The Power of Subscriptions: How to Commercialize SaaS Products from 0 to 1?

This will be the output of another professional series in the workplace after the last output of Sanbai in the user growth series, because the entire series is around the commercialization direction of SaaS subscription, so I named this series of content “The Power of Subscription”, this content is the first in the series, mainly sharing how to commercialize SaaS products from 0 to 1? I will update the remaining 4 articles in the next month, welcome to follow me and read later.

1. Why do you want to write this article?

Looking back on my work experience over the past 10 years, if I were to summarize my knowledge reserve and direction of expertise through a few keywords, I think it would be “AI”, “user growth”, “commercialization”, and “SaaS”.

In 2024, I spent a lot of time summarizing and reviewing my knowledge and experience in the direction of user growth, and precipitating my content output in the user growth series into a knowledge base “AI & Business Growth Research”The content of the user growth series is also fortunate to be published as a complete book in Tsinghua University Press, with the title “Growth Leverage: 6 Steps to Explore User Growth”, welcome to read it later; At the same time, in order to learn and understand AI, in the past two years, on the one hand, I have output a lot of in-depth research in the field of AI, precipitating a knowledge base of AI learning, and on the other hand, I have also bowed to the game and my production and research team to do oneAI products in the field of deep research, self-exploration of the transformation path of AI product managers;

In the process of making AI products from 0 to 1, on the one hand, I practice and summarize “AI” and “user growth”knowledge and experience in the field, and at the same time, they are also practiced“Commercialization”, “SaaS”experience in the field; How to commercialize the SaaS product of AI Kuaiyanxia from 0 to 1 is also something I have been exploring and working for more than a year. Therefore, this year, in addition to continuing to output content on AI and user growth direction, I will also focus on “SaaS” and “commercialization”These two key areas, like the previous AI and user growth, output my knowledge and in-depth thinking in these two fields through the review system, so that when I encounter related problems at work, I can think clearly and answer these questions professionally, and finally I hope that my summary output can help more friends who work together in this field.

2. Summarize the content of this article in one sentence

“OneSaaS products, how to design and output a commercialization plan from 0 to 1, including business strategy, growth strategy, indicator system and organizational strategy, and increase subscription revenue through continuous operationThis is my one-sentence summary of the entire content of this article. Throughout the article, I will focus on the following questions:

From the perspective of business model, think about common business models in the SaaS field and how to choose the most suitable business model for the enterprise itself.
From the perspective of commercialization strategy, think about how to design SaaS commercialization strategy, including product commercialization version, value-added rights, package pricing, and payment contact strategy design.
From the perspective of product logic, think about how to design the product logic of SaaS subscription based on the commercialization strategy.
From the perspective of operational strategy design, think about how SaaS products set up subscription packages and pricing plans;
From the perspective of subscription revenue growth, think about how to improve the paid conversion rate, renewal rate and ARPU of SaaS products.
From the system of data indicators, think about how to build a data index system for SaaS subscriptions;
From the perspective of the organization, think about how the enterprise organization of the commercialization business of SaaS products is designed;

3. Who is this article suitable for?

I think the following groups of users may be able to gain some from this article:

Practitioners in the SaaS product field, especially strategic designers, product managers, operators, and salespeople responsible for commercialization and user growth business;
Practitioners who are interested in systematically understanding the subscription logic and commercialization logic of SaaS products;

4. How will I write the entire article?

In my past work experience and in the process of communicating with many peers, I found that most friends mainly lack a top-down system thinking framework when formulating product commercialization plans, that is, what problems should be started.

What does a product manager need to do?
In the process of a product from scratch, it is not easy to do a good job in the role of product manager, in addition to the well-known writing requirements, writing requirements, writing requirements, there are many things to do. The product manager is not what you think, but will only ask you for trouble, make a request:

View details >

Therefore, in this article, when discussing each part of the content, I will pay more attention to the thinking framework of the upper level, and not too much discussion of the details of the execution, but I will try to make the output content concretely implemented, rather than empty theory.

In addition, in each part of the content, I will try to bring some actual cases in the industry to facilitate everyone’s better understanding, in the full text I will involve product cases including Tencent Conference, WPS, Zoom, Microsoft office and other well-known products in the industry, and I will also list the AI products I am polishing“AI Quick Research Hero”Some cases encountered in

5. Overview of the full series of content outlines for “The Power of Subscriptions”

The following is an overview of the entire commercialization series, which will include 2 parts: exploring the business model of SaaS products and how to design a commercialization strategy for SaaS subscriptions.

1. Exploration of the business model of SaaS products

1) Common business models of Internet products and SaaS products

Business model of Internet products
Business model for SaaS products
Choose a business model that suits you

2) Why do many products like to do “membership subscriptions”?

What is a SaaS subscription?
The temptation of subscription-based business growth

2. How to design a commercialization strategy for SaaS subscription?

1) How to design a commercial version of SaaS?

What is a commercial version?
What types of customers is your product targeting?
What logic is used to design a commercial version?
Some thoughts on commercial version design

Practical case: Design a commercial version of AI Kuaiyanxia

2) Equity design of different commercial versions

How are paid benefits designed?
How to plan and distribute benefits for different commercial versions?

Case study: Take the equity design of WPS as an example

3) Subscription packages and package pricing design

How are the different commercial versions of the package designed?
How are subscription packages priced?

Pricing case: Take a domestic SaaS product as an example?

