Let’s dive in!<\/p>\n
What is the value metric in a pricing strategy?<\/h2>\n
Value metrics are the key aspects of a product or service that customers link with its value <\/a>and are ready to pay for.<\/p>\n In other words, value metrics are the foundation of the pricing strategy.<\/a> They communicate the value each plan offers and are the reason why customers sign up for the product, upgrade to a premium plan<\/a> or renew their subscription.<\/p>\n An example of a value metric would be the number of team seats or MAUs.<\/p>\n Tracking and understanding value metrics helps you:<\/p>\n We distinguish two main kinds of value metrics: functional and outcome-based.<\/p>\n A good value metric needs to tick three boxes. It needs to be<\/p>\n When looking at your pricing plans, your customers must know immediately what the price depends on and which plan suits them best.<\/p>\n If they don’t understand the value each of the plans offers or how much it’s going to cost, they simply won’t subscribe.<\/p>\n Alignment with product value<\/a> is essential.<\/p>\n Start by identifying where customers get value from and then charge them based on that.<\/p>\n For example, if your product is a project management tool, like Asana, you could charge your customer per the number of team seats or active projects, but not by the time they spend inside the product.<\/p>\n However, for an AI meeting assistant software, like Sembly AI, charging per minute makes perfect sense.<\/p>\n If your value metric is aligned with your customer usage, their success will be yours.<\/p>\n How come?<\/p>\n For example, if you charge your customers per user, then your revenue will grow as they acquire new users. Their growth automatically translates into your growth.<\/p>\n Before you start fine-tuning your pricing strategy, set a baseline by measuring a few key metrics.<\/a><\/p>\n Metrics that are associated with customer-perceived value<\/a> include:<\/p>\n Tracking them will help you assess the impact of the changes you make and ultimately select the perfect value metrics for your company.<\/p>\n Once we’ve got the figures to benchmark against, let’s try to find the value metrics for your company.<\/p>\n Value metrics depend on the product use case.<\/p>\n For example, for a video editing tool, the value metrics could be the length of the videos you can edit, the number of templates, or the quality of the output video. For a cloud storage solution, that could be the storage space available.<\/p>\n Start the quest for your perfect value metrics by listing all the use cases your product has.<\/p>\n Another way to generate ideas for value metrics is by looking at product usage data.<\/a> In particular, look at the specific segments<\/a>: your most and least successful customers.<\/p>\n Focus on<\/p>\n These are the dimensions along which you could plot your product value.<\/p>\n In Userpilot, you can identify your power users<\/a> based on their survey responses (e.g., NPS score), product usage frequency, or how long they’ve been your customers. You could use the same criteria to single out the unsuccessful or dissatisfied <\/a>customers.<\/p>\n Next, you can find out more about their in-app behavior <\/a>and the features they use from the Features & Events dashboard.<\/p>\n User interviews and surveys are the most direct way to identify your value metrics. It also allows you to validate the hypotheses that you make based on product usage analytics.<\/p>\n Start with surveys<\/a>. They allow you to collect lots of customer data at scale by targeting specific user segments. You can deliver them either in-app or via email to target inactive or churned users<\/a>.<\/p>\n Interviews give you the flexibility to adjust your questions depending on customer responses. However, they are time-consuming to arrange and require a lot of preparation to get the information you need, so use them to follow up on survey results.<\/p>\n Mobile surveys<\/a> are a quick way to measure customer satisfaction, gather real-time feedback, and boost engagement.<\/p>\n Once you identify the key features correlated with your product’s core value, you can start designing your pricing plans around them.<\/p>\n Your value metrics will be your main price differentiator. You\u2019ve got them now.<\/p>\n The main challenge is setting the usage limits.<\/p>\n Basically, you want your users to realize your product value<\/a> but at the same time, they need an incentive to upgrade. This is particularly important if you\u2019re using a freemium model.