Choosing the Right Value Metric for Your SaaS Pricing Model: A Make or Break Decision

Are you choosing the right value metricValue MetricA value metric is the unit of measurement that determines how a customer is charged. It's the axis along which price scales — such as users, contacts, API calls, revenue managed, or storage.Read more → for your SaaS pricing model?

It's a crucial decision…

It can make or break your relationship with your customers.

Choosing the right value metric for your SaaS pricing model is complex. The wrong metric can mean your fees feel more like a tax, and over time you and your customer will start to diverge as they feel like the fees don't match the value... and you'll end up with an unhappy customer, a crappy G2 review and a pile MRRMonthly Recurring Revenue (MRR)Monthly Recurring Revenue (MRR) is the predictable, normalized monthly revenue a SaaS company earns from active subscriptions. It excludes one-time fees, professional services, and variable overages, providing a clean measure of the subscription business's monthly run rate.Read more → walking out the door.

Here's a couple of things you can do to find the right metric.

Try and get as close as possible to the value you deliver to your customer. Start by mapping out all the steps your customer takes in the software to get their desired result. Some questions to ask yourself to help evaluate:

📏 Which one of those steps can we measure?

⚖️ Which of these lines up with our customer's expectations around our value?

📈 Which one do they use internally to measure their growth?

💳 Does my customer (or their industry) pay for other products based on this metric?

When you find this kind of value metric, you become completely aligned with your customer's success, it will feel natural to charge them more as they grow, and if done right, they should be comfortable with it. And even better, you become a trusted partner instead of a replaceable vendor.

Not to mention you're setting yourself up for growth! Every department, from product to marketing to customer success, will be fully dedicated to helping your customers grow.

So take your time when choosing your value metric — make sure it's easily measurable, lines up with the value you deliver and, ideally, is a growth metric for your customer.

Do you want to see more content on value metrics? Join the discussion on LinkedIn here.

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