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Pricing Model Research

As Head of the Platform @ TEN13 I built a product 0-1. It was a two-sided marketplace between Investors & Startups looking for funding.

We’re early movers in the local market with a unique product. So we pursued a Premium Pricing strategy. That allowed us to be profitable on day 1 and cover op-ex costs and growth. We were deploying a “Clip-the-ticket” pricing model where it was a % of invested as fees. Competitors didn't have the trust and network effects we managed to build into the model in the first 6 months.

When working at a much larger organisation in Neo-banking in Berlin @ N26. It also had a Clipped-The-Ticket strategy being a bank.

The competition was with competitors with tiered “Premium” subscription products. This was much more competitive. From the outside, this may look like a competitor-based pricing strategy. Often due to the competition in the market, it was more of a Market Penetration pricing exercise. Between competitors like Starling, Monzo, Revolut and N26 in the UK & Greater european market.

Product Pricing Analysis Checklist

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Is this a new feature or an existing one?

What is the true cost of the product or the service?

Did we talk to customers about it yet? What was the feedback?

What about the greater market?

Does our competitor have similar feature, what do they charge?

Market Analysis

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Competition

Seek: Competition like Seek has moved to Dynamic Pricing for the last couple of years that has often made it more confusing for vendors to understand and budget for their platform. It also increases friction during integration and renewal.

Otta: The biggest competitor mainly based in Europe. Overall great UX and they do some things better than hatch in my opinion as their main focus is Startups. Starting at £150 / job / month this is almost double hatches pricing however they don’t have a platform fee per month.

Macro Climate: Considering the data shows that the average salary for a graduate role in London start at £30,000 ($AUD 57,912.84) vs AUD $75,000 you could consider that Hatch current pricing model is underpriced in the market.

JoinHandshake: Sales based approach to onboarding employers. With a social approach (home feed) for job seekers particularly focusing on students. Only sign-up through .edu email addresses. As a growth tactic this is great, but more could be implemented to take it to a facebook, TTYL, or

Gassed⁠

level of virality.

Faire: I saw this listed as a Market Leader in the 3rd wave marketplace, but often don’t see it mentioned much so it’s great to be able to discuss how a B2B aggregator models like faire have innovated on the B2B approach with a B2C style.

Marketplaces

Hinge, Bumble & Uber (Customer Targeted): Their could potentially be an advantage to offering premium pricing to consumers during dynamic periods or testing the freemium tiers (Application limit). Similar to how third wave marketplaces like hinge (hinge plus), Uber (Uber One), Tinder (Plus, Gold, Platinum).

Feedback

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From initial feedback gathered from the investment deck

Key Customer Themes:

Customers are dissatisfied with job board pricing models. They don’t like uncertainty of dynamic pricing, long lock in periods, and perceived low ROI.

Customers prefer subscription plans for easier central budget approval, rather than having role posts signed off individually.

Customers want flexible plans that scale up and down with their volume.

Beyond role posts, customers want to pay for plan features that unlock employer brand awareness and allow them to connect with the next generation with their profile.

New Features

New feature bundling is interesting. Add-on pricing per feature is the most conventional way to approach it. However if it’s an AI based feature it’s much more a competitive market almost every product is trying to pitch one and you of course have sandboxes and APIs for companies to create their non-native or fine-tuned options.

Best Resources

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Hubspot

Hubspot probably has the best resources even breaking down the various calculators you can use to break down in accessing which strategy or model to approach.

You can find a copy of the pricing model calculator

here⁠

You can find Hubspots breakdown of pricing models here

Product Marketing Alliance

Product Marketing Alliance also offer a great deck on how to approach product pricing you can find it

here⁠

Overview of Strategies & Models

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Pricing Strategies

Pricing Strategies

Name

Description

Pricing Strategies

This pricing strategy involves adding up your costs, adding percentage points on profit, and setting your prices from there.

Competitor-based pricing

Quite simple—you look at your nearest competitors and base your prices on what they’re charging. This is often a useful approach for startups. If you’re unsure of your market value, see what your competitors are charging.

Value-based pricing

Involves a process of looking out towards your customers. Although time-consuming, if you ask your user base what they expect from your products, then you can charge them based on their feedback. This can sharpen up your market value and makes sure you’re appealing to your audience.

Market penetration pricing

Here you’ll ignore the real costs of your product, with the aim of choosing a competitive price. This can help you to launch onto the market and appeal to your audience immediately.

