Ask HN: Metered Pricing vs. Tiered Pricing | Hacker News Reader

Ask HN: Metered Pricing vs. Tiered Pricing

3 pointspsychstudio3 comments

Hi HN, Metered pricing for SaaS seems like the model that best balances customer usage and value with the vendors costs and margins. Why don't we see a greater proportion of metered pricing vs plan tiers?

For example, let's look at the survey market. This market seems ideal for a metered pricing model but all the major players use tiered plans (with limits).

We're struggling with this at the moment with Psychstudio, particularly with university classes. By charging per seat we've "encouraged" account sharing (against our TOS) in some cases and have had to customize plans for others.

Pricing has been a constant experiment for us for a long time now and whilst we think we've got single academic/researchers under control, our Lab pricing breaks down.

Metered pricing could be the answer, but would be a lot of work for a small customer base and a solo entrepreneur and does not seem to be used much at all in our industry or in adjacent industries.

I'd love to hear your opinions and experiences, so please, enlighten me!

Thanks, Ben.

Pricing is a dark art but essentially tiered pricing is usually about going after different sets of customers who have clearly different needs and clearly different propensity to pay.

For example, you sell premium email accounts which give you a back rub when you send an email. There might be some luxury retail customers who love backrubs and would pay $30 a month for that service, but they're not gonna pay $20.000. But a hedgefund might see this as an essential part of their recruitment and retention strategy. They have very different needs like email audit, but also they might pay $1000 a year for one person. You want to tier those customers out.

Metering works better when the thing you sell has some real cost. An API that sends you a handwritten letter giving you a personalised compliment - that should be metered because of the cost per unit. You are encouraging the user to use your product less which is often not ideal.

>Why don't we see a greater proportion of metered pricing vs plan tiers?

I think it's because most sw companies pay very little on cost of goods so whether you use 10.000 or 10 of their product doesn't cost them more or less. Tiers are a way of offering the 'same' product to two different people who have different budgets and optimising for those budgets - this happens with software quite a bit.

If you have low cost of goods and one type of customer - just charge on price. No need to cargo-cult other start ups.

Thanks for the reply, flave.

Yeah, we have perhaps 4 quite different customer types [student, researcher, research group/lab and student classes/lab]. Currently we have a single lab tier which was designed for research groups but it seems a number of universities want to use that tier for their classes. We didn't expect this use-case and the "per seat" pricing in this tier doesn't work for this case.

We've run the numbers and generally the two lab based use-cases look like so:

Accounts used for research contain: - a low number of experiments - a high number of participants/results - long(er) "active" time per experiment

Accounts used for teaching: - a high number of experiments - a low number of participants/results - short(er) "active" time per experiment

The conclusion we've reached is that we need tiers based upon n experiments and n participants/results (with options to increase both). This would allow lab licensees to add/remove/transfer accounts at will.

I'd still be interested to hear from others who've moved from "per seat" to other metrics.

Hi, OP chiming in...

We've come to realization that we need to move away from "per seat" licensing.

Whilst metered pricing would seem to be the most balanced approach, there are too many general, and industry specific cons to make it workable.

Has anyone been in this position before? Can you tell us how you moved to a different pricing strategy? Did you end up making less per customer?

Any advice/anecdata would be great.

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