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Slack charges per active user only as opposed to the per seat pricing charged by SalesForce irrespective of the usage. Why hasn't this become more popular with other subscription companies selling on the basis of seats? I would think you can really use this as a differentiator, create goodwill for yourself and overall and make for an easier sell. But more importantly, why aren't more users asking for it already?

  • YK

    Yannis Karagiannidis

    almost 3 years ago #

    It's so simple. There are so many companies (especially in the B2B space) that have "ghost" accounts - accounts that are paid but never used. Switching to a "per active user" price will have a dramatic effect on their pricing

    • SN

      Sanket Nadhani

      almost 3 years ago #

      From a business point of view, I agree. But I am also thinking a business could use this to really align themselves with delivering value to the customers—make a product so valuable that users embed it in their day-to-day lives. And of course, it will help you generate buzz and goodwill.

      But what I am wondering most about is why isn't this something users are demanding for? I am seeing companies using anything from 30-100 SaaS products depending on size, and more and more products to manage billing of multiple SaaS apps and remove the ones that are not being used coming up, so wondering if it's just a matter of time?

  • VR

    Vignesh Rajendran

    almost 3 years ago #

    In case of slack you can derive value only if you have separate users in the system, you cannot have a common login to use the system. So if you have SaaS app and you get a value out of it by common login, then user based pricing wouldn't make sense.

    • SN

      Sanket Nadhani

      almost 3 years ago #

      True, this works best for tools that have a per seat pricing. But even for tools with a common login, if the customer has not used it at all in a month, don't charge them?

  • KP

    Kashyap Patel

    almost 3 years ago #

    Sanket,

    I believe there are several reasons for the active users pricing strategy having not caught on:

    1) Because those unused but billed accounts are useful for the revenue. You are not supporting them but yet getting paid for it.

    2) It is sometimes difficult to manage find what is considered as an active user. For example, would you consider only a login as active? Or would you consider some user activity as active? In that case, what activity is classified to be used for identifying an active user?

    3) Some SaaS systems have temporary users or guest users. How would you charge for them?

    4) Many SaaS companies use subscription billing software. Active users as a strategy is normally not supported. Or if it is, then it is generally through the API and in that case, you are better off directly integrating into the payment gateway.

    5) Bill shock: If the bill for a particular month increases by a larger amount, it causes bill shock to smaller businesses. They want predictability if not anything else. So active users as a strategy may not work.

    6) Many companies have already realized that value-based pricing will earn them more money than per-seat pricing. In most cases. So they are moving away from such a model.

    Nevertheless, it is a great pricing strategy. If a product is as habit-forming as Slack, you would never require active user strategy. You would always have active users all the time. I first saw this pricing in the Basecamp and was pleasantly surprised by the same. It communicates the boldness of the value that the product brings but I believe it has got its own set of problems that early stage SaaS companies will try to avoid.

  • KI

    Kevin Indig

    almost 3 years ago #

    I would argue it is... At Atlassian you also pay per user. It has to do with their business model, called "land and expand", too.

    I wrote about it here: http://www.kevin-indig.com/growing-a-saas-company-to-100m-arr-without-a-sales-team/

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