Andras Marcell Marko

Aug 29, 2018

posted by Andras Marcell Marko

About the SaaS Revenue-based Pricing Model

About the SaaS Revenue-based pricing model

Prepaid Pricing Plans are too Risky

Imagine being a fashion store owner somewhere in America in the roaring ‘20-s! You are about to hire sales representatives who will walk around the city and lure customers into your store. Back those times it was almost impossible to monitor the sales staff performance unless you sent a supervisor to the heels of each sales rep.

You are over the first interview with the 3 candidates, and when you come to negotiate about the compensation…

The first candidate says this:
– Package 1, free: I will walk up and down in the city and I may send you customers.
– Package 2, 30 USD per month: Package 1 + I will wear your product and I will be very polite to the people, and you may receive more customers!
– Package 3, 60 USD per month: Package 2 + I will carry your huge ad board.’

First billboard sales person

Source: OOhtoday

The second candidate: ‘I will send 100 visitors to your store per week. You give me 150 USD after every 100 visitors.’

The third candidate: ‘I will send visitors to your store, and you pay me 1 USD after every 10 USD my visitors spend in your store.’

Which Candidate would you Choose and Why?

Now imagine you have to make a decision between 2 apps for your e-commerce store! Both of them cost 20 USD. You can choose only one of them.
The first plugin has a prepaid plan. Its value proposition was ‘expanded time spent on the retargeted products’ or ‘more subscribers’ – and, on the long run, higher conversion. Apps save time for us, educate our customers, polish their user experience, and increase our conversion of course but in the end, we are prone to insist on one measurable purpose: has the app driven more sales to our store and has it created massive profit or not?

Imagine that the first app you bought fulfilled your primary expectations! The users spent more time on the ads indeed and you have forked in more mail list subscribers. But they did not fulfill your real expectation: they haven’t brought the sales figures you expected.

The other app doesn’t promise more than 10-15 % sales growth, and you pay at the end of the month. It makes sense to get some thinking done about WHY we buy an app. For the direct impact or for the indirect sales growth?

Too Compound, almost Incomprehensible Pricing Plans

You can say very rarely, seeing the pricing page: ‘what a favorable price, I’m longing for paying for this product and waiting months until the revenue uphill appears.’ The app must be super famous to attract customers this way…

Many apps say it’s free, but some additional costs appear: ‘30 USD for 1000 more visitors, 70 USD fixed price monthly if you want to upgrade… ‘
Who guarantees the quality of visitors?
There were several scandals about app producers hiring hackers who drove robots or low-paid dummies to visit pages and reaping e-commerce stores off in turn for these fake visits.

And the fixed prices: 19 / 49 / 89 USD per month? The app producer wants me to pay 89 USD. But what can I get if I have only 60 in my planned budget?

Plan based pricing model

Source: Pricing News

Critics on Another Pricing Schemes

1. Free apps

Free apps cost nothing but our time: when we have to reject the unexpected, unwanted offers or when we have to reject when they solicit our opinion views on their products and they want to convince us with the premium plan. The sneakily added products also want to sell themselves within the app.

2. Fixed price apps

These app producers charge you the same price regardless how much revenue they drive to you. Why should I pay the same 100 USD for my + 0,01 % sales growth when others having +10 % growth, also pay the same?

3. Featured or Compiled plans

The more you pay, the broader scope of features become available for you. But many times, not the necessary ones. You can be lucky if you can utilize all the features in the beginner package. But the features are usually batched together the way that there is always a missing patch for the considerable functioning. And the measurable conversion stays a distant dream! You can’t do else, you buy more and more advanced packages to gain the maximum performance out of the app.
If you have a look to these kinds of apps, almost none of them guarantees the desired ‘measurable conversions’

4. Visitor number-based and order-based apps

These kinds of apps would like you to pay the same fee after non-buying and passive visitors as well. Order-based pricing is more righteous however it still leaves a huge hiatus around the order value. But be precautious with order-based pricing schemes because they may bill the same after each completed order. They will make you pay the same price after a sold toothpick-case as a sold luxury fridge.

5. Performance-based plans

The fairest category appears to be the performance-based pricing structure. However, there are apps bearing the facade of being value-based but they don’t actually deliver the promise. For example, they measure performance when the visitor clicks on the popup but nothing else happens. We do not consider these quasi-bounce-offs to be a performance if it doesn’t end up in sales.

Developers are Not Driven to make more Money for the Stores

Rigid fixed-price structures usually do not force the service provider-developers to launch quick fixing and polishing sprints. Especially when many eCommerce owners subscribe to annual plans or 6-month plans. The app developer can sit back and relax with the stable income has been set up for the next 6 months. But in performance-based pricing structures, the developer faces the problems and deficiencies instantly and first-hand. Seeing the falling sales numbers the developer can start to fix the app bugs and imperfections immediately.

Yuspify revenue based pricing slider

Yuspify pricing slider shows revenue share options, with an average of 10% revenue generated by Yuspify.

Advantages and Value Propositions of “Growing Together”

Growing Trend: The necessity of Billing based on Value

Of course, there are app types that cannot really afford the performance-based pricing. But the product recommender systems don’t belong to this category. The ‘growing together-theory’ and its business philosophy should penetrate the recommender engine providers if they want to stay afloat and grow. Recommender systems like Yuspify provide instant feedback from the client’s sales numbers so the maintenance or fixing sprints can be started immediately. You will only pay more if we deliver more sales to you as Yuspify only charges after the extra sales generated by recommendations.

Symbiotic Relationship with Yuspify

As there is no risk from customers’ side in a ROI-based pricing model, the goal is even more common than in a ‘simple subscription-relation’: both parties rely on each other. Yuspify’s pricing starts from $29, which is the base price of the service and is billed only after the end of the subscription period. If your revenue generated by Yuspify is under $1,000, your bill contains the minimum base price only. Above $1,000 you are charged only by the 1-3 % ROI-based commission deducted from the revenue generated through the recommendations.

We help you to use Yuspify without any risk and let you pay only on the results we deliver. We don’t oblige our clients to take any severe commitment, they can end the billing period anytime during the month. In the event of this, they have to pay the charges only after the broken month’s revenue.

We provide an additional free trial period that lasts 30 days from registration, where you can try the service without any risk or cost on your end.

Apart from the revenue share model, Yuspify also offers usage-based (number of recommendations provided / month) payment structures if you’re monetization is different from the typical eCommerce structure.

Sign up for email updates

Get regular tips and updates from the world of eCommerce and big data.

We take your privacy seriously. No spam. See our Privacy policy here.

Recent Blogposts