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Our Recurring Payment Pricing Was Rejected

jerviswhitley.com

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Re: Our Recurring Payment Pricing Was Rejected

#51

Post by garysweaver »

Recurring pricing is more acceptable when:

* Larger amounts can be made monthly instead of annual with similarly short contract length. E.g. $39.95/mo not only seems less than $479.40/yr, but if they are unsure about dropping $479.40 on an unproven service, then being able to drop out after 1 month with a loss of only $39.95 is important.

* The value of the maintenance/support provided is something of obvious value to the customer and perceived to be commensurate to the recurring charge. E.g. if you are just hosting a free open-source platform that they could host themselves, choose from many others to host, some of which might be free, then even if you as the vendor are paying for the domain, bandwidth, storage, etc., all of that which has real cost to you may not be perceived to be as much value to the customer. But, if you wrote the product, it is awesome and multifaceted, no one else does anything like it, and the customer perceives your expertise in the product to be something necessary to their future success, then they may be happier making larger recurring payments.

Re: Our Recurring Payment Pricing Was Rejected

#52

Post by 6d0debc071 »

Something I'm not sure that you've thought of that might be one way to think about how some people assess part of the value:

Just as a hypothetical boundary case: Why should I pay you to do nothing forever? That's effectively the question that gets run in my head when I look at SAAS.

That sound quite insulting, so - just to point out again: Boundary case! I don't think you actually are doing nothing forever. However, if they're effectively employing you, and perhaps have a fairly static need. What do they need to employ you to do?

For a lot of new software it's meanest competitor is its last version. The version that comes out four years down the line is not that much better, generally speaking. People talk about companies upgrading, but a lot of them don't - at least not on the sort of time-table that would justify SAAS. In that sense you'd have to sell me on the future of the software or on the idea that my needs are going to change rapidly so I'll need software to change rapidly with them. If you're going to be making it significantly better year on year then I'd probably go with SAAS. If I'd pay for the software on a SAAS plan, before I'd upgrade normally though, then it seems like a bad deal.

It strikes me that in a relatively static environment the thing to talk up is going to be what you can do for them in terms of support. And they're going to have to compare the costs of supporting the software themselves to the risk that they take on in using your solution (your company going under, etc.) Much of which is very difficult to quantify and is made a greater concern by our tendency to be fairly risk-averse.

Re: Our Recurring Payment Pricing Was Rejected

#53

Post by wnight »

StavrosK wrote: post #24
michaelt wrote: post #8

A supplier who wants to switch from pay-once to pay-monthly is either going to be charging me less or charging me more. If they claim they'll be charging me less, that leaves me confused as to why they think the change is in their interests, unless they actually anticipate charging me more.

" who wants to switch from is either going to be charging me less or charging me more." This is just an argument against change.

No, this is the reasoning behind thinking someone is full of shit if they're pushing you to do something, supposedly for your sake.

Re: Our Recurring Payment Pricing Was Rejected

#54

Post by bernardlunn »

You can offer:

A. Limited to say 5 years. The world will have changed by then.

B. $200k License Fee with 20% Annual Maintenance. Then in a burst of generosity you can waive the License Fee but keep to the Annual Mtce. This is pretty standard, sounds a bit sneaky but focusses customer attention on value.

Re: Our Recurring Payment Pricing Was Rejected

#55

Post by lifeisstillgood »

tumba wrote: post #41
patio11 wrote: post #15

We get IP ownership, but we don’t bill for our time at all. Instead they become our first customer to use the new tool for a lower yearly fee (including maintenance). You're taking on market and execution risk here, for which you are not receiving compensation. (Presumably you set your consulting rates high enough such that engagements are a win for you. The SaaSification option is at a discount to your rate, which y…

This is a common scenario for me. My contract generally includes the following provision. "Client shall have a perpetual, irrevocable, nontransferable license to use and copy the materials and deliverables created, discovered, invented, developed or prepared in the course of this agreement (“Deliverables”) and prepare derivative works based on the Deliverables for its internal use. All other rights in the Deliverable…

Thank you - going to get that UK-law-ified and stick it all over the place

Cheers !

Re: Our Recurring Payment Pricing Was Rejected

#56

Post by jasim »

valdiorn wrote: post #46

I'd like to offer my opinion as someone who LOATHES the SaaS model. The first and only thing you need to consider is who you're selling to (power systems engineering businesses, as you said) and what they do. They make power systems that need to be reliable and last for fifty years or more. You probably know banks use 30 year old COBOL software to make the world tick. Why? Because it's reliable and rarely breaks. Whe…

This is a valid argument. SaaS is a step in the wrong direction for use cases where continued access to the service is crucial.

