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As a general principle, the best pricing structure for a product is one that most closely matches the value that the customer derives from a product. Usage-base

As a general principle, the best pricing structure for a product is one that most closely matches the value that the customer derives from a product. Usage-based pricing is best when each time you use it, you're saving your customers money. The company I work for makes software that helps to speed up the process of reviewing real estate appraisals. We help a human check for important issues in the appraisal much more quickly than they could do so themselves. That makes usage-based pricing perfect - every time our customers use us for an appraisal, they pay us. That's ideal, because the amount of time they save by using our software has a greater dollar value than the amount they pay us. It also means that when the market turns down and they need our software less, they're not stuck with large, fixed bills. For many tools, this isn't the case. I've worked on a lot of enterprise software that charges on a per-user basis. This makes sense for something like enterprise content management and CRMs - the number of people using them is roughly going to correlate for their value. If you hire a new salesperson, you expect to make more sales and thus have a willingness to pay a little more for a tool that helps with that.

hinata08 4y ago
>I've worked on a lot of enterprise software that charges on a per-user basis. I hate them the most, after seeing them in companies with 10^2 - 10^3 of employees. whenever you get an intern, or when an employee could help on a job that isn't his, you have to get them a license. And by the time the licensing process has happened, someone would have found a solution without using the software. Then, instead of getting new licenses, some employees will just waste time to find someone who can access the right functionality on the software. Eventually, if your company doesn't have a strict whitelisting policy for the software that is being used, employees will just end up using their own open source software or free smartphone apps, and will ditch the software that will charge on a per user basis. If your company has a strict policy, they will just hate it. I would prefer to have a bundle, and a salesperson that properly estimates the value for each company, so that each employee can have the proper tools.
- idopmstuff 4y ago
  > Eventually, if your company doesn't have a strict whitelisting policy for the software that is being used, employees will just end up using their own open source software or free smartphone apps We're definitely thinking of different kinds of software here, as this would never be the case with the kind of stuff I'm talking about. Whatever CRM your company uses, every salesperson is using. It would be incredibly obvious if they were using something else (their manager is regularly looking at reporting in the CRM), and it wouldn't ever fly. To your point, many people do hate it, but you can't find a way around it. Similar with services like Box, Zoom, ServiceNow, JIRA, etc. If it's important that each person have their own account, then a per-user model is generally pretty reasonable. You'd typically need this if you need to easily track which user is doing what and/or if you need user-level access controls.
  - ghaff 4y ago
    This is especially true if, as if often the case, only a segment of the company uses the software in question. Engineering probably doesn't use Salesforce. Sales probably doesn't use JIRA. A flat fee based on some tiered size of the company might still make sense and reduce some friction. But the amount has to work for both the buyer and seller and per-user pricing is just a natural fit in a lot of circumstances.

hinata08 4y ago

>I've worked on a lot of enterprise software that charges on a per-user basis. I hate them the most, after seeing them in companies with 10^2 - 10^3 of employees. whenever you get an intern, or when an employee could help on a job that isn't his, you have to get them a license. And by the time the licensing process has happened, someone would have found a solution without using the software. Then, instead of getting new licenses, some employees will just waste time to find someone who can access the right functionality on the software. Eventually, if your company doesn't have a strict whitelisting policy for the software that is being used, employees will just end up using their own open source software or free smartphone apps, and will ditch the software that will charge on a per user basis. If your company has a strict policy, they will just hate it. I would prefer to have a bundle, and a salesperson that properly estimates the value for each company, so that each employee can have the proper tools.

idopmstuff 4y ago
> Eventually, if your company doesn't have a strict whitelisting policy for the software that is being used, employees will just end up using their own open source software or free smartphone apps We're definitely thinking of different kinds of software here, as this would never be the case with the kind of stuff I'm talking about. Whatever CRM your company uses, every salesperson is using. It would be incredibly obvious if they were using something else (their manager is regularly looking at reporting in the CRM), and it wouldn't ever fly. To your point, many people do hate it, but you can't find a way around it. Similar with services like Box, Zoom, ServiceNow, JIRA, etc. If it's important that each person have their own account, then a per-user model is generally pretty reasonable. You'd typically need this if you need to easily track which user is doing what and/or if you need user-level access controls.
- ghaff 4y ago
  This is especially true if, as if often the case, only a segment of the company uses the software in question. Engineering probably doesn't use Salesforce. Sales probably doesn't use JIRA. A flat fee based on some tiered size of the company might still make sense and reduce some friction. But the amount has to work for both the buyer and seller and per-user pricing is just a natural fit in a lot of circumstances.