Platform Price Tiering

Part
01
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Part
01

SAAS Companies - Tiering Their Pricing: Best Practices

Some best practices on how SaaS companies that have large enterprise clients are tiering their pricing for their platform are exemplified by companies DropBox and HubSpot. These two SaaScompanies were singled out because they have both been recently featured in industry reports as top examples of price tiering. They employ the best practices of limiting data usage across tiers and of providing access to certain features at certain tier levels.

DropBox — DATA USAGE LIMITING

  • DropBox is a cloud storage company that has experienced massive growth in the number of registered users and revenue in 12 years of its existence.
  • The company has recently been featured in an industry report as one of the most successful B2B SaaS companies.
  • The company has a large client base. Some of their prominent clients are Under Armour, Hewlett Packard, Spotify and National Geographic.
  • 56% of the Fortune 500 companies have at least one Dropbox team within their organization.
  • Businesses are offered the following pricing tiers: Standard, Advanced and Enterprise.
  • Dropbox limits data usage for the first tier and then limits certain features for the second tier, so the company actually employs a combination of the two best practices.
  • The main difference between the first two tiers is that Standard tier users only have access to 3TB of storage space, while Advanced tier users have unlimited storage space access.
  • The main difference between the Advanced and Enterprise tiers is that Enterprise tier has a higher level of customer support and it offers individualized solutions to teams.
  • Overall, these tiers are designed based on the needs and the budget of potential customers. For example, the Advanced tier includes everything that the Standard tier does, plus other perks, such as advanced admin controls, tiered admin roles and advanced user management tools.
  • The Enterprise tier includes everything that the Advanced tier does, but it also covers EEM support, 24/7 phone support and advanced training for end users and admins.

HubSpot — Limiting of features

  • HubSpot is an award-winning SaaS company that offers software solutions to companies interested in transforming their online business.
  • HubSpot has recently been featured in an industry report as an example of best practices in tiered pricing.
  • The company's big client base includes large companies such as ADP, Expedia and Intuit. Some clients, like SAP, are Fortune 500.
  • The main advantages of their price tiering system include an appeal to multiple personas and a clear upselling route.
  • HubSpot offers three options, based on the needs of a client and their budget: Starter, Professional and Enterprise.
  • The best practice of the limiting of features is beautifully employed by HubSpot, because the additional features are closely aligned with the size of the enterprise customer. Larger enterprises need greater integration options across products and they also appreciate additional reporting capabilities.
  • The Professional tier represents an upgrade from the Starter tier mainly because of additional marketing strategy tools and phone support.
  • The Enterprise tier is the most comprehensive, and it offers integration and reporting options that the other two tiers don't include.
  • The Professional tier includes everything that Starter tier does, plus other perks, such as SEO and content strategy, standard SSL certificate and marketing automation.
  • On top of services included in the Professional tier, Enterprise tier includes: up to 500 custom marketing reports, predictive lead scoring, content partitioning and CMS membership.

Research strategy

To select the best practices in the industry, we searched through multiple credible industry analysis reports. There is a wealth of general data on the topics, both from general technology websites like TechCrunch and from industry-specific researchers like Process Street. Price-Intelligently, for example, recently created a 140-page report on SaaS pricing. We narrowed down the list of best practices by selecting only those mentioned in at least two industry-related sources. Then, we further narrowed down our list by selecting only best practices that are clearly adopted by certain companies to address how companies are employing the best practices. When identifying the companies, we selected Dropbox because it works with a number of Fortune 500 companies and we have selected HubSpot because the company is already used for a case study in a related response. So, the best practices presented above are those practices listed as best by numerous experts that are adopted by successful businesses that work with Fortune 500 companies.
Part
02
of two
Part
02

SAAS Companies - Tiering Their Pricing: Case Study

Salesforce and HubSpot are examples of large SaaS companies that have introduced tier pricing. Salesforce features four pricing tiers, ranging from $25 to $300 monthly per user. On the other hand, HubSpot has three pricing tiers which include Basic, Pro (professional), and Enterprise plans.

Salesforce’s Tier Pricing Model

  • Salesforce is a key player in the global enterprise software market, popular recognized for its customer relationship management (CRM) solution. The company offers the CRM software using a cloud-based offering which features four pricing tiers, ranging from $25 to $300 monthly per user.
  • The company also has Force.com, a platform that features API for developers to create individual apps for their Salesforce accounts. In order to access the functionality of the platform, the company has established a tiered pricing model based on light and enterprise categories.

