Cloud Monetization: A Step-by-Step Guide
to Optimizing Your SaaS Business Model
Shlomo Weiss
VP of Business Development
May 9, 2012
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Typical SaaS Company
Approach…
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It starts with a land grab …
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…and turns into “How do we optimize?”
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A Balanced Business Model
Monetization
(LTV)
Cost to
Acquire a
Customer
(CAC)
Source: David Skok, Matrix Partners
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Questions we often hear…
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What business model should we use?
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How do we optimize our offering?
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What metric should we use to charge
our customers?
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Maximizing Revenues
Lower
Price
Higher
Price
Segmented
Price
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Match Offering to Value
Received by the Customer
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Segmented Offering
+ Value A, B and C
+ Value A, B or C
Standard Package
Packages with different
values, where values can
be:
• Features
• Resources
• Service Levels
• Frequency/duration
• Etc.
Light Version
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Optimized Offering
+ Value A, B and C
+ Value A, B or C
Standard Package
Packages with different
values, where values can
be:
• Features
• Resources
• Service Levels
• Frequency/duration
• Etc.
Light Version
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But, how do we get there?
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It’s complicated…
Elements of a SaaS business model
Price ($X or free)
Metric (user, transaction, instance, bandwidth, click, print, save, etc.)
License Model (subscription, pre-pay, post paid, metered, concurrent users)
Package (Standard, Basic, Pro, Enterprise, etc)
But which combination is right for you?
Option 1
Option 2
Option 3
Option 4
Option 5
Etc….
Price A ,
Metric B,
License A,
Package C
Price B,
Metric B,
License D,
Package A
Price A,
Metric C,
License B,
Package B
Price C,
Metric B,
License A,
Package A
Price D,
Metric D,
License C,
Package C
…….
…….
…….
…….
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Challenge: How to take the guesswork out
of finding the right model?
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5 Steps to Optimize Your SaaS
Business Model
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1. Track Usage
Implement usage tracking to understand how
customers are using our service today
Resources
Users
Content
Features
Modules
Bandwidth
Storage
Instances
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2. Identify Patterns
2A - Analyze usage data to identify patterns
Frequency of use
By % of users
Peak usage times
Grouping of types of usage/users
Usage over time
2B - Survey/Speak with users to validate findings
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3. Segment Accordingly
Customer
Segmentation
Product
Packaging
Optimized
Market
Applicability
(The right offering for
every customer)
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4. Test Models
Run A/B tests to try out new models
Existing users
New customers
Have systems in place to easily implement and adjust
Pricing
Metrics
License models
Packages
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5. Measure Results
Select packages based on the results of A/B testing
Discontinue packages that are not performing well
Continue to iterate and refine offerings that perform well
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5 Steps to Optimize Your SaaS Business
Model
Track
Usage
Measure
Results
Test
Models
Identify
Patterns
Segment
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Bringing it all together
SaaS application for Beta management
2007:
Seat Based –
Usage Limits
2002:
Perpetual
License
2011:
Optimized Offering
– Segmented
Packages
2009:
Seat Based
Editions
2005:
Annual Subscription
– Unlimited Usage
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Additional Tips
Link model to value provided to customer
Need to find the right balance: segmentation vs.
keeping things simple
Enable common features to be used by
customers of different sizes
Consider combining different models
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To Sum it Up
One size does not fit all
Segment your offering to maximize revenue based on
real usage data & customer feedback
Continuously iterate to improve your offering
Make sure you have the processes and systems in place
to enable you to optimize your business model
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Software Monetization in the Cloud
• Flexible Service Catalogs
• Automated Provisioning
• Service Usage Control
• Service Usage Measurement
FREE
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Visit us today at www.SentinelCloud.com
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Thank You
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