4) Design of paid contacts, conversion guidance and upgrade links

Payment window design strategy for SaaS products
Payment contact strategy for SaaS products
Subscription upgrade guidance strategy for SaaS products

3. Product logic design of SaaS subscription

Basic concepts: organization type, commercial version, tenant type, account, seat
Order behavior logic: order, add-on, single purchase, renewal, upgrade, refund
Equity logic: distribution, consumption, and update
User state logic

4. How to find the strategic direction of SaaS product subscription revenue growth?

1) How to break down the growth formula for SaaS product subscription revenue?

2) How to find key levers for subscription revenue growth?

First, clarify the key strategic direction of revenue growth
Develop growth strategies through business analytics

3) How to optimize conversion funnel efficiency and improve paid conversion rates?

Locate key churn links in the conversion funnel
Optimization of the funnel of the main process of the product
Conversion funnel optimization for payment window exposure to pay

4) How to improve the renewal rate of paying users?

The higher the proportion of users who purchase auto-renewal products, the higher the overall renewal rate
Let paying users continue to use the rights, and the more users use the rights, the higher the probability of renewal
Strengthen the perception of privileged value, let users know that they have obtained privileged services, and enhance the sense of dignity of subscribers
Continuously update product and service capabilities and establish a rich rights and interests system
Establish a complete renewal reminder reach channel

5) How to increase customer unit price or ARPU?

Five. How to build a data indicator system and analysis model for SaaS subscription?

1) Data indicator system for SaaS subscription

Commercial revenue metrics
Customer value metrics
SaaS health metrics

2) SaaS subscription analytics model

Revenue analysis
Conversion funnel analysis
Business health analysis

6. How to design an enterprise organization for SaaS subscription business?

1) The importance of organizational design around commercialization

2) How is the organization designed around commercialization?

Organizational structure and division of labor of the commercial team
Collaborative relationships between different teams

1. Exploration of business models of SaaS products

1.1 Common business models of Internet products and SaaS products

1.1.1. Common business models of Internet products

Before officially starting to talk about the business model of SaaS products, let’s first think about what the business model of the current mainstream Internet products is, so that it is convenient to compare with the business model of SaaS products.

For Internet products, my personal summary mainly includes social sharing, content services and creation, search engines, app stores, entertainment games, tool services, e-commerce, and Internet + applications in different industries, see the following examples, of which the common business models mainly include the following 6 types:

1) Advertising model

This is the most common and earliest business model of Internet products, and the more typical products include Baidu’s SEM bidding ranking advertising, headline and Douyin advertising, as well as Taobao merchant advertising What many people may not know is that although Taobao is a product in the field of e-commerce, its commercial income mainly comes from collecting advertising fees for store promotion (of course, transaction sharing is also one of Taobao’s main business models);

2) Value-added service model

For example, QQ is one of the founders of the business model of value-added services of Internet products, attracting users to pay through personalized dressing, expressions and other value-added privileges; Another example is Taobao, which allows merchants to pay by providing value-added capabilities such as store decoration, data analysis, and customer service sales tools for merchants;

3) In-app transaction sharing

This method is usually the product as a trading platform, allowing users to generate transactions within the app, and then the platform charges a commission for the transaction. More typical cases include e-commerce products, such as Taobao, JD.com, Pinduoduo, etc., which charge merchants transaction commissions after selling goods online; Another example is WeChat, in addition to advertising, WeChat’s core business model has a considerable proportion of revenue obtained through WeChat payment, game recharge, mini programs, etc. Similarly, AppBao and Apple APPstore are also commercialized by charging transaction commissions from third parties;

4) Membership subscription

This is also a common business model for Internet products, which guide users to become paid members and enjoy better services by providing differentiated services for paid members; Typical representatives include Tencent Video, iQiyi members, as well as WPS, Evernote and other tool products, which are commercialized through membership subscriptions;

5) Virtual currency trading

This model mainly appears in games and live broadcast products, where users recharge to purchase equipment, skins, etc. in the game, or recharge to buy reward gifts in live broadcast products;

6) Financial investment

This model is common in products that generate a large amount of capital flow, such as Alipay’s Yuebao and WeChat Wealth Management, because in the process of Taobao e-commerce guaranteed transactions, there are a large number of merchant transaction funds temporarily stored in Taobao officials, and user funds exist in WeChat wallets and other scenarios, so it has given birth to the official commercialization model through financial investment.

1.1.2. Business model of SaaS products

Next, we focus on thinking about what the business model of SaaS products is, we often hear that the essence of SaaS products is subscription, and the subscription model is its core business model, but in addition to this, SaaS products also have a variety of business models, which can be summarized as 6 types:

1) SaaS subscription model

This is the most common business model for SaaS products, where users pay a recurring fee (usually monthly or annually) to gain access to the product. This model usually includes different subscription tiers or versions to suit different types of customers and needs, such as WPS, which is for individual users and enterprise users, providing individual membership subscription versions and enterprise subscription versions respectively;

2) Pay-as-you-go model

In addition to charging according to the service duration, there are also many products that are charged according to usage, such as Boss Direct Recruitment for enterprises according to the number of times they contact candidates;

1) Licensing model

This model is the earliest way to sell many traditional software products, including Microsoft Office and Adobe. The licensing model usually includes three types: authorization according to the number of licenses, authorization according to the site, and one-time authorization; Among them, the license is suitable for customers with long-term clear needs but limited costs; The method of site authorization is suitable for customers with long-term clear needs and a very large number of customers (usually more than 100,000) and fixed physical locations, such as schools, state-owned enterprises, etc.; One-time authorization refers to customers purchasing software licenses and licenses at one time, obtaining usage licenses, and subsequently paying maintenance and support fees periodically, which is suitable for customers with long-term needs, very large employees, and relatively high negotiation power. At present, this method has been gradually replaced by the subscription method, and only some traditional software products still retain this method.

