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How Customer-Driven, Pay-As-You-Go Pricing Changes Everything | OpenView

Some SaaS companies still have the pricing strategy that their founder picked after a thirty minute whiteboarding session five years ago; those startups subist but rarely thrive. After fifteen years of running Logikcull, a Series B legal tech startup (and OpenView portfolio company), I’ve learned a lot about the art and science of pricing, particularly when I transitioned Logikcull from a managed service to software-as-a-service. As a SaaS company, it is crucial to prioritize finding a pricing model that aligns with both your broader mission and customer demand as soon as possible. You need to constantly test pricing schemes and remain open to further pivoting even after you’ve landed on a successful strategy.

If We Didn’t Pivot from Service to SaaS, Someone Else Would
In 2004, Logikcull was a highly profitable services company that streamlined legal discovery by processing and packaging data from customer hard drives. After seven years of successfully operating as a service, though, we realized that since we used a proprietary software to process the hard drives, we were manually doing what should have been an end-to-end digital process. Instead of shipping us hard drives to process, our customers could process their own data with our software if we made it self-service and put it on the cloud. As much as wanted to continue coasting as a service, we knew that if we didn’t make the pivot to software-as-a-service, someone else would.

From Profitable to Intentionally Unprofitable: The Importance of Catching the Pricing Bug Early
As a service, we worked with the largest companies (e.g., Bank of America) and charged a fortune: a $2,500-5,000 per gigabyte data processing fee, which often amounted to millions of dollars given that we often processed terabyte hard drives. By switching to SaaS, we aggregated and automated services that were previously purchased a la carte so we didn’t know how to adequately price our new software. Yet we needed to become even more profitable than we had been as a service, quickly. This sense of urgency helped us realize what some SaaS companies discover too late: the necessity of finding product-market-price fit ASAP. Rather than perfect our product, we were fortunately forced to take an MVP approach and prioritize pricing, a strategy that I now highly recommend.

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How Customer-Driven, Pay-As-You-Go Pricing Changes Everything | OpenView.

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