Best Pricing Practices or Conventional Wisdom?Always be up to Date subscribe to updates - September 23, 2010
Top Five Cloud Computing Pricing Trends You Probably Didn’t Know
Individuals can be prone to error, bias and results that can’t be reproduced, but crowdsourcing, as coined by Wired’s Jeff Lowe, suggests that the trends of a large group reveal collective intelligence, experience and best practices that can be replicated. So what does this have to do with pricing in cloud computing?
Curious as to what this approach might reveal, I took an analytic look at the pricing and sign-up strategies of 605 cloud computing companies ranging from Actionize to ZumoDrive to discover what tactics, trends and traps may be hidden in plain sight.
I quickly zoomed in on the 52% of firms offering a pricing plan as part of their online registration for Software as a Service (SaaS). Interested in how these 317 firms presented their products and pricing options, then I focused on exactly how they merchandised their products, how much they charged for them and how well they drove trial and conversions.
Whether you’re keeping tabs on your competition, in line with the majority momentum or planning to buck some trends, the results show what’s happening in the marketplace today.
Several of them defy conventional wisdom.
1. A (Pricing) Plan for Every Season
Almost one-third (31%) the 317 firms gravitated towards the same sweet spot, each offering exactly four separate pricing plans to their customers and clients. Another 47% deviated by just one digit, offering either three or five distinct pricing plans.
While the number of products a company sells is the most determining factor in setting the number of pricing plans, bundling and packaging strategies can make this number fairly pliable for industry marketers.
Applied with logic and common sense, this suggests that perhaps a menu of just two plans is too restrictive (for the company, for its customers or both), while six plans or more can easily become confusing and overwhelming.
2. Up Trumps Down & Editorializing Helps
Almost two-thirds (62%) of the 317 firms list their product in order from the lowest to highest priced. Most of the remaining third (32%) take the opposite approach, showcases product with their prices in a descending order. However a small remainder (6%) display their plans in a non-numerical fashion, focusing on product similarities, customer popularity or another concealed attribute.
But despite this overwhelming preference for listing prices in a sequential order, 54% of the firms also editorialize and highlight select products, labeling them as “our most popular” or “best value” to draw customers toward preferred choices.
3. Business Customers Like Freebies Too
Everyone knows that consumer-focused services such as Mindmeisters and ShutterFly have leaned heavily on a model offering basic accounts at no cost, whetting users’ appetites for the main course of value-added services that come with a paid, premium account. What has been less obvious until now is just how much business-to-business web service firms have adopted this tactic as well.
But business-to-buiness firms like LightCMS, SimpleBill and
Mockups are now also acquiring new business by removing pricing barriers to entry. Convert Insights’s study reveals that almost half (47%) of business-to-business software services also offer these “freemium” services in order to drive trial and conversion to paid accounts.
4. Free 30-Day Trials (with a Credit Card) Lead the Pack
Generally, free 14-day and 30-day trials saw increased conversion rates ranging from 2% to 10%. Firms that don’t already offer free trials, such as GetPrept and Icebrrg, could anticipate an increase in sign-ups of 50% to 65%, therefore eventually realizing conversions rate of 1% to 7%.
Regarding trials, one month must feel pretty good right now to most firms and their customers. Just more than half of the firms offered 30-day trial periods. While only 16% offered 14- or 15-day trial periods, a shocking 28% of firms offering trials did not specify the length of the free trial.
Although not an exact overlap of the firms offering 30-day trials, 51% of firms required that customers provide sign up with their credit card information in order to receive a free month trial, which would begin billing unless canceled.
5. Everyone’s on Cloud Nine
In the SaaS space, nine sure is a popular number. More than two-thirds (67%) of firms surveyed priced their monthly services ending in rounded $9, $9.95 or $9.99.
In fact, the prices of 70% of all firms did not include decimals points or additional cents. Therefore, in the popular range of nine to ten dollars, most monthly prices fell at either $9 or at $10, rather than at the $9.95 or $9.99 rate that decades of infomercials have trained us all to expect.
As part of a market snapshot taken in September 2010, these results may well depict the direction that overall direction for SaaS pricing and registration. But given the growth and innovation in the marketplace, it may also represent the common results in an industry that prizes uncommon players.
After all, as detractors of crowdsourcing argue, looking for a group to average out the best solution and technique often fails to recognize experimentation, initiative and getting there first.
So what do you think? How long will free-trials drive conversion? And will trials with credit card become the best practice?
317 Sites with Price Plan Researched
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