3) Customization and privatization

The enterprise provides customers with customized development and privatization development services, charging one-time development project fees and periodic technical maintenance fees;

4) Open platform and in-app transaction sharing

When the company’s product develops to a relatively mature level, the enterprise opens up its product capabilities through API and SDK, provides it to customers and partners in the ecosystem to use and access, and then charges according to the number of calls. In addition, some large-scale platform products will also build their own application centers within their products, support external products to join the application center, and collect transaction commissions after generating transactions in the application.

5) Service fee model

In addition to providing products and services, enterprises can also provide additional value-added services, such as training, technical service support and other services;

1.1.3. Choose a business model that suits you

For the choice of business model, I personally feel that there is only suitable or not, not correct or not, and the product can choose the most suitable business model at the moment according to its actual situation. For SAAS products, the more common and recognized way in the industry is the SAAS subscription model, and in the process of product development, the business model of the product is gradually enriched, and the evolution route of the typical SaaS product business model is as follows:

1) Prioritize the development of subscription models, continue to accumulate paying users, and protect long-term value;

2) After the development of product technology and capabilities, begin to release technical capabilities, including obtaining major customer orders by providing customized development and privatization, and opening up technical capabilities through APIs and SDKs;

3) After the volume of product users rises, expand the advertising model, application distribution and transaction mode in Internet products;

We take the business models of Tencent Conference and WPS as examples to introduce the business models of these two more influential products in China:

Because the subscription model is the most important business model of SaaS products, in the next article, I will also mainly introduce the business strategies and growth strategies involved in the SaaS subscription model, and will not cover other models for the time being.

1.2 Why do many products like to do “membership subscriptions”?

Now we will see a variety of “members”, basically most of the products, except for WeChat and Douyin, two super products, have been or are on the way to launch membership, the way of subscription is deeply loved by many enterprises and products, not to mention the products in the SaaS field, so why do everyone like to do membership subscriptions, what are the benefits of membership subscriptions? Let’s talk about this topic in this part.

1.2.1. What is SaaS subscription?

1) License model: The traditional software sales model before the emergence of the subscription system

Before talking about the subscription system, let’s first understand the main way of selling software services before the emergence of the subscription system: license modeling.

Before the emergence of the subscription model in the late 90s of the 20th century, the sales model of software products of traditional software companies including Adobe, Microsoft, and Oracle was basically a license model, and the license model mainly had the following characteristics:

2) The license authorization cycle is relatively long

Customers usually buy permanent licenses, of course, they can also support the leasing model, but the lease period is usually longer, for example, it may be about 3~5 years, so for customers, the initial purchase cost is relatively high, and the long-term cost is relatively low;

3) Licenses can only be installed and activated on 1 device

License is like a one-time activation code for software on a device, one license can only be installed and activated on one device, if there are multiple devices, multiple licenses need to be purchased; If the license migration requires the support of the software vendor after the device is replaced, the flexibility of license authorization porting is relatively poor.

4) The customer has full control over the data

The data generated in the process of software service is stored on the enterprise intranet, and the enterprise has complete ownership and control of the data, and the software service provider cannot obtain the data generated by customers in the process of using the software.

5) Software upgrades, support, and maintenance require additional fees

After purchasing a perpetual license, customers do not need to pay for licenses, but if the software needs to be upgraded or maintained, they need to pay additional fees, which means that customers can basically not experience the latest products and services provided by software service providers, and software service providers have no incentive to update and improve software services.

Standing at the current cloud software prevalence today, you can clearly feel the obvious problems of the above model, and even difficult to accept this model, at that time, the advantages and disadvantages of the license model are as follows:

To sum up, although the license model also has some advantages and benefits, this model is not a customer-oriented model, it is not very friendly to the customer side, and it is difficult to satisfy customers in the long run, so it is not a long-term development model for software vendors.

2. The birth of the subscription system

In the case of many problems in the license model, the subscription model began to gradually emerge in the 90s, the first company to open this model was Salesforce, Salesforce boldly subverted the traditional sales model, launched the subscription model, and opened the transformation of the entire software industry, at the beginning only Salesforce, and then Amazon, Google, Microsoft, Adobe have followed suit, until after 2010, Basically, the entire industry adopts the subscription method, and the traditional license authorization method is basically abandoned.

The stages and key events regarding the development of the subscription system are as follows:

Initial stage (late 1990s-early 2000s):

In 1999, Salesforce.com was founded and launched the first commercially available SaaS CRM (Customer Relationship Management) solution, which led to the emergence of the SaaS model.
In 2000, Salesforce.com released a multi-airport architecture that allows multiple clients to share the same application instance.

Growth stage (mid-2000s-early 2010s):

In 2006, Amazon Web Services (AWS) launched the Elastic Computing Cloud (EC2) service, which provides strong infrastructure support for SaaS.
In 2008, Google launched Google Apps, which includes tools like Gmail, Google Docs, and Google Calendar, providing businesses with a cloud-based office suite.
In 2009, Microsoft launched Office 365, transforming traditional desktop applications into a subscription-based SaaS model.
In 2010, Adobe moved its creative suites, such as Photoshop and Illustrator, to a subscription-based SaaS model, launching Adobe Creative Cloud.

Maturity stage (2010s to present):

In 2013, Slack launched a team collaboration platform that provides enterprises with instant messaging, file sharing, and project management, creating a SaaS subscription model for collaboration tools.
In 2015, Microsoft released Azure services, providing developers and enterprises with a range of cloud services, including SaaS, PaaS, and IaaS.
In 2016, Oracle announced a full transformation to cloud services, launching Oracle Cloud, which provides a variety of SaaS applications and cloud infrastructure infrastructure.

