In this month’s report, we look at five major types of packaging model changes SaaS vendors are consistently making
August 2022
Authors: Bryan Belanger, Colin Naples
Overall XaaS pricing trends and updates
Macroeconomic uncertainty is prompting pricing-related changes in the XaaS industry; the market varies considerably in the type of changes and the pace with which these changes are being made. SaaS companies are moving much faster with pricing changes and packaging experiments than other XaaS sectors.
The most obvious and most publicized response has been to implement price increases, typically between 5% and 10%. The most notable was Slack, which announced its first-ever pricing increase. Slack’s rollout included changes to its free plan and overall packaging and tier entitlements. The change will be rolled out on Sept. 1, 2022, and any customers who subscribe before that date will be entitled to the current pricing for their initial term.
Price changes like this are expected, but vendors that have enacted such changes have faced rollout challenges with messaging. In Slack’s case, price increases were overdue, which resulted in some backlash from buyers who had grown accustomed to a single fixed price per seat for Slack.
There is an undercurrent of other changes vendors are undertaking that XaaS Pricing encapsulates as “packaging optimization.” This includes consolidating tiers, adjusting tier entitlements (as with Slack), launching new or add-on products and/or adjusting tier messaging. In some cases, these changes are standard course-of-business updates. In other instances, volatility has prompted vendors to seek ways to optimize their product positioning through packaging updates.
We believe packaging optimization remains a primary and critical lever that XaaS companies of all categories should evaluate in the current environment to explore avenues for retention and upsell. [Tweet this!]
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XaaS Pricing updates by key area
Packaging models
- Changes are occurring across packaging models.
- Add-ons are a primary focus; add-ons are being launched, updated and expanded to other tiers and editions.
- Other companies, such as CRM provider vtiger and conferencing platform Airmeet, are consolidating functionalities into a single product suite. These companies previously sold multiple products in different modules but have recently consolidated the offerings into a single platform with different user types.
- Another common strategy is to remove an underperforming plan or adjust the entitlements or branding of a particular plan to optimize customer targeting.
Pricing models
- Minimal changes are being made to pricing models.
- Any pricing model changes are occurring in concert with a larger change, such as a new product rollout or comprehensive update to packaging.
- A pricing model update is inherently disruptive to existing customers; given the current environment, churn-conscious XaaS companies are unlikely to make major changes to pricing models for their offerings.
Pricing and discounting
- Overall, the market trend currently is to increase prices, typically by 5% to 10%.
- Notable examples include Slack and Klaviyo.
- However, depending on target customer profile and category, some vendors are also reducing prices by the same order of magnitude.
- Pricing adjustments will remain an area of primary focus for XaaS vendors that are adapting to the current macro environment.
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