The AI Pricing Decision Tree
The AI Pricing Decision Tree
Plus: Updates from Grammarly, Quickbooks, and Mailchimp.
Welcome back to Good Better Best.
Earlier this week, we launched our Guide to AI Pricing. Today, we’re sharing the AI Pricing Decision Tree, a cheat-sheet to helping SaaS operators choose the right approach to pricing AI functionality.
Check out the whole guide here, which features examples of AI pricing from some of the top players in SaaS.
🚨 SaaS Product and Pricing News
Grammarly adjusted member limits.
Quickbooks raised prices.
Mailchimp reduced free trials from 14 to 7 days.
Drift removed its entry level plan.
Smartsheet updated the pricing page to focus on trial conversions.
🧰 The AI Pricing Decision Tree
Generative AI is evolving so fast that pricing and product decisions are a moving target. To help, we created a cheat sheet outlining the most common approaches we’re seeing across the PricingSaaS database.
Below, we broke down each approach with the goal that it solves for. Check out the full guide to see real examples of SaaS leaders implementing these strategies.
Add-On: Selling AI functionality as an additional fee on top of your core offering.
Seat-Based: Increase ARPU by pricing the add-ons in proportion to the cost of a seat.
Usage Based: Increase ARPA by for AI consumption (e.g., credits). This approach is more relevant for companies that do not charge per seat.
Hybrid: Increase ARPU and create expansion opportunities as users consume their allocated credits. This approach is the best of both worlds, but the most complex to implement.
Existing Tiers: Weaving AI capabilities into existing plans to drive differentiation.
All Tiers: Offer AI to all customers to enhance product value, increase usage, and improve retention.
Premium Tiers: Create expansion opportunities for lower-tier customers and improve retention for existing customers on premium tiers.
Enterprise Only: Leverage AI to drive expansion or as a negotiation/retention tactic.
New Product: Launching a new, standalone AI product.
Porfolio Expansion: This approach is ideal for companies with an established customer base, where adjacent products can be cross-sold to boost ARPU.
Thanks for tuning in and see you next week!
Good Better Best reaches 5,800 SaaS leaders, operators, and investors every week. Reply to this email if you want to reach our audience.