In the past few years, SaaS subscription has developed rapidly in various fields, covering many application areas, such as enterprise resource planning (ERP), human resource management (HRM), customer management (CRM), etc.

3. Characteristics of subscription system

Compared to the license model, the subscription model is generally more customer-oriented and features the following:

Allow customers to subscribe on a monthly/yearly basis without the need for a one-time subscription for a long period of access; The short-term procurement cost is lower for customers and can be afforded by small and medium-sized enterprises;
One subscription account can support multiple devices, which is relatively more flexible.
Software suppliers pay more attention to after-sales service, customer service quality is higher, and software suppliers continue to upgrade and iterate products for free, and provide basic technical support and services;
Data is stored on the software vendor’s server, which reduces customer storage costs on the one hand, and software vendors have the advantage of data assets on the other hand.

The following is a comparison of the two models in terms of cost, flexibility, service quality, data control, etc.:

1.2.2. The temptation of subscription business growth

To summarize earlier, the birth of the subscription system is mainly to cater to the development of the times and customers, and the advanced service model has eliminated the backward service model.

The principle of 1000 iron fans In the book “1000 Iron Fans”, a truth is expounded, if a company or a person, can have 1000 iron fans who pay 1000 yuan a year for continuous subscriptions, they can basically have no worries about food and clothing, indeed, the benefit of subscription is that users will continue to pay, rather than a one-time transaction, as long as you continue to accumulate subscribers and reach a certain scale, this part of the subscribers will generate continuous value for you for life, This is the benefit of subscriptions, and the reason why most products like subscriptions.
Continuous subscription is like a “money printing machine” believes in every subscription product, his ultimate dream is to accumulate a sufficient number of continuous subscriptions and automatically renew users, which is basically equivalent to a fixed money printing machine, you can predict how much revenue can be generated through this part of the user for a period of time in the future, so subscription is the favorite of many SaaS products, and continuous subscription is what SaaS products people dream of having, so the ultimate purpose of everyone to do subscriptions, It is also the size of users who want to develop continuous subscriptions. Of course, the continuous subscription here, the continuous subscription that the special value user expects and willingly receives, does not refer to the shady behavior of maliciously guiding users to open continuous monthly subscriptions and then automatically deducting the payment behind the user’s back.

1.2.3. Successful cases of subscription transformation

Scenario 1: Adobe Creative Cloud

Adobe is one of the most successful cases of SaaS subscription transformation in the industry, before the SaaS subscription transformation, Adobe’s software sales method was mainly through the sale of licenses, and at that time, the software sales business brought considerable revenue to the company every year, and the gross profit margin was as high as 97%, but at that time they faced two important challenges at that time, first, the revenue growth of the software business mainly relied on price increases, and the overall base of customers was basically flat, and the new additions were insufficient. If this trend continues, the growth of the software business is likely to stagnate; The second is the existing business model, the company only updates software products every 18~24 months, and this rhythm can no longer keep up with the speed of changes in customer needs.

So in 2013, Adobe made the most resolute and thorough transformation in history, releasing creative cloud, replacing the licensed software creative suit, and announced that all creative suits in the future can only be purchased by subscription, Adobe completely transformed from an authorized software company to a SaaS company, at that time the financial director also said that he would do his best to reduce the company’s revenue, and the faster the better, during the period, The share of SaaS subscription revenue increased from 10% in 2009 to 87.7% in 2018.

2013 was a painful period for Adobe’s transformation, with revenue falling by 7.9% and profits falling by 65.8%, but in the five years after his transformation, revenue and profit rebounded significantly and increased significantly, and were recognized by investors, the stock price tripled, and Adobe became a model of the subscription model in the software industry.

Case 2: Netflix

Another successful case of subscription system is Netflix, which is known for its minimalist business model in the industry, and its business model is very simple, that is, through the way of membership subscription, the scale of revenue growth mainly depends on the growth of the size of subscription members.

Netflix withRich original contentand personalized recommendation technology, attracting and retaining hundreds of millions of paying subscribers, its multi-tier pricing strategy (basic/standard/premium package) covers different user needs, realizes the rapid growth of paying users, and continues to invest in content production and technology research and development, making it a global leader.

2. How to design a commercialization strategy for SaaS subscription?

Now let’s make a suppose, for example, you are in charge of a SaaS product, and the product has developed to the stage where you need to consider the design for commercialization, and you will use the subscription method, as the main business model of the product, you need to design a complete commercialization strategy for the product from 0 to 1, what should you do? In this part, we will make an explanation from 0 to 1 around this topic, and the ultimate goal is to design a complete set of commercialization strategies for your products.

A complete commercialization strategy plan needs to include the following 4 parts according to the decision-making order:

Design a commercial version of your SaaS subscription
Benefit design for different commercial versions
Subscription plans and package pricing design
Design of paid contacts and upgrade links

It can be said that if you have described the above four parts clearly, then the commercialization strategy of the product will also be basically defined, and you will build a relatively complete, logically clear and delivery plan for your product that can be delivered to the product development stage.

In the next content introduction part, I will share design ideas and design cases in the industry, including Tencent Meeting, WPS, Microsoft office, zoom, and my AI product “AI Quick Research Hero”.

2.1 How to design a commercial version of SaaS?

2.1.1. What is a commercial version?

Many SaaS products will provide multiple commercial versions of subscriptions to meet the subscription needs of different customer groups or to divide different rights and interests and pricing ranges, such as the personal version, team version, enterprise version, or Pro version, business version, etc., which refer to the commercial version, as shown in the figure below, Tencent Conference provides users with 4 commercial versions: “free version, professional version, business version, and enterprise version”.

The first step in formulating a commercialization strategy is to first clarify which subscription versions your product will provide and how the specific commercial version should be designed, which we will discuss in detail below.