The Pricing Plans

Salesforce’s plans constitute different services, known as “clouds.” The company offers four types of clouds:
  • Sales Cloud—This is the basic CRM system of Salesforce, including all the basics that users need for client management services such as lead tracking, notes, client records, and deals.
  • Marketing Cloud—This system enables users to create a one-to-one marketing campaign.
  • Service Cloud—This cloud enables users to perform any online customer service using any mobile device, and can integrate customer records in different clouds with customer service data.
  • Commerce Cloud—Enable users to create online shopping experiences.
The company’s pricing tiers include:

tier #1: Salesforce Essentials

This plan is available for users at $25 per month. The plan can only include five users and obtain a Collaboration suite which comprises Chatter, Files, and Topics and Recommendations. The plan is also packed with CRM features that enable users to manage leads, sales, and customers.

tier #2: Lightning Professional

Users are able to access this tier at $75 per user per month. It offers a complete CRM solution for any size of the team. The tier comes with functionality features used for configuration, cross-selling, upselling, and collaboration.

tier #3: Lightning Enterprise

This pricing tier costs $150 per user per month. It has an extended functionality which includes Sales Console app, real-time sales insights, and accurate sales forecasting. The plan also offers a credible Salesforce identity, access to API, and private App Exchange.

tier #4: Lightning Unlimited

Users can access this tier at $300 per user per month. The plan offers complete CRM solution for any size of the team and is also packed with contact management features, sandboxes, unlimited custom app development, and Sales and Service Cloud Consoles.

HubSpot’s Tier Pricing Model

  • HubSpot offers its customers several applications through its SaaS platform. It uses a hybrid pricing model that includes freemium, consumption, and tired. First, the company’s functionality has three service levels, i.e., basic, pro, and enterprise that offer progressively diverse features to its clients.
  • Users then have the opportunity to select the number of leads and contacts they need to access from the platform, which is charged every month. This pricing strategy combines both consumption and tiered models which enable the consumer to select the preferred service level.

The Pricing Plans

tier #1: Basic Plan--$200 monthly

  • HubSpot Basic tier is meant for smaller teams that require a contact database of less than 1,000. The plan enables users to run inbound initiatives and learn how they can align their existing marketing strategies with HubSpot’s CRM. Features of the tier include:
— A one-time Basic onboarding fee of $600
— Onboarding Add-Ons: Tech Support ($4,200), Tech Support and Custom Campaign Strategy ($7,200), Custom Consulting ($10,000), and HubSpot Classroom Training ($500 per person).
3 user logins for admin and a marketing team

tier #2: HubSpot Pro--$800 monthly

  • This pricing tier is ideal for companies that have between 15 and 30 employees and have a database of approximately 10,000 contacts. The plan allows for site traffic ranging from 3,000 to 15,000 visits every month. Apart from having access to the Basic features, this plan has the following additional features:
— A maximum of 1,000 contacts
— Unlimited users for marketing, sales, and admin teams
— Smart Content Tools
— Salesforce CRM integration
A/B Testing for emails, landing pages, and more

tier #3: HubSpot Enterprise--$2,400 monthly

  • This tier is best suited for companies that have over 10,000 contacts on their database with over 15,000 site visits every month. With Enterprise, users get everything provided to Basic and Pro plans as well as:
— A one-time Basic onboarding fee of $5,000
— Onboarding Add-Ons: Tech Support ($4,200), Tech Support and Custom Campaign Strategy ($7,200), Custom Consulting ($10,000), and HubSpot Classroom Training ($500 per person).

RESEARCH STRATEGY:

In order to identify case studies of the way large SaaS companies have introduced tier pricing, we began our research by looking for market research published by credible journals such as Harvard Business Review, McKinsey Quarterly, and the Business Journal that have pre-compiled case studies of fortune 500 SaaS companies. However, we were unable to get this information from the public domain. We found an article by Harvard Business Review addressing the tiered pricing model, but we were unable to access the content since the journal is behind a paywall.
We then began searching through the industry reports that have been published by credible online sites such as PRNewswire, Marketwired, Business Wire, and CISION (PR Web) that provide case studies of large SaaS companies with tier pricing. We located a report published by Byron Deeter and Ryan Jung that outlines case studies of SaaS companies that utilize tier pricing including HubSpot, Salesforce, and Assistly. Since the case studies met the research criteria, we considered HubSpot and Salesforce since they are among the top Fortune 500 companies. We further located more information about the two companies to provide a comprehensive case studies review of the tiered pricing model. We found data from individual company websites as well as credible websites such as lean labs, and tech.co. Also, we included Neil Patel's blog since the author (Neil Patel) is a digital marketing expert who is a top influencer on the web. Our findings are outlined in the above section.


Sources
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