This week's guest is John Griffin, co-founder and CRO of m3ter, who joined Neel Desai at SaaStock 2022 to discuss the importance of usage-based billing in SaaS and its impact on businesses. John emphasizes the need for SaaS companies to focus on customer success to drive adoption and product usage, and shares his thoughts on the future of SaaS, suggesting that it will involve a combination of product-led growth (PLG) and traditional enterprise sales motions.

High Level Overview:

• Usage-based billing aligns customer value with product usage, driving adoption and increased revenue for SaaS businesses.
• The future of SaaS involves a combination of product-led growth (PLG) and traditional enterprise sales motions, with the most successful companies deploying both strategies.
• Customer success departments are crucial in driving adoption and ensuring customers get the most value from a product, making them vital for businesses using usage-based billing.
• SaaS companies can benefit from ingesting cost data along with usage data, enabling them to show finance departments the correlation between customer usage and company costs.
• Identify the appropriate usage metric for your product, ensuring it directly correlates with customer value.

A Crash Course on Usage-Based Pricing:

Usage-based pricing is a billing model where customers are charged based on the actual usage of a product or service rather than a flat fee or subscription. It aligns product usage with customer value, creating a more symbiotic relationship between the provider and the customer. Here are some key points to consider when implementing usage-based pricing in your business:

• Pricing tiers: Set clear and transparent pricing tiers to help customers understand the costs associated with different usage levels.
• Track usage: Continuously monitor and optimize your pricing model, as usage patterns and customer needs may change over time.
• Enable your customers to succeed: Provide customers with tools to track and manage their usage, helping them avoid unexpected charges and better control costs.
• Customer success teams: Invest in customer success teams to drive adoption, increase product penetration, and ensure customers are getting the most value from your product.
• Hybrid values: Consider a hybrid pricing model combining usage-based and subscription elements if it better suits your industry or product type.
• Internal transparency: Present a clear view of costs and margins to finance departments, demonstrating the alignment between customer usage and company expenses.

Further Learnings

Follow John on LinkedIn and check out m3ter for more on Usage-Based Pricing.