2.1.2. What types of customers is your product aimed at?

The commercial version division logic of many products is based on the customer group of the product, so before dividing the commercial version, we usually need to discuss the question of the type of customer that the product is facing, according to personal experience, in this process, many teams will encounter two problems and be entangled:

According to what logic is used to divide customer types: according to the type of subject, or according to the industry, or according to single and multiple;
The definition of user language is confusing: For example, individuals, teams, and enterprises are commonly used terms, and how should their concepts be defined.

Before starting to design the commercial version, you must define the premise of these two questions, otherwise when communicating the commercial version issue across teams, you will find that the concept expressed by each person is different, which is prone to many ineffective communication problems, so unifying language and logic will be of great help to the process of formulating and promoting the subsequent commercial version.

1. What logic is used to divide customer types?

For example, most products will be divided based on the main type of user (individual or enterprise) and the logic of the number of users (single and multi-person use), because the products are oriented to individuals and enterprises, or for single and multiple people, and the products and services they provide are fundamentally different.

According to the subject type, it includes the following two types:

Enterprise entity: indicates the main customer who has obtained industrial and commercial registration and issued an enterprise business license;
Individual subject: refers to users who are not enterprise entities, including individual users and users who have obtained self-employed licenses;

According to the number of users, there are two types:

Single use: The product is only for personal use by users, Does not involve multi-person organization and collaboration, For example, the aforementioned Baidu Netdisk and other products;
Multi-person use: The core services of the product are mainly used by multi-person team organizations, and customers are mainly organization-oriented, and this type of product mainly includes enterprise WeChat, DingTalk, Feishu and other collaborative office platform products.

2. How do I define user language?

In order to be able to clearly define the concepts of these user terms, so that they can be used in subsequent commercialization plans, we need a unified definition, according to personal experience, I am used to defining it like this:

Individual user: refers to the user used by one of the individual main users, which is often referred to as the C-end user;
Team users: refers to users who are used by multiple people in collaboration among individual users, which is called a team;
Enterprise: As long as it is a customer with a business license, it is called an enterprise, whether it is a one-person enterprise or a multi-person enterprise.

3. From the perspective of customer types, what types of products exist in the SaaS industry?

To sum up, the products of the SaaS industry mainly include the following three types:

Completely for individual users: The service objects of the product are mainly C-end individual users, such as Baidu Netdisk, Doubao, Tencent Yuanbao, etc.;
Completely oriented to enterprises or teams: The service objects of the products are completely based on enterprises and teams, such as selling products such as Yi and Beisen;

Serving individuals, teams, and enterprises at the same time: The products include C-end individual users, as well as team and enterprise products, and there are many such products, including WPS, Tencent Meeting, Tencent Docs, and Canva;

Finally, when designing a commercial version, we need to divide according to the type of customer, but also according to the logic of whether the product is provided for free for users to useFree version and paid versionTwo types, how to design, let’s look down.

2.1.3. What logic is used to design a commercial version?

Among many SaaS products, the products with more complex logic of commercial version design are mainly products that serve both C-end and B-end customers, as well as products for organizational use, so we mainly focus on the commercial version design of such products.

1. Design and logic of the commercial version of WPS

From the above, it can be seen that the division logic of the commercial version of WPS is first divided into two categories: the version for individuals and the version for teams or enterprises according to the logic of individual use and multi-person use. The individual version provides a free-to-use version and a paid membership version, and the membership also includes three types of members;

In addition to the two types of versions according to the logic of free and paid, the paid version is divided into three versions according to the size of the enterprise, which are for small and medium-sized enterprises/teams, medium and large enterprises, and large enterprises.

2. Design and logic of the commercial version of Microsoft Office

In contrast, the division logic of Microsoft’s commercial version is more complex, first divided into three types of versions: individual users, teams, and enterprises according to customer types;

Among them, the personal version is set up for individual users, the family version is set up for team users, and the version for enterprise customers, also according to the logic of single use and multi-person use, first designed for one-person enterprises, to meet the needs of customers who do not have collaboration needs and mainly need software licensing and other application services; Among the enterprise customers who use multiple people, it is divided into three versions: business basic version, standard version and advanced version according to customer size.

It is worth noting that in the commercial version of Microsoft, whether it is an individual version or a team or enterprise version, there is no free version, which means that the software does not support free use, and directly needs to pay to use, which is a strategic way of Microsoft’s business model design.

3. Design and logic of the commercial version of Tencent Meeting

The commercial version of Tencent Conference is relatively simpler, first of all, it is divided into two categories of versions according to whether the user is an enterprise; Among them, for individual users or teams, it provides a free version and a paid professional version, and whether it is a free version or a professional version, it supports the use of organizations within 5 people, and there is no need to distinguish whether the user is used by a single person or multiple people. In the enterprise version, it is divided into commercial version and enterprise version according to the scale of enterprise users, which are aimed at small and medium-sized enterprises and large enterprise customers respectively;

On the whole, the division logic of the commercial version of Tencent Conference is to divide customers into individual or team organizations with less than 5 people, enterprise organizations with 6~255 people, and enterprise organizations with more than 255 people according to the gradient of organizational scale.

4. Design and logic of the commercial version of ZOOM

Different from the previous cases, the logic of Zoom’s commercial version is not entirely divided according to the logic of subject type and number of users, but by the supporting capabilities of products and services. For individual users, he can use the free version, or he can purchase the professional version or the commercial version, and choose which version to use according to his own ability;

For users with 2 or more people, you must purchase the paid version, and what version to buy is also selected according to your ability.

