Please note that I am specifically referring to SaaS providers that have adopted the traditional pricing model of charging per user per month, and have at some point considered offering pricing tiers for bulk users (ie: first 10 users are billed at $50 per user per month, then next 20 users at $45, the next 50 at $40, etc). In other words, I am not referring to offering discounts to customers who pay their monthly fees in advance for the year, as this has already been covered extensively on this forum here and here.
The reason I ask is because I've recently read "Behind the Clouds" by SalesForce.com CEO Marc Benioff. Marc discusses how all their customers pay the same monthly user subscription fee, regardless of whether they have 5, 50 or 5000 users. To quote Marc:
Many of our sales reps who came from the enterprise software industry were accustomed to offering a discount. The discount had become their closing strategy when they had to make their targets. I didn’t think we needed that motivator, and I believed that our service was fairly priced. Discounts, I thought, were tied to perceived risk. Offering deals would compromise the service’s value.
Most important, by keeping the price the same for everyone, we kept the costs low for everyone. It was the most democratic way. Unlike the rest of the industry, we charged the same per seat, whether someone wanted two licenses or two hundred. Why should someone pay less just because his or her company was bigger? That didn’t seem fair.
Furthermore, some companies take the tiered subscription fee model I described above, and extend it with an "unlimited" user / flat license fee for their largest customers. An interesting argument against this was put forward by Joel Spolsky in his article on pricing software, where he explains that:
I have certain competitors that do this: they charge small customers per-user but then there's a "unlimited" license at a fixed price. This is nutty, because you're giving the biggest price break precisely to the largest customers, the ones who would be willing to pay you the most money. Do you really want IBM to buy your software for their 400,000 employees and pay you $2000? Hmm?
As soon as you have an "unlimited" price, you are instantly giving a gigantic gift of consumer surplus to the least price-sensitive customers who should have been the cash cows of your business.
It's interesting to hear the views of these industry giants.
What is your personal experience? Do you offer bulk user discounts for your SaaS solution?
If not, why not? And if so, why (and how)?
