Ditch Feature Paywalls: How Usage-Based Pricing Can Benefit Your SaaS Business
Feature-based paywalls need to go.
It's time to embrace a new era of SaaS monetization with usage-based pricing that not only benefits businesses, but also puts users first.
Usage-based paywalls offer several benefits that make them a better option for many SaaS products.
Increased Engagement
By allowing users to access the product for free up to a certain point, usage paywalls encourage users to try the product and engage with it. This can lead to higher conversion rates and more loyal users, as they have already invested time and effort into the product.
There is a concept called The Endowment Effect. It refers to our tendency to value items we own more highly than we would if they did not belong to us. As users begin to use more of the app, it starts to feel like they already own it. This means it will be more painful for them to adjust their behavior to stop using the app.
Feature-based paywalls force the users to decide whether this effect could ever kick in.
Better Data Around User Patterns
Usage-based paywalls offer a technical advantage over feature-based paywalls.
With usage-based paywalls, you can collect data on how users are using the product and what features they need the most. This data can then be used to inform product development and improve the user experience.
In addition, usage-based paywalls allow for more granular pricing, as users are only charged for the specific features they use. This can lead to a more accurate and fair pricing model, as users are not paying for features they don't need.
Overall, the technical advantages of usage-based paywalls make them a better option for many SaaS products.
Incentive Alignment For A Better Ecosystem
Users will also become more efficient with their usage of the product.
When users are charged for their actual usage of the product, they become more aware of how they are using it and may be more mindful of the time or resources they are investing into it. This can lead to more efficient usage, which can benefit the user, the business, and the entire ecosystem around the product.
For example, if a user is charged based on the number of emails they send through an email marketing platform, they may be more strategic and targeted with their email campaigns to maximize their return on investment. This can lead to higher engagement rates from their subscribers and ultimately, a higher return on investment for the user. Plus, less spam.
By incentivizing efficient usage, usage-based paywalls can help users to get the most out of the product while also ensuring that the business is compensated fairly for the resources that are being used.
The Benefits Speak For Themselves
While feature paywalls can still be effective in some cases, usage paywalls offer a ton more benefits that make them a better option for many SaaS products. By encouraging engagement, providing better user data, and ensuring better incentives, usage paywalls can help SaaS companies grow much more robust products.