Pricing a subscription model can be a bit complicated depending on the product you are offering. These are some of the factors that came in to play with one of my SaaS software clients.

First, determine your fixed cost per customer. Most entrepreneurs in the SaaS (Software as a Service) subscription space do not realize there is a very real cost per user.

Look at all your infrastructure costs. How many concurrent users can your infrastructure handle before you have to scale? What are the variable costs based on usage such as per-user storage space requirements? Number of emails allowed (if that is part of the offer)? Bandwidth?

Overselling the infrastructure is an acceptable practice. Meaning, if you use a 20-1 ratio, you are saying for every one real user accessing the system at any given moment, you can have 20 subscribers paying for the service. The assumption is that all 20 will not generally access the system concurrently.

What will be your expected user support load? Depending on the simplicity or complexity of your offering, your users may or may not need to contact support. The simpler the program to use, the higher the customer to support ratio can be. For instance, if you remember Countrywide Financial, they staffed approximately one customer service rep for every 684 loans they serviced. A 684-1 ratio. Your ratio will probably not be that high with software.

Look at your competitors. What do they charge for similar services? Decide if you are competing on price or quality. I generally prefer to not compete on price. But, that is a situational decision.

Keep your pricing model simple. The more options you add, whether the number of plans or the add-ons, the higher the shopping cart abandonment will be.

I've been involved in subscription models since 1997 when I first created an online real estate agent portal and sold subscriptions to agents in the US and Canada. Give me a call if you have any further questions. I'm certain I can save you time, money and a lot of grieve.

All the best!

Kevin McCarthy