Compared with the commercial version design of Tencent Meeting, the slight difference is that Zoom does not provide a free version for team organization customers of less than 5 people, as long as it is a multi-person organization, you must pay, and the paid version supports both single and multi-person use scenarios.

In the above four cases, when each product sets its own commercial version, the method and logic used may not be exactly the same, the reasons are mainly related to the product form, commercialization logic, product service method, etc. behind it, and the product needs to design a commercial version that serves its own business characteristics according to its own business logic.

Therefore, when you design a commercial version of your own product, you need to analyze it in combination with your own product characteristics and specific cases, but in any case, the design of the commercial version is basically nothing more than considering the following factors:

The customer group is individuals or enterprises;
for single-person or multi-person use scenarios;
Whether a free version is available

2.1.4. Some thoughts in the design of commercial versions

1. Should SaaS products offer a free version?

As can be seen from the previous cases, domestic SaaS products such as WPS and Tencent Meeting, whether they are for individual users, or for teams or enterprise customers, will provide a free-to-use version in the product and commercial version, which can meet the needs of users without going through salespeople to use it directly.

For example, ZOOM provided a free version for individual users, but did not provide a free version for enterprise users and team users at that time; Microsoft is more direct, whether it is an individual, a team or an enterprise, it does not provide a free version, and the direct positioning is a paid version; Of course, in order to meet the needs of users, they usually provide some trial versions with a limited validity period, but this is only a trial, not a free version.

Therefore, many teams inevitably need to discuss this question when designing commercial versions: whether it is an individual version or an enterprise version, should a free version be provided? My personal opinion is that domestic SaaS products, considering user usage habits and favorable payment conversion paths, should provide free versions, as follows:

1) Domestic users’ perception and usage habits of SaaS products are different from those of overseas users, especially American users

Domestic users are basically accustomed to SaaS products should be used for free, and can pay for value-added services. Unlike American users, they have long been accustomed to SaaS products should be paid to use this thing, and if you don’t pay instead, they still wonder if there may be any problems with your product, so many SaaS products in the United States do not set free versions;

2) For team and enterprise versions, providing a free version is conducive to completing the natural conversion from C→ team → enterprise

The advantage of this is that it is conducive to screening out enterprise and team customers from C-end individual users, and allowing them to naturally complete paid conversions through the natural guidance of products. In this process, the free version is equivalent to providing the value of a trial version, compared with the traditional sales method for TO B to expand customers through sales, and then provide a trial version, this method can also solve the cost of a large number of salespeople, and build a conversion path to tap and develop enterprise customers from C-end users.

2. Is it necessary to design a separate commercial version for a one-person user and a one-person enterprise?

In the previous case, we noticed that Microsoft has set up a commercial version specifically for 1-person enterprise customers who do not have collaboration needs, and the same situation is also the same in many products in the industry, this question is basically the problem you often encounter when formulating commercialization strategies, whether it is necessary to set up a separate commercial version for 1 individual user and 1 person enterprise, because the needs of these two types of customer types may be relatively different, the specific characteristics are as follows:

1 individual user, usually the user does not need the need for collaboration, nor does the ability required by the main body of the enterprise, only needs to be able to meet their own use; In the face of a single individual user, the common practice includes setting it as a separate commercial version, such as WPS, of course, there is also another practice is to treat a single user as a one-person team, through the team version includes a one-person organization and a multi-person organization, such as Tencent Conference, the implicit product logic of this idea is that the core of this type of product is aimed at the team and the enterprise, they weaken the value of the individual, and the overall product design is focused on the team and the enterprise.
However, because the main body of the enterprise may be affected by policies and regulations in the process of using the product, it is necessary to obtain copyright authorization, enterprise certification and other related services, and these needs may be the core payment point of the enterprise, which cannot be ignored; For example, in Microsoft’s case, even a one-person enterprise in the United States must use genuine licensed software, and the number of such customers may be relatively large, so Microsoft launches a separate commercial version around a one-person enterprise; But such a thing is not necessarily necessary if it is placed in China, such as many one-person companies, they do not care much about copyright and other related issues, and the launch of such a version may not be of much value to them.

Therefore, to sum up, for a single user, whether to choose to design a separate commercial version for it, or to merge it with multiple team users into a commercial version, the key depends on the importance of individual users in the positioning of the product, whether to choose to take the route of serving C and B at the same time, or purely take the TO B route, focusing on the team and enterprise and weakening individual users.

For one-person enterprises, it mainly depends on whether there are some services provided by the product that have nothing to do with collaboration but are very concerned and needed by the enterprise, or indispensable capabilities, such as copyright, security, etc.

2.1.5. Practical case: Design a commercial version of AI Kuaiyanxia

Next, I will take my product AI Quick Research Man as an example, combine the thinking process shared earlier, design a commercial version of AI Quick Research Man, and think about and summarize the problems encountered in the process.

What types of customers does 1.AI Kuaiyanxia face?

Kuaiyanxia is a product that mainly provides in-depth research generative AI services, and our customer types mainly include two categories, one is individual users, and the main demand is to obtain generative AI services; The other category is enterprise customers, who may want to receive privatization, APIs, and custom-developed services in addition to AI services with more flexible packages and pricing.

Because our products do not have many collaboration-related needs, there is no need to divide customer types according to the logic of single use and multiple use, for us, we only need to pay attention to whether the customer is an enterprise and whether there are enterprise-related needs.

2. Commercial version design

Therefore, to put it together, the commercial version of Kuaiyanxia is very simple, only three are required: free version, individual membership, and enterprise version:

Among them, we need to provide a free version for individual users, so that they can complete the experience of basic capabilities, and then guide payment by providing value-added services. In addition, for 1 person enterprise and 1 person user, we believe that for the product of Kuaiyanxia, there is no difference between the two, and we do not provide differentiated services, so its commercial version can be covered through the free version and the membership version; For multi-person teams, they can use the team by purchasing multiple Quick Research memberships separately, so we don’t need to provide a version similar to the “Team Edition” to meet their needs.

