The pandemic has transformed the way companies interact with their clients and opened the door for more SaaS subscription models to develop. In fact, the financial services company, UBS, predicts by 2025, the industry of subscriptions will grow by doubling to approximately $1.5 trillion.
How Can SaaS Subscription Model Generate Income?
If your company is using subscription models, then the revenues are generated through agreements and automatic renewals. A SaaS subscription model offers the same product or service over several time periods at the same cost.
Additionally, a company that trades on subscription models will usually offer services or goods that are simple to replicate and expand as demand increases.
What Is Horizontal and Vertical SaaS?
Horizontal SaaS is a type of structure that is utilized by well-established cloud services like Salesforce, Microsoft, Slack, Hubspot etc. The horizontal model permits large enterprises to provide large numbers of customers with a wide range of industries and to manage their business effectively and efficiently.
It makes it simpler for them to expand their offerings or bundle their offerings. This means they can increase their offerings to include many SaaS categories in one place.
However, Vertical SaaS solutions are developed to cater to a particular or niche market. Examples include trade, insurance or an industry that is not well-served. The model concentrates on the verticals of the industry and provides solutions to meet the niche’s issues and demands.
Inside the SaaS subscription industries, there are several categories of software that offer solutions that are based on your business or industry, or the needs of your customers.
Types of SaaS Subscription Models
- Fixed or Flat Pricing
For products with specific features, users pay a flat monthly fee.
This strategy is one-size-fits all and reduces confusion for customers. All customers are charged the same amount, regardless of how many they use or what features they require.
Flat-rate pricing allows companies to make their value proposition very clear and customers are not confused about which features they will have.
Flat-rate pricing works best for companies that have an idea of their ideal customer. This will help them to design landing pages that appeal to their target audience. Basecamp is one example of a tool that makes use of this billing type.
- Tiered Pricing
Multiple product plans can be offered by a company with different features and different pricing.
This allows customers to have more control over the software and gives them the chance to upgrade as they begin to enjoy the benefits. This pricing model works well in combination with other strategies. Many companies base their tiers on usage, features or users.
Tiered pricing is a great way for SaaS companies to increase their recurring revenue and upsell. Tiered pricing should be strategic and have clear benefits and advantages at each tier. Customers will know how much value they currently get and what additional features they could benefit from if their subscriptions grow.
Hubspot is a great example of intelligently arranged tiered pricing that is feature-based.
- Usage-Based or Pay as You Go
The company may charge the user according to how often they use the product.
Pricing strategy that is based on the amount of customers who use the service. You can use one or more metrics. Phone companies use this billing model to break down different subsets.
Pay-as-you go or usage-based pricing is more affordable and flexible from the customer’s point of view. You may also find that people are most interested in this option as a way to save money and stay within their budget.
The company provides basic features of its products for no cost and charges a monthly subscription for the premium features.
SaaS companies who want to offer a limited edition of their product can use the freemium pricing model. This strategy helps them attract new customers and allows them to offer the option to upgrade to the paid version. A lot of free-versions come with ads.
Dropbox offers a free trial that will help you attract customers. You can try premium features to see if you like the performance.
Benefits of SaaS Subscriptions Model
There are clear advantages to the CRM for SaaS businesses.
Advantages for Companies
Subscriptions are recurring sales that continue to be recurring which means a steady flow of income. For businesses that have inventory, this model allows them to handle their stocks.
It also assists businesses in building trust with their customers, building an impressive client base and lessening the burden of sales teams in order to simplify the process and move your business to the next step.
Advantages for Users
Subscriptions are convenient and offer efficient pricing for recurring purchases to allow brand costs to be planned. This means that there are there is no need to make decisions on what to buy or the best time to buy it, and no requirement to go to the physical store to shop.
A More Flexible Model
According to analysts, companies tend to prefer this method. Although they may pay some extra for subscription-based services, the advantages of not having to maintain, improve and update the apps are well worth the cost. Furthermore, the freedom of being capable of adding and subtracting customers as you wish is a plus.
Aids in Building a Stronger Bond with Customers
According to software vendors the main benefit of a subscription-based cloud method is that it allows the company to establish an immediate connection to their customers. If the software is continuously updated and it is easier to add the latest features to address the real problems.
The most beneficial thing that subscriptions allow businesses to be able to have direct contact with customers. When used correctly they can help companies to increase their profits.
Software as a service will have a potential for growth and is drawing the attention of consumers and companies.
The subscription-based pricing system is more efficient than the conventional. It provides real outcomes to customers at a price that is cost-effective.