Premium pricing

Takes the approach that higher subscription costs means better quality. So, you charge above the market value for your product, with the explanation your product offers more to your audience than your competitors.

Skimming pricing

The opposite of the market penetration strategy. Here you make your subscription price high. The belief behind this is customer demand will decrease the longer your product is available. So, you can lower the subscription cost over time—that makes it increasingly competitive in the market.

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Pricing Models

Pricing Models

Name

Description

Flat-rate pricing

You provide one product, one set of features, and a set price. It’s the simplest model and a straightforward way to sell your goods.

Advantages: It’s easier to sell this way. You can focus all your marketing and sales at selling one offer.

Disadvantages: It’s not very flexible, so you often have only one shot at winning over customers. So, you’ll need to make that opening offer very tempting.

Usage-based pricing

Pay-as-you-go, essentially. The cost of your software is down to the amount a customer uses it. The more usage, the higher the bill.

Advantages: It’s fair to use—price scales alongside the time spent on the software. This means a customer can judge their use of your software for the right monthly fee. The model also removes big upfront fees, while charging heavy cost users the right amount for their extra usage.

Disadvantages: It makes it harder to tell what customer costs will be. In turn, that makes it more difficult to predict your revenue

Tiered pricing

Here you can offer packages featuring different features to cover different needs and budgets.

Advantages: You’ll appeal to many buyer personas and maximize the revenue from each type. There’s also a great chance to upsell, as customers can easily move to a better package if they need to.

Disadvantages: It can confuse some customers in the sales funnel, leaving them to drop out of the sale. Also, heavier use customers can easily exceed their use on a top tier package.

Per seat pricing

A popular choice thanks to its simplicity. Using this, a customer pays a fixed monthly price. If they add another user, then the price doubles. And third and it trebles. So, it’s very clear to customers what their money buys them.

Advantages: It’s easy to understand and helps customers calculate the costs. In turn, your revenue scales alongside your customer’s continuous extra users. And that means you can easily predict your revenue.

Disadvantages: This model does let customers cheat with a single login between multiple colleagues. And that means it’s easy for customers to churn at low cost when they’re done with the software.

Per active user pricing

Advancing on from per seat pricing, this model encourages customers to sign on as many employees as possible. But the customer is only charged for active users at the end of a billing period..

Advantages: Customers get a great deal and don’t waste any money. They’re also more inclined to roll out the software across the company, without any huge bills if it doesn’t work out for them.

Disadvantages: For smaller businesses, the pricing model doesn’t work as well for you. It’s more effective with enterprise-level organizations.

Per feature pricing

You can use your software’s features as a pricing model. Here you provide tiers with different features available. For example, the highest cost for all of your core features. The lowest charge for fewer.

Advantages: It’s a convincing way to get customers to upgrade, as they’re aware of what they’re missing out on. It also saves your business resources if fewer customers use intensive features.

Disadvantages: It’s tricky to get this right and you could easily get the balance of your packages wrong. You may also annoy paying customers by blocking them from key features

Customizable pricing

Here you let customers customize their basic service package, adding on features as and when they need them.

Advantages: Proves popular with smaller businesses, so it can help your software gain popularity with SMEs. The flexibility is a proven way to encourage subscriptions.

Disadvantages: Revenue is uncertain as customers only choose certain features. And you risk devaluing your product by only offering certain features, rather than your full service.

Freemium

You could provide your software in limited form for free. Around that, you can offer paid packages for those who want to improve what your software offers.

Advantages: Can promote a high sign-up rate as customers try out your software. So, you get your foot in the door and have the potential for word of mouth to make you a success story.

Disadvantages: Obviously, that may all result in no revenue if customers don’t start paying. Churn rates can also be high. And you risk devaluing what your business offer

Freemium, but with ads

You use the freemium model, but rely on adverts to generate income. Then when a customer signs up to your paid service, you can remove the ads.

Advantages: Guarantees you’ll have an income source while you wait for your software to gain more paying customers.

Disadvantages: You may annoy your customers with adverts, which could lead to high churn rates. As well as poor word of mouth.

Per storage user

A combination of tiered and usage-based, here customers pick from the amount of storage tiers. The more they need, the more you’ll charge them.

Advantages: You charge customers for exactly what they’re using, so you can maximize profits. You also ensure customers don’t overuse their quote with unlimited storage space.

Disadvantages: There’s a risk of excluding customers who don’t fit into your storage tiers.

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