The case of Kuaiyanxia is relatively simple and easy to understand, but for many relatively more complex products on the market, the design of the commercial version is full of logical challenges, and it is not easy to design a smooth commercial version.

2.2 Equity design of different commercial versions

After setting up the commercial version, the second step is to design value-added rights for different commercial versions, in this link, we need to focus on two issues:

How are paid benefits designed?
How to plan and distribute benefits for different commercial versions?

2.2.1. How are paid benefits designed?

In this link, you need to think about which rights and functions the product charges users through, and the design of rights and interests must comprehensively consider factors such as conversion value and user acceptance. secondly, if charged, how to charge, whether to pay for use or to experience first and pay later; Next, how should the payment threshold be set, such as how many times the user uses it for free before triggering the payment; Finally, how to assess and deal with the risks caused by product restrictions and charges.

1. What features are suitable for setting up as value-added paid benefits?

First of all, not all functional points are suitable for use as paid rights, if the paid rights and interests are not well designed, not only do not get the corresponding target conversion, but may also be complained and criticized by users, which will eventually lead to user loss, so the gains outweigh the losses; The core goal of the setting of paid rights is to allow potential paying users to complete the conversion to obtain commercial revenue while minimizing the loss of users, the key principle is “value-added”, in this regard, based on personal experience, I have defined the following principles for whether a certain product function should be set as a paid rights:

Value estimation: Features with high usage or high frequency of use, priority is given to functions that can generate considerable commercial revenue after payment;
Product functions and user experience: The functions have been relatively perfect, and the user satisfaction is relatively high;
Comparison with competing products: Competing products at the top of the industry have been set as paid functions, and can be prioritized as value-added paid rights;
Value appreciation: Under the premise that the basic experience can be guaranteed, there are functions that generate value-added value (such as users can profit from it) or have a more pleasant user experience (such as faster download, more resources, etc.);
Implementation cost: The use and operation of functions require high server, bandwidth, or labor costs, or technical capabilities that are not self-developed and use external capabilities, and the recovery cost needs to be considered, and priority can be given to value-added payment rights.
The impact on users and risk prevention measures after restricting payment: whether the risk is relatively controllable after the payment is restricted, or whether there are measures to deal with the risk;

The specific judgment logic and process are summarized into a logic diagram as follows:

2. How do you pay?

If a certain function of the product, after the above judgment conditions, you decide to set it as a paid right, next, you need to consider the question of how to pay, in summary, there are usually two types of payment method design:

Experience first and pay later: Provide users with a limited number of free experiences or effective usage time to ensure that users can experience and predict the full experience of the product in advance, and then charge users for more usage and time;
Pay for use: Users need to pay for it, and users are not provided with free use rights;

In most cases, many products will tend to use the experience before paying later, especially when users do not have the perception and expectation of the value-added functions of the product, it is obviously wiser to use the experience first and pay later method.

However, a certain amount of free experience rights means that more resources and costs need to be paid for this, and in some scenarios where the cost of free experience is relatively high, some products will tend to pay to use, and the main challenge of this model is how to make users perceive and understand the paid functions without using the product.

3. How to set a toll threshold limit?

If your decision is to provide a certain amount of experience rights for free, and start charging users after exceeding a certain usage threshold, then how should the limit point of the payment threshold be designed?

Before the function is launched, you can test and analyze the relationship between the payment threshold limit and the user’s payment conversion rate to find the limit point with the largest change in conversion rate, as a reference for the payment limit point: for example, when the analysis finds the relationship between the number of user uses and the payment conversion rate, and it is found that when the user uses more than N times, the payment conversion rate will increase significantly or decrease, which means that when the user’s usage reaches this limit, the willingness to pay increases or decreases significantly, then this limit point can be used as a reference payment limit point;

According to the distribution of user usage times, in accordance with the 28 principle, ensure that the use of 80% of users is not affected:

This method is by: analyzing the distribution of the number of user function uses, analyzing how many users are expected to be affected under the restrictions of different payment thresholds, and the business can design the critical point according to its own expectations, such as according to the 28 principle, only 20% of high-frequency users are charged, and the normal use of 80% of users is not affected;

Charge users who have the ability to recover their paid costs: If there are some users in your product who can help them obtain additional commercial income by using the product, or can implicitly help them save more costs, you can charge these users, but you need to distinguish the relationship between these users and the number of uses, such as how many times such users will be used significantly more.

Refer to the payment threshold restrictions of competing products:This method also has certain uses, for example, when users choose between you and similar competitors, they may compare the differences between you and competitors, so it is necessary to refer to the payment threshold restrictions of competitors;

After the launch, continue to test different payment limit points: pay attention to conversion effects and user feedback, and continue to find the best limit points;

2.2.2. How to plan and distribute the benefits of different commercial versions?

After the previous combing, if you have considered which rights and interests your product mainly charges users through, and have also planned the charging method and threshold, the next thing to do is how to plan and allocate different rights and interests for different commercial versions, and finally enter a rights comparison plan similar to the one shown in the figure below.

When planning and distributing the content of rights and interests, the following principles need to be followed:

The distribution of rights and interests should clearly reflect the positioning and value of different commercial versions

The purpose of this is to allow users to quickly understand the value of each commercial version, and find the commercial version that meets their needs according to their own needs;

Each commercial version must ensure that there are core paid benefits at the killer level

The core paid rights and interests of the killer level represent the most confident rights and interests that drive users to pay, and may also be the most critical paid rights and interests of the commercial version.