I do not trust LastPass or similar third party systems with my passwords. Passwords are too important a part of my identity that I should have complete and exclusive control over it. (I use a mix of Text files+TrueCrypt+Timemachine and Dropbox for sync).

Same goes for email. I use IMAP to keep a local storage of my emails. But that is not a complete solution - my email address is still owned by a third party (Google) and they can lock me out of my identity any time they choose.

I'm currently cobbling together a couple of scripts to backup my pictures and media, mostly WORM (http://git-annex.branchable.com/backends/) data, onto multiple harddisks. The 1 TB storage of Flickr is enticing, but I'm not ready to exclusively trust a part of my identity which I want to indefinitely preserve, to yet another third party.

Re: Our Recurring Payment Pricing Was Rejected

#57

Post by curveship »

It's not just the total price, and it's not just the risk that you may disappear, it's also that the client will likely get a different product under the two pricing structures. In the flat-fee case, objectives are defined solely by the needs of the client; in the SaaS model, they're split between what the client needs and what you want for your future product. The split incentives can go bad for the client in all kinds of ways:

- they get a product that is kind of what they wanted but not really, because you built it to cover what you see as the general use case (i.e., the one that you might be able to sell widely), while they wanted you to cover their specific needs.

- alternately, they insist that it cover their specific needs (they started this process after all), and you end up fighting with them over design and over who should cover the costs of customization.

- maybe you were lucky and there weren't any of these conflicts with the first round of development, but now they want a second round that will take the product in a direction that isn't consistent with your plans for it. What then? Do you go to a hybrid pricing model, where the monthly fee covers the "base" product and they have to pay a one-time fee for their extensions? Do you tell them to take a hike and start all over again with a new dev, because you're not interested in their unmarketable extensions?

As others have said, we charge on T&M and make sure first and foremost that our client is happy. AND we retain a right to the code. If we think there might be a broader use for the tool, then AFTER we've made the client happy, we'll branch and adapt it to our sense of what is marketable.

Re: Our Recurring Payment Pricing Was Rejected

#58

Post by ams6110 »

john_w_t_b wrote: post #44
patio11 wrote: post #15

We get IP ownership, but we don’t bill for our time at all. Instead they become our first customer to use the new tool for a lower yearly fee (including maintenance). You're taking on market and execution risk here, for which you are not receiving compensation. (Presumably you set your consulting rates high enough such that engagements are a win for you. The SaaSification option is at a discount to your rate, which y…

This is a common arrangement for consultants in the ERP sector. It's a nice way to start a software business. Your customers provide you with seed capital, user requirements and a reference site. I've seen a couple of people start multi-million dollar businesses with this approach.

It can work particularly well for public sector customers, because they generally are not worried about "trade secrets" or other IP being later sold to a competitor.

Re: Our Recurring Payment Pricing Was Rejected

#59

Post by ams6110 »

jguimont wrote: post #36
blindhippo wrote: post #4

Earlier quoted context omitted.

Not sure I understand this sentiment. This same manager would likely be buying a 15k used car outright if he's worried about paying for software over time. The problem that I have with SaaS is that most companies pursuing it's business model fail at the value option. Take Freshbooks for instance - I started using their service 3 years ago for 9$ per month. This got bumped to 14$ per month. I now have to pay 20$ per m…

What about the new SaaS that 37signals' Basecamp Breeze is trying to put forward? Pay one fee of X$ and have access to it forever. I guess this applies more to single purpose laser focused services that are not expected to change in the foreseeable future.

"Forever" meaning "as long as 37signals exists" ?

Re: Our Recurring Payment Pricing Was Rejected

#60

Post by njx »

6d0debc071 wrote: post #52

Something I'm not sure that you've thought of that might be one way to think about how some people assess part of the value: Just as a hypothetical boundary case: Why should I pay you to do nothing forever? That's effectively the question that gets run in my head when I look at SAAS. That sound quite insulting, so - just to point out again: Boundary case! I don't think you actually are doing nothing forever. However,…

We provide annual subscription for our software (http://www.infocaptor.com) but the price for subscription is significantly lower than if the customer decides to go the perpetual route with optional upgrade path. Some do ask for perpetual license and most of them are happy with the annual subscription as it behaves like an installment plan.

In either case, the customer hosts the software internally within their intranet/firewall.

So offering two price points perpetual and subscription will let the customer see the value and help them make better decision. You have to constantly make an effort to show value in your software at the pricing you offer.

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