Lack of pricing transparency remains a huge issue across the software industry and it’s one that’s causing companies to overspend on their SaaS applications by an average of 26% – often substantially more.
But while 55% of SaaS providers continue to obscure their list prices, often leaving finance and procurement leaders with little to no frame of reference on costs, it’s not the only pricing transparency issue at play.
This is because it’s not just the list prices that are being obscured. In some cases, it’s also entirely separate pricing models.
But what exactly are these unadvertised pricing models? And how can you leverage them?
Here’s what you need to know.
Examples of hidden SaaS pricing models
Purchasing hours rather than additional licenses
User-based pricing certainly offers many benefits to organizations – including the ability to scale usage and costs according to headcount – but one of the downsides is that this model doesn’t always align with the actual usage or value derived by different users.
Take the customer service software sector, for example.
While we can assume that the majority of customer support staff will be avid users, given the general ‘stickiness’ of these tools – that being the metric used to measure the frequency and depth of user interactions within the platform – what about the employees that require access, but not to the same level that a dedicated customer support representative might?
A member of the IT team, for instance, that may be required to log in from time-to-time to answer more complex customer queries. Or another non-support staff needing ad-hoc access to handle escalated customer issues or complaints.
Unfortunately, this very situation has left many organizations needing to pay for additional licenses, which of course comes at an extra cost.
In fact, we can see from the average utilization rates for tools within this sector that only two-thirds of licenses are being actively used (66%). Meaning a third aren’t – while a proportion of these underutilized tools will no doubt be a result of overprovisioning, it’s likely that some are for employees outside of the core user base requiring limited access.
But what if there was a way to grant these employees access without having to pay out for numerous additional, and largely unused, licenses?
In some cases, there is.
While almost all customer support tool providers advertise user-based pricing, what many SaaS buyers aren’t aware of is that some vendors also offer per-hour pricing.
This means that in some cases you may be able to purchase an additional 40 hours, for example, to be used on an ad-hoc basis by non-support staff requiring occasional access, in turn saving a potentially substantial amount of money on unnecessary user licenses.
Paying per document rather than per seat
Another type of SaaS provider operating a hidden pricing model are those within the document management software sector.
While these companies tend to advertise their prices either by seat or by user, we’ve found that some also charge per document instead. They’re just more subtle about it.
But what exactly does this unadvertised pricing model entail?
Well, despite the average utilization rate for these tools being higher than average at around 77% – in many cases, only a small number of employees will handle these processes and therefore require access to the platform – this isn’t the case for every company.
Some, for instance, may need to grant their entire sales team access, in order to create proposals, quotes, contracts or other sales documentation, or to obtain electronic signatures.
The problem is, despite so many employees needing access, the frequency of this access is likely to be limited. Which means that the cost of a standard subscription based on 20 users, for example, could simply be unjustifiable.
It is for this reason why some providers are now charging per document instead. In other words, offering companies a plan that consists of unlimited users but limited documents.
How to benefit from unadvertised vendor pricing models
With the price of software increasing by an average of 12% year-on-year and the average organization now using in excess of 130 tools, many are left with no choice but to minimize spend.
But while there are a number of ways to achieve this, including rightsizing your SaaS licenses and leveraging pricing benchmarks as part of a solid negotiation strategy, capitalizing on unadvertised pricing models can also prove successful in lowering the overall cost of a contract.
The challenge is knowing how to find them and how to get vendors to agree to these terms.
At Vertice, our in-depth knowledge of the SaaS sector, combined with our access to the pricing and discounting data for more than 16,000 software vendors worldwide, means we can not only see what companies like yours are actually paying for their subscriptions, but we can also pinpoint the pricing models that aren’t made publicly available.
Better still, our experienced purchasing team can negotiate on your behalf, ensuring that you’re getting the best possible price on any SaaS contract.
See for yourself how we helped one company save as much as $170,000 on a single SaaS contract and achieve ROI in just three days. Alternatively, request an audit of your software stack and find out how much you could be saving on your annual SaaS spend.
