any given product or service. I used it for awhile for helping my clients as well as my own projects but it was just too pricey for the odd use now and then.

But when I finally cancelled the subscription I found later, when trying to use it for a client, that Paypal won't let you re-start a cancelled subscription.

I haven't used that service since. That's not a win/win. that's a lose/lose.

Reluctantlyregistered Send private email
Thursday, November 14, 2013
"So what is it really comparable to?"
Office furniture.  When you need it, it's essential, when you don't, it's worthless.  If you rent office furniture for more than six months, you might as well buy it outright.  If you don't have cash when starting out, you lease to own.  If you need to replace office furniture that still works, you barter it for something different, by trading it in on new, or exchanging it for other used furniture.  If you have to sell used office furniture for cash, it's value is a fraction of what you can get by bartering it.  In a pinch, you can improvise, but eventually you have to replace crates and cardboard boxes with furniture designed for the task.

This only applies to standalone software, where the user picks up the product and does all of the setup and operation by him/herself.  Don't confuse support with service, as a vendor you are obligated to provide products suitable for the task they were purchased to perform.  If you can't make your product work like it is supposed to, you take it back and refund the customer. 

The other point about standalone software is that if it is used infrequently for short periods of time, the user probably doesn't know how to use it.  On the other hand, software that anyone can use without training isn't worth much because there are so many different ways to perform the same simple tasks.  In the first instance, a user that rents software still has to invest in expertise, which is a cost that doesn't change according to how long the software is used.  In the second instance, the user can get an unlimited rental (buying the software outright) for almost the same price as the limited rental that will have to be renewed.
Howard Ness Send private email
Friday, November 15, 2013
Yeah that's a pretty good analogy.
Scott Send private email
Saturday, November 16, 2013
Dear AC,

This is a business model decision and a common sense issue.

The short answer is, the software vendors that are your lifeblood as a copywriter can't make a living and stay in business by selling occasional one-hit one-off monthly uses of their product for ten or twenty bucks.  For perspective - large lump sums once ruled the software market. Vendors have to annuitize their income now because of market pressure.

At one time 10+ years ago, the software market was entirely based on packages. You didn't even have a *choice* of a SaaS solution, it was buying and "loading" Quickbooks or Photoshop or Dreamweaver and getting reamed for several hundred or thousand dollars a pop. 

Today you have the flexibility of choosing a nominal SaaS solution. Yeah, there's the hassle of de-subscribing if you only use it for a  month. But still, that's on you. If you're that adamant about not overpaying then go for it.

But that's the bottom line. If it were possible to market a package of any depth by occasionally charging a base of thousands ten bucks for a few hours of use per seat, then you'd see someone doing it.

Clearly, it's not.

I'm pleased when I see a SaaS that does not have a yearly commitment. That would actually be fairer to the revenue needs of a decent software house. There are some "plans" that rope you into a permanent monthly charge with the caveat that subscriptions are one year contracts.
Profit and Loss Send private email
Sunday, November 17, 2013
+1 profit and loss.
IdeaSkeer Send private email
Sunday, November 17, 2013

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