There should be obvious value differences between different commercial versions

There must be pricing and levels between different commercial versions, and if you want users to upgrade to a higher version, you need to form a clear difference in rights and interests between the versions.

2.2.3. Case study: Take the equity design of WPS as an example

Next, we take WPS’s equity design as an example to analyze the characteristics of its equity design:

WPS Personal Edition Membership: Its core rights and interests are mainly based on functions and content, including PDF tool privileges, paid templates, paid materials, etc., and attract users to pay through free experience of basic capabilities and payment of value-added capabilities.
Business Collaboration Edition: The core rights and interests of the Collaboration Edition are mainly based on collaboration capabilities, including space, IM, conferences, etc., and the core value is to meet the collaboration needs of enterprises;
Business Premium Edition: Compared with the Collaborative Edition, the core value of the Advanced Edition lies in security and software authorization certification, which mainly meets the needs of enterprises for security and copyright.
Business Flagship Edition: The Ultimate Edition further emphasizes the value related to AI, enterprise templates, and enterprise management;

On the whole, through the comparison of equity, you can quickly know the core value and positioning of different commercial versions, and design core rights and interests for each version around the needs of different customer groups in different dimensions such as function, collaboration, security, and management, and also form a version difference with increasing equity value.

2.3. Subscription Packages and Package Pricing Design

After the commercial version is finalized, the next step is to set the subscription package and set the package pricing, so in this part, we will mainly talk about two things:

How are the different commercial versions of the package designed?
How to price the package?

See below for details.

2.3.1. How to design different commercial versions of packages?

Subscription packages usually refer to the subscription “goods” that users actually purchase, such as purchasing a one-year membership or a one-month membership; Usually the subscription package is divided according to the duration of the subscription, which is a more common way of division, which is more in line with the needs of SaaS subscription, and there is also a way to divide the package according to the amount of equity, but that person thinks it is not typical enough, so today’s package design, we are mainly aimed at the situation of dividing by duration.

Often, the logic of dividing subscription packages for individual members and subscription packages for businesses may not be the same, so let’s talk about these two things separately.

1. How are individual membership subscription packages divided?

For most individual members on the market, the duration of their subscription packages is basically as follows:

So when we design a subscription package, how should we choose a subscription package?

The vast majority of users will prefer monthly and annual plans

From the perspective of personal experience in commercial operation, most SaaS products in terms of the actual distribution of membership time, monthly membership and annual membership are basically popular subscription packages for users, of which monthly membership usually accounts for the highest proportion of subscribers, and annual membership usually accounts for the highest proportion of sales, so these two packages are usually mandatory packages; Taking the distribution data of the subscription package duration of individual members of a SaaS product in China as an example (the following data is purely fictious, not real data, just an example), the total proportion of monthly members and annual members is almost more than 90%, and the same conclusion, according to personal understanding, is almost applicable to most other products.

It is recommended to set up a continuous monthly plan, but do not set up a continuous annual planFrom the perspective of actual business effects, users usually weigh the choice between monthly packages and continuous monthly packages, but rarely choose between annual packages and continuous annual packages, because the duration of the annual package is too long, even if it expires, it is good to renew it manually, and there is no need for automatic renewal, most of the users who will choose to purchase continuous annual subscriptions are because the pricing of continuous annual subscriptions is usually lower than the pricing of 1 year, so many people take the initiative to cancel continuous subscriptions after purchase. Therefore, the significance of setting is not very great, and we can also see from the package settings of many products that there are still relatively few cases of setting continuous annual packages.

Do you want to set up a quarterly membership package?Judging from the previous suggestions, the monthly package and the annual package, the continuous monthly package is the recommended first choice package, there are already 3, for the continuous new package, the defect is that there are too many package choices, which is easy to make users entangled and confused, which is not conducive to the user’s purchase decision, so many teams often struggle with whether to set up an intermediate package, that is, a quarterly package.

Taking the product distribution of a SaaS product in China as an example, the quarterly member users of the product account for nearly 32%, and the payment penetration is quite high. I would like to share my own understanding of this issue.

First of all, from the perspective of users, there are two most critical reasons why users buy quarterly membership packages:

(1) The demand, recognition and loyalty for products and services have not yet reached a high level, which is not enough to purchase annual memberships, in the final analysis, it is still because of the purchase principle of “on-demand consumption”;

(2) Compared with purchasing monthly memberships, users are also aware that they will continue to use the product in the short and medium term, so the total cost of purchasing monthly memberships multiple times may still be higher than purchasing quarterly memberships, so from the perspective of economic benefits, consider purchasing quarterly memberships; Therefore, the total cost of purchasing monthly memberships multiple times may still be higher than purchasing quarterly memberships, so from the perspective of affordability, consider purchasing quarterly memberships;

Secondly, from the perspective of enterprises, the key reasons for designing quarterly membership packages are mainly as follows:

(1) Set up quarterly memberships to provide a purchase option for such intermediate users;

(2) Resist the uncertainty of renewal and change the value of existing potential renewal users in advance;

Therefore, as for whether to set up a quarterly membership package, my personal opinion is that if it is not stable, it is better to do a round of AB testing to see if the users who do not provide the quarterly membership package, after purchasing the monthly membership, in the renewal results of the subsequent cycles, the proportion of users who have renewed the number of renewals reaching March can be the same, compared with the proportion of users who provide quarterly membership packages at the beginning, whether it can be the same, if it is flat, from the perspective of pricing and total actual sales, there is no need to provide quarterly membership packages;

Do you want to set up a lifetime membership?

When designing a subscription package, another problem that some businