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What does everyone here think about a Pay What You Want SaaS revenue model? To me it seems like if the good that you’re selling doesn’t have much material cost, then letting users decide on a price could be a good way to get people interested. It also hopefully means that fewer people would not buy it for price reasons. Obviously, if your product requires lots of support or server costs, then this is much less feasible, but many SaaS products have a low cost to produce. To mitigate fixed costs, you could set a price floor.

Despite the appeal of this revenue model, I couldn’t find any other examples of this revenue model - are there any other companies doing this? If not, why not?

Disclosure - I am currently trying this revenue model for a language learning website MVP I’m working on (I don’t want to be spammy, but if people are interested I can post the name/link).

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    That essentially reduces to the free with donation option that already exists. Doesn’t work out for most FOSS in terms of making money. There could be a psychological benefit to popping up an initial screen to buy it with user-selectable amount. Maybe put a sensible default with a “Skip payment. Pirate it instead.” option on bottom-right like other skip options to evoke a feeling of responsibility in some users. Important that there’s a nearly, one-click default to pay with to maximize convenience. I don’t have experimental evidence but it seems important.

    Far as the concept, it’s been done by many authors but I didn’t find almost anything for software. Search terms necessary to narrow the question down further were basically buzzwords that produce endless garbage in results. Did find one, though:

    https://defuse.ca/honestyware.htm

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      Interesting link! The MVP that I built has a minimum price of $1 - this is because Stripe’s minimum price is 50 cents, and if that had been my minimum price, then after Stripe fees I would only be making about 17 cents/month/user. At $1, I am making 68 cents/month/user, which brings the pricing model from “totally impossible to live off of” to only “probably impossible to live off of”.

      On the note of the “Skip payment, Pirate it instead” idea, I remember something similar for some Linux distro (maybe elementalOS?) getting a lot of hate on HackerNews. Obviously HackerNews isn’t the end-all-be-all, but I think that some people might be upset if you insinuate that they are doing something bad by not paying for your content.

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      I think this is a mistake. Pay-what-you-want works OK for entertainment but I’ve never heard of it working anywhere else. It seems especially likely to do poorly for language learning - users have high churn because they need daily effort towards something that pays off months later. If they set a low price they’ll be especially likely to churn out because “eh, it’s only a couple bucks” rather than “I better make sure I get my money’s worth”.

      When setting a price, ignore costs entirely. Forget them. Live in your customer’s head. How much value will they get? Will they make or save money directly? Why do they want to learn a language? Will they get a raise at work, land a job, be able to emigrate, get along with their in-laws, what? Then, how much is that worth to them? Charge a reasonable percent of that. Now you’re allowed to think about costs - if a price is reasonably connected to value and the equation (price - cost) leaves you a good profit, great, do the business.

      Please do post the name and link. Given that you wrote a serious question and have engaged with comments, it’s not spammy at all.

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        I think the problem with guessing what kind of value your customer gets is that different customers get different amounts of value. For example, someone who is using my site to help them pass a French class in college might pay $10/month for it, and someone who just wants to keep themselves from getting rusty might only be willing to pay $3/month for it. Something else to note is that I have a price floor of $1, meaning that essentially the product costs $1/month and takes donations. I also have a bonus feature for users whose subscription is above average (like the Humble Bundle), and so far that has actually been working fairly well to drive the average price up.

        Although to be honest, I utilized this pricing scheme mostly as an experiment. I wanted to see what the average price would be, whether it would generate any discussion around the revenue model, etc. Plus it gave me a chance to do a lot with Stripe’s API.

        Anyways, the site is https://parale.la. I’m going to write a retrospective blog post on what the average price was, how much traffic I got from different sources, return on investment for ads, and other such topics. I’ll be sure to post it here once I’ve written it.

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          As I mentioned elsewhere in thread I’m a big fan of tiered pricing for this, finding some feature that college students can’t live without (reminder notifications? study plans for exams?) and putting it on a high-priced tier.

          I really look forward to that writeup of your results. I remain super skeptical of pay-what-you-want and would love to be proven wrong by a thorough counter-example. :)

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        I would strongly suggest against this for many reasons. Most importantly, price isn’t just what you charge. It’s also a statement to potential customers about the value that you deliver. Pay what you want demonstrates that you’re not confident in the value you’re delivering. In many cases, customers are far more constrained by time and attention. They’re willing to pay - if there’s value in your offering.

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          then letting users decide on a price could be a good way to get people interested

          It’s better to just concentrate on providing value. People will be interested if your product is valuable enough to them.

          Having a “free tier” generally just attracts the kind of not-really-customers that you’d rather not deal with.

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            I agree that free tiers generally are not the best plan. How do you feel about Pay What You Want with a price floor? Or PWYW with incentives, like the Humble Bundle, where paying X% over the average gives you some extra features?

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              Can you name five products sold pay-what-you-want outside of entertainment?

              Tiered pricing is insanely valuable and I heartily encourage its use.

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                Sure, I mean there are plenty of online courses, restaurants, operating systems (Ubuntu and elementaryOS come to mind), etcetera. But I see your point, that the model is much bigger in entertainment (Radiohead being the most well known example).

                And yes, tiered pricing is great!