Pricing & Packaging and the developer buyer — 4 insights from SaaS IPOs

  1. X-small: ACV < $10k, e.g. Dropbox, Slack, and Zoom. 13 companies
  2. Small: $10k <= ACV < $50k, e.g. Datadog, PagerDuty, and ZoomInfo. 12 companies.
  3. Medium: $50k <= ACV < $100k, e.g. Fastly, Sumo Logic, and ZScaler. 6 companies.
  4. Large: $100k <= ACV < $1m, e.g. Anaplan, Medallia, and Snowflake. 8 companies.
  1. Insight #1: x-small ACV companies have visible pricing; the rest tend to be opaque. Companies that sell to developers all have visible pricing irrespective of ACV.
  2. Insight #2: A quarter of companies offer a free version of their product so customers can “try before they buy”. On the opposite end, a quarter insists on a sales demo as the only way to experience the product. The rest offer a trial as the offer of least friction. Where you fall on that spectrum depends on the ACV and buyer profile.
  3. Insight #3: Trials are typically 30 days long, do not require a credit card, and are fulfilled immediately.
  4. Insight #4: x-small ACV companies offer monthly billing. Annual billing is offered at an average 20% discount to monthly billing. 90% of companies selling to developers offer monthly billing.
  1. Benchmarks for Key SaaS metrics from SaaS IPOs of 2018–2020

Insight #1: Pricing Visibility

Price visibility spans a spectrum. On one end is total transparency where companies show the price per unit (e.g. per seat price) for at least one package. On the other end is the practice of showing a “starting price”. I consider any numerical guidance on pricing an example of pricing visibility.

Percentage of companies with visible pricing

Insight #2: The least friction offer

There are three packaging archetypes: free, trial, and sales demo. Companies can offer a menu of packages from these archetypes. Free gives the least friction to the buyer, followed by trial and sales demo. When a company offers packages from multiple archetypes, the “least friction offer” is the archetype with the least friction. For instance, if a company offers a trial and sales demo, the trial is the “least friction offer”.

Distribution of the least friction offer

Insight #3: Trial duration, fulfillment, and credit card requirements

The median trial duration is 30 days. Since no company in this data set offers a trial longer than 30 days, this is a safe option for the rest of us.

Insight #4: Monthly billing

Practically all companies in this data set offer annual billing. However, 46% also offer monthly billing. This is a sizable number, driven primarily by x-small and small ACV companies:

Summary

The goal of x-small ACV companies is to reduce buying friction: hence, they focus on being transparent in pricing, offering free or trial versions of their products, and offer easy pay-as-you-go monthly billing options.

Footnotes

  1. ADIN, AVLR, CBLK, DBX, DOCU, DOMO, ESTC, PLAN, PS, SMAR, SVMK, TENB, XM, ZS, ZUO went public in 2018. BILL, CRWD, DDOG, DT, FSLY, MDLA, NET, PD, PING, SPT, WORK, ZM in 2019. API, ASAN, BIGC, BSY, FROG, JAMF, MSP, NCNO, SNOW, SUMO, VERX, ZI in 2020.

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