An expert's guide to enterprise pricing for SaaS

Looking to venture into SaaS enterprise pricing but unsure about how to go about it? 

Our guide will explain enterprise pricing in SaaS and how you can implement it successfully. Here are some of the concepts we’ll explore:

• A definition of enterprise pricing in SaaS
• The difference between enterprise and SMB pricing 
• Benefits of enterprise pricing in SaaS
• A quick rundown of the main SaaS enterprise pricing models
• Things to consider when setting enterprise prices
• Best practices and common hurdles in enterprise pricing
• Three case studies of SaaS companies that use enterprise pricing 

Let’s begin.

What is enterprise pricing?

Enterprise pricing is a strategic pricing model designed to meet the unique needs and demands of large organizations. It involves tailoring solutions and offering value that typically goes beyond a standard package suitable for small business or mid-market customers.

So, what sets it apart from other pricing models?

Enterprise pricing often involves a blend of the following:

• Customization: Enterprise clients often need features that aren't outlined or guaranteed in your standard offerings. This means anything from advanced data analytics to integrations with their existing systems.
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• Volume discounts: Larger companies usually buy in bulk. Think of companies that buy lots of licenses or seats for a SaaS product. Enterprise pricing often offers discounts that get more enticing as the volume increases.
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• Premium support: These are high-value clients, so you want to offer them a white-glove treatment. Enterprise pricing often includes faster SLA’s or 24/7 support.
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• Scalability: Enterprise solutions need to handle a ton of data and user activity. Scalability is built into the pricing, ensuring the software can grow alongside the company.

Enterprise vs. SMB pricing

You might be thinking, "Okay, but SMBs (small and medium-sized businesses) also need customized solutions." And you're right.

Here's the key difference:

• SMBs: They typically start with your standard packages. Then, they may add a few tweaks here and there. Their needs are usually less complex and less demanding in terms of scale.
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• Enterprises: They often need a completely tailored experience. Think custom integrations and unique features to handle massive amounts of data. Rather than just buying a SaaS product, they're investing in a long-term solution.

Benefits of enterprise pricing for SaaS

Let's dive into the advantages that make enterprise pricing models so appealing for SaaS companies:

1. Higher revenue potential

One of the biggest draws of enterprise pricing is the potential to increase average contract value. 

Larger organizations typically have larger budgets than smaller businesses. By tailoring your pricing to their needs, you can command higher prices and boost your bottom line.

2. Customization and adaptability

Enterprise pricing allows you to create bespoke solutions that align with each client's unique needs. This level of customization ensures they get exactly what they want. Most importantly, it positions you as a partner invested in their success.

3. Stronger client relationships

Enterprise pricing isn't just about high-ticket sales. It's about building lasting relationships with high-value clients. You want to go above and beyond to understand their needs and deliver customized solutions. As stated above, you're not just a vendor — you're a strategic partner.

This deeper connection translates into:

• Increased loyalty: They're less likely to jump ship when a competitor comes knocking.
• Longer contracts: Enterprises are often looking for long-term solutions, not quick fixes.
• Advocacy: Happy clients become your biggest advocates. They spread the word about how your solution helped them achieve a meaningful goal.

Key enterprise pricing models

The best model for your SaaS will depend on your product, your target market, and your business goals. Here's a rundown of six popular models to consider:

1. Flat rate pricing

This one's straightforward: One price, one product (or a set of features). It's the "no frills" option, ideal for companies just starting out or those with a very focused offering.

Pros:

• It’s easy to understand.
• It’s easy to sell.

Cons:

• It can be tough to scale as your product evolves.
• It might not capture the full value you're offering.

2. Per user pricing

This model charges based on the number of users who access your software. It's transparent and easy for clients to budget for.

Pros:

• It’s simple to understand.
• It scales with the client's growth.

Cons:

• It can discourage adding new users if the cost per user is high.
• There’s the risk of underutilization.

3. Tiered pricing

With tiered pricing, you offer multiple tiers, each with a different set of features and price points. This allows you to cater to a wider range of clients with different needs and budgets. You’re aiming for enterprise-level companies, but you want to cover all fronts. 

Pros:

• It caters to different customer segments.
• It allows for upselling as clients' needs grow.

Cons:

• It can get complex quickly if there are too many tiers.
• It might lead to "analysis paralysis" for potential clients.

4. Usage-based pricing

With this model, clients pay based on how much they actually use your product. This could be based on data usage, transactions, and API calls. 

Pros:

• It’s highly flexible.
• It aligns cost with value.
• It’s good for products with variable usage patterns.

Cons:

• Usage-based pricing can be unpredictable for clients.
• It requires robust usage tracking and billing systems.

5. Value-based pricing

This is the most customer-centric model. You price your product based on the value it delivers to the client. This could be increased revenue, cost savings, or improved efficiency.

Pros:

• It aligns your interests with the client's.
• It allows you to capture a larger share of the value you create.

Cons:

• Value-based pricing requires a deep understanding of your client's business.
• It requires the ability to quantify the value you provide.

6. Custom pricing

This is the most flexible option but also the most complex. Pricing is tailored to each individual client based on their specific needs and circumstances.

Pros:

• It offers maximum flexibility to capture the full value of your offering.
• It can lead to stronger client relationships.

Cons:

• Custom pricing requires significant time and effort to negotiate each deal.
• It can be difficult to scale.

Factors to consider when setting enterprise prices

Setting the right SaaS enterprise pricing isn't a guessing game. It's a strategic balancing act that requires careful consideration of several key factors:

Market position and competition

Before you even think about numbers, take a good look around. 

• Who are your competitors? 
• What are they charging? 
• Are they offering similar features and value? 

Understanding your competitors' pricing strategies can help you better position your offering. 

Equally important is your unique selling proposition (USP). Do you have a standout feature that justifies a premium price? Highlighting your unique value can help you command higher prices. This helps set yourself apart from competitors too.

Finally, consider the overall market sentiment. Is it a buyer's or a seller's market? The market conditions can influence your pricing power. This will have an impact on the willingness of customers to pay a premium.

Customer needs and value perception

Enterprise clients aren't just buying a product; they're buying a solution. To set the right price, you need to understand their pain points and the value your product brings. How much is that relief or value worth to them?

• What outcomes are they hoping to achieve?
• Can you quantify the value you bring in terms of revenue, cost savings, or efficiency?

Cost structure and profit margin

Your cost structure sets the floor for your pricing. You need to cover these costs and then some to stay profitable. But what's your desired profit margin? How much do you need to make to keep the lights on and invest in future growth? 

You need to strike the right balance. This means you’ll juggle covering costs and hitting your profit goals for a sustainable pricing strategy.

Pricing flexibility

Enterprise deals aren’t set in stone. In fact, a degree of flexibility can go a long way:

• Negotiation is key: Have some wiggle room in your pricing based on the size of the deal. This could involve offering volume discounts, feature bundles, or phased implementation plans.
• Know your limits: Flexibility is important, but don't compromise your profitability. Know your walk-away point, and don't be afraid to say no to a deal that doesn’t make financial sense.

Contract length and terms

The devil is in the details, especially when it comes to enterprise contracts. Consider the following carefully:

• Contract length: Are you looking for annual or multi-year commitments? Longer contracts can provide more predictable revenue. This may require offering incentives to secure the deal.
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• Payment terms: Are you open to monthly, quarterly, or annual payments? Consider your cash flow needs and the client's preferences.
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• Cancellation and downgrade terms: What happens if the client wants to cancel or downgrade? Put clear terms in place to protect your interests and avoid surprises down the line.

Best practices for enterprise pricing

Here are some proven tactics to help you navigate this terrain and set prices that resonate with your high-value clients:

Dig deep with market research

Before you set any prices, immerse yourself in the market. Understand your competitors' offerings, pricing structures, and target segments. Look for gaps in the market where you can differentiate yourself and command a premium.

Focus on value, not just cost

Don't just talk numbers with your clients; talk value. Discuss their pain points, desired outcomes, and how your solution can help their business. When clients see the tangible benefits your product brings, they'll be more willing to invest in it.

Stay nimble, review, and adjust

The market isn't static, and neither should your prices be. Regularly review your pricing model. Take into account market shifts, competitor moves, and customer feedback. Don't be afraid to make adjustments as needed.

Make the most of what your data tells you

Leverage the power of data and analytics. Use it to gain insights into customer behavior, usage patterns, and price sensitivity. These insights can help you fine-tune your pricing strategy and find opportunities for growth.

Invest in your sales and support teams

Your sales and support teams are on the front lines, interacting with clients daily. Equip them with the knowledge and tools to articulate the value of your product. This way, they’ll negotiate deals more effectively.

A strong sales and support team can make all the difference in closing high-value enterprise deals.

Common challenges in enterprise pricing

Enterprise pricing can be a lucrative strategy for SaaS businesses. However, it's not without its challenges. These obstacles can make the difference between success and failure.

Pricing complexity 

With custom features, volume discounts, and varying contract terms, it's easy for things to get messy. This complexity can confuse potential clients and make it harder to close deals. 

The solution? Strive for transparency and simplicity in your pricing structure. Clearly communicate the value of each feature and tier, and avoid hidden fees or confusing jargon.

Competitive pressure

The SaaS market is crowded, and competitors are always vying for those big enterprise contracts. This can lead to a race to the bottom in terms of pricing, as companies undercut each other to win deals. 

To stay competitive, focus on differentiating your offering. Do this through unique features, exceptional customer service, or a proven track record of success. Don't hesitate to charge a premium if you can truly show superior value.

Aligning sales and pricing strategies

Your sales team and your pricing strategy need to be in sync. Sales reps can't be promising discounts or custom features that aren't accounted for in your pricing model. This mistake can lead to a lot of confusion and even lost revenue.

Make sure your sales team understands your pricing structure inside and out. Empower them to negotiate within established guidelines.

Handling discount requests

Some enterprise clients will ask for discounts. While it's important to be flexible, you also need to protect your profit margins. 

Establish clear guidelines for discounts, and be prepared to justify your prices based on the value you deliver. Consider offering alternative incentives. For instance, you can offer extended support to sweeten the deal without sacrificing revenue.

Case studies of successful enterprise pricing

Let's take a peek into the real-life examples of some SaaS giants who've mastered enterprise pricing:

Salesforce

Salesforce knows how to cater to a wide range of businesses. Their tiered pricing model is a masterclass in segmentation. 

They offer packages with features and price points that appeal to small businesses and scaling enterprises. This approach allows them to capture a larger market share and upsell clients as their needs evolve.

Microsoft Azure

Microsoft Azure understands that enterprise clients crave flexibility. Their Enterprise Agreement (EA) offers custom terms, volume discounts, and a range of payment options. The goal? Catering to the unique needs and budgets of large organizations. 

This approach attracts enterprise clients and fosters long-term relationships based on mutual benefit.

Oracle

Oracle uses value-based pricing for its enterprise solutions. They focus on the tangible outcomes and ROI their software delivers to clients. Think more efficiency and reduced costs. This approach justifies premium prices and aligns Oracle's interests with those of its clients. It’s a win-win scenario for both. 

Next steps

We've covered a lot of ground in this guide, explaining enterprise pricing models. But understanding these models is just the beginning. The challenge is bringing them to life through efficient billing.

That's where a billing solution like Orb enters the picture.

Orb is your answer to these complexities. It's a billing management platform designed to unlock the full potential of your chosen pricing model. Most importantly, it simplifies your billing operations.

Let's explore how Orb can elevate your billing experience:

• Effortless data integration: Orb connects with your current systems. It consolidates usage data from various sources like S3 and Segment. This holistic view of your data ensures accurate billing and reduces errors.
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• Customizable usage metrics: Orb lets you define and monitor the metrics that underpin your pricing model. We cover API calls, data storage, and other key activities. This level of granularity guarantees that billing accurately mirrors product usage.
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• Flexible pricing structures: With Orb, you can implement a wide range of pricing models. Our user-friendly interface lets you design and deploy your pricing models easily. You don't even need coding expertise to get it done.
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• Automated billing workflow: Orb automates the entire billing lifecycle. We cover everything from usage calculation to invoices and payment collection. This saves valuable time and resources, resulting in accurate and prompt billing.

Ready to experience the difference Orb can make in your enterprise billing operations? Discover how Orb can help.