Pricing and Planning: What will shape SaaS pricing in 2024?
Steven Forth is CEO of Ibbaka. See his Skill Profile on Ibbaka Talio.
What will shape SaaS. pricing in 2024?
We asked this simple question in a poll in the week of January 15. We proposed three responses and of course left room for people to add their own ideas with an ‘other’ response.
Vendor Consolidation
AI Monetization
Value Documentation
Other
We asked this across four LinkedIn groups, on the Ibbaka LinkedIn page and on Steven Forth’s personal LinkedIn feed. We got 102 responses all together.
The dominant answer was AI Monetization, followed by Vendor Consolidation and then Value Documentation.
There were surprisingly few people who replied other, just two, and only one left a comment. The alternative offered was ‘market pressure reducing willingness to pay.’
What to make of these results?
There is a lot of interest in AI these days, and many SaaS product and sales leaders are spending a lot of time thinking about this. As Ibbaka is active in this area and designs pricing systems for AI powered solutions are data is skewed to people concerned with this.
But I wonder if we are getting distracted by the shiny new thing?
We are already seeing signs of vendor consolidation. Buyers are wondering
Do we really need all these applications?
Do these applications overlap?
If we had fewer applications could we operate more efficiently?
Why is it so difficult to connect data across application and to get coherent insights?
Companies are going to have to give compelling answers to all of these questions.
The large vendors, who claim to provide all necessary functionality within their own platforms, will be arguing that if there is money to be spent it should be spent on them, and they will be fighting hard to increase their share of wallet.
Value documentation will be critical to defending against SaaS vendor consolidation
Which brings us to value documentation.
What is value documentation?
Basically it means collecting data from your customers about how they are using your application and the results being generated. Ideally this relies on data collected by your own application. Every application should have a value dashboard that shows how value is being delivered over time. In some cases this will need to be augmented by data from third party apps, and in other cases one will need to conduct periodic value interviews.
A value interview is not a Customer Satisfaction Survey (C-Sat) or Net Promoter Score (NPS). A customer can be satisfied with your application and happy to recommend it but not be getting enough value to renew. A value interview is also based on a value model and basically turns the model into a story that can be shared with and discussed with a client.
Value communication, value delivery, value documentation and value capture all work better with a value model.
A value model is a formal model of how a solution creates value for a specific customer or set of customers. It is a system of equations that connects a solution to its impact and how those impacts create value.
Monetizing and pricing AI is an important these. And how we do this will shape SaaS pricing for the next decade. Ibbaka will continue to work in this area. But value is foundational, and in a tough economy the ability to communicate and document value is critical.