Our research suggested that optimizing your monetization strategy is the growth lever with the highest impact on revenue growth. Surprisingly, it was also the one least likely to be adopted by software companies. So what’s stopping them and how can these businesses get it right?
As simple as it sounds, improving how you price your products is going to make you more money. So what does optimizing monetization mean? Essentially, it means ensuring that your customers are getting value from your product and that you’re getting value from them in return by pricing for the right thing.
This is known as determining your value metric, aka what you should be charging your customers for. You wouldn’t want to charge your customers more for an upgrade or different price plan without generating more value (and nor would they want to purchase it), so it’s vital to ascertain what part of your service brings the most value. Once you have a clear idea of what you should be billing for it’s time to optimize your billing model . Continually iterating on pricing is the key to optimizing monetization.
Taking the time to iterate on your billing can be a time-consuming task - but the rewards are there for the reaping. Let’s take a look at the data behind this route to growth.
Optimizing monetization had the highest impact on revenue growth at 16%
We’ve identified 5 key growth levers to grow your SaaS company, as introduced in our blog SaaS Growth Strategies: The Five Stars Framework .
Expanding your Product Suite
From surveying hundreds of SaaS companies (all with between 1 and 500 employees) we found that the average impact of the monetization growth lever on revenue growth is 16% - the highest impact of all 5 of the growth levers.
So why, then, when we asked these SaaS companies which routes they’ve leveraged, did ‘optimizing monetization’ fall to the very bottom of these 5?
Here’s the impact that each growth lever was discovered to have on revenue growth:
3 in 5 SaaS companies have made more profit per customer with better monetizing
The financial benefits of optimizing monetization are clear, with 3 in 5 of the SaaS companies we surveyed stating that they’ve made more profit per customer through iterating on their pricing. 44%, meanwhile, have experienced an increase in revenue per customer.
In terms of the number of companies who plan to improve their monetization in the next year, over half said it was on the cards, giving an interesting reason as to why they haven’t yet taken this seemingly lucrative growth route:
The key to unlocking optimal monetization isn’t easy
If the key to optimizing monetization is a billing model that is frequently iterated upon, then the blockers that SaaS companies cited may go some way to explaining why the best growth lever for revenue is the least frequently used.
Almost half of the SaaS companies we spoke to found determining the right pricing plan to be the most difficult aspect when improving their monetizing (47%). Have a look at the other difficulties they encountered:
Optimizing monetization has boosted the revenue of the SaaS companies who took the leap. Learn more about how successful software companies grow with our SaaS Commerce Trends: 2020 Report or get in touch to see how Paddle can help you determine your optimal pricing model .