The Future of SaaS: Hybrid Pricing (Feat. James Wood)

Key Takeaways:

1. Key trends defining SaaS pricing currently include:
   • Monetization of AI
   • Capital efficiency and a push for 1) ensuring pricing protects margin and 2) driving efficient growth through NRR
   • More challenging deal environment forces
   • Hybrid pricing
2. Hybrid pricing gives you flexibility in incorporating usage into your pricing model without sacrificing ARR or monetization from your platform.
3. There are multiple forms of "hybrid pricing" + (Check out Kyle Poyar's article that mentions the spectrum of usage-based pricing)
   • UBP expansion (primary or fencing metrics)
   • Usage-Based Subs
   • TRX revenue and subscription
   • Success-based or outcome – based pricing
   • Segment – specific usage / occasional usage pricing
   • Active users
4. Active users does not work well for every scenario. It can be effective IF (1) it does not limit ARR, (2) it is aligned to value for customers, and (3) "active" can be clearly defined
5. A key part of implementation of usage-based pricing is the ability to track and action against usage data. Data availability and infrastructure can be a roadblock, but there are new tools coming available to support usage tracking.
6. Introducing usage-based pricing is a solution for many companies to better align to value or growth, BUT it's not right for everyone (i.e. if you're already value-aligned or the effort to operationalize usage tracking is too high).
7. There is a common fear that introducing usage-based pricing to a seat-based model will discourage usage. If, in practice, usage-based pricing discourages usage, it may indicate that either (a) it's the wrong metric or (b) it's the wrong price.  

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Recording