<\/a><\/p>\n For example, Loom has imposed a 5-minute limit on the videos available in the free plan. To record longer videos, users must upgrade.<\/p>\n Apart from limiting usage, you could also differentiate your plans based on additional features. These won’t be painkillers but rather vitamins, but will still dramatically enhance user experience.<\/a><\/p>\n So for Loom, this is the option to edit out all the fillers from your videos.<\/p>\n To put such differentiation in place, you need to segment your users and enable different features and usage limits for each of them.<\/p>\n It will be incredibly difficult to nail your pricing plans if you’re only starting out and have no user data. The odds are that you will need a few iterations <\/a>to finalize the details.<\/p>\n So, make sure to track the success KPIs <\/a>you\u2019ve used to set the baseline. Tweak your plans, for example, by adjusting the usage caps, until you start getting the business results you’re after.<\/p>\n Let’s check out a few great examples of how SaaS companies use value metrics to structure their pricing strategy.<\/p>\n Userpilot <\/a>is a digital product adoption platform. It allows product managers, <\/a>marketers<\/a>, and customer success managers<\/a> to collect user feedback, track and analyze product usage and drive product adoption with personalized in-app onboarding experiences.<\/a><\/p>\n Userpilot has built its pricing<\/a> on a number of value metrics:<\/p>\n Slack is an instant messaging platform of choice for many SaaS companies, small and large alike.<\/p>\n The company has 3 main value metrics:<\/p>\n Just like Userpilot, Slack also adds additional features to the paid plans.<\/p>\n For example, in the Pro plan, you get collaboration with people outside your organization, the Business plan includes advanced identity management, while the Enterprise Grid offers advanced security and compliance features like HIPAA support.<\/p>\n Zoom is a video conferencing solution whose popularity skyrocketed during the Covid pandemic.<\/p>\n The Zoom team uses 4 main value metrics:<\/p>\nWhy is it important to monitor value metrics?<\/h2>\n
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What are the two types of value metrics in the SaaS pricing model?<\/h2>\n
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What makes a good value metric?<\/h2>\n
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Easy for customers to understand<\/h3>\n
Aligned with your product value<\/h3>\n
Grows with customer usage<\/h3>\n
Metrics to measure before defining your pricing strategy<\/h2>\n
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How to set the right value metrics for your SaaS business?<\/h2>\n
Consider your product’s use case<\/h3>\n
Track product usage patterns of different segments<\/h3>\n
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![\"Event](\"https:\/\/images.storychief.com\/account_6827\/power-users-product-usage-value-metrics_f30122770668e2e6c2ee3df3fe09c246_800.jpg)
<\/picture>Conduct surveys\/interviews to determine where customers perceive value<\/h3>\n
![\"User](\"https:\/\/images.storychief.com\/account_6827\/survey-userpilot-value-metrics_637c716db2965ee8a5836ea2374c7294_800.jpg)
<\/picture>Define limits for different segments<\/h3>\n
![\"Loom](\"https:\/\/images.storychief.com\/account_6827\/loom-value-metrics_5158b311a8de35dfb2a37dc45a2348a0_800.jpg)
<\/picture>![\"Loom](\"https:\/\/images.storychief.com\/account_6827\/loom-freemium-conversion-value-metrics_e1dce4ab2df7e4c998418caebe45b8ce_800.jpg)
<\/picture>![\"User](\"https:\/\/images.storychief.com\/account_6827\/freemium-segmentation-value-metrics_f8d796135b2d3cd09394b7536dd0a34d_800.jpg)
<\/picture>Measure and iterate as you grow<\/h3>\n
![\"Features](\"https:\/\/images.storychief.com\/account_6827\/features-dashboard-userpilot-value-metrics_c153e6455a6f72d6af20ad8db45e3eba_800.jpg)
<\/picture>Examples of value-based metrics from SaaS companies<\/h2>\n
Userpilot<\/h3>\n
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Slack<\/h3>\n
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![\"Slack](\"https:\/\/images.storychief.com\/account_6827\/slack-freemium-strategy-value-metrics_e080ef2c87b3b69ee7df9cea66f6eff4_800.jpg)
<\/picture>Zoom<\/h3>\n
![\"Zoom](\"https:\/\/images.storychief.com\/account_6827\/zoom-pricing-value-metrics_0b093dc8122f5e3487627617db60380a_800.png)
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