The Software as a Service (SaaS) distribution model, which evolved from the Application Service Provider (ASP) model first used in the nineties, offers the opportunity to use software applications directly accessible on the internet. These are offered as a service and can relate to areas such as, for example, music streaming or storage of company documentation.
As far as pricing is concerned, users have the option to open a freemium account, which includes a variety of functionalities which are however more limited than those available to paying account holders. It is therefore only natural to wonder whether it is right to pay and also to reflect upon the strategies used by companies to persuade users to upgrade from a freemium to a premium account.
Software as a Service: from a freemium to a paying account
There are no fixed pricing criteria in the SaaS sector. There are however some companies which have started to introduce a specific strategy, in other words they try to manipulate users’ feelings via the strengthening of the brand’s presence on social networks. Several marketing experts have realised that it does not take long to create an emotional bond between companies who offer Software as a Service and the end users.
When these users are offered new tools to help them build up their business, they are better disposed towards contributing financially to support a Software House’s work. The developers, for their part, must make sure that the Freemium model really does allow the user to improve their business, so that the latter will be in a position to pay for the Premium version very soon. In other words, the Freemium version of a Software as a Service should not be a mere ‘watered down’ version of the Premium one.
Pricing policy and Software House selection criteria
When considering SaaS and their pricing policies, it is important to remember that costs for Premium users are closely linked to the number of people who decide to continue with a Freemium subscription. In such cases, the Software House must still cover the costs of program management and, therefore, offset these through Premium user fees.
In order to avoid paying over the odds, it is therefore essential to choose the Software company very carefully. These are the features which their offer should have in order to secure a high number of Freemium subscribers, therefore avoiding excessive charges for Premium users:
- The service must have the potential for viral growth.
- Market potential must be as wide as possible, so the service must be suitable for both B2C and B2B markets.
- The service must be easy to manage and users should not need to contact any support services.
- The service must be constantly updated, in order to meet users’ requirements efficiently.
There is a lot of information available online regarding the company policies of various Software Houses. With some research into this, you can find out more about the number of paying users and the costs incurred due to the acquisition of new clients.
In order to identify the best company to purchase an SaaS from, it is very important to gather information on the monitoring of the number of Freemium users. In order to avoid Premium user costs becoming unsustainable, it is essential that the Software House keeps this aspect under control, therefore avoiding a point of no return being reached.
Translated by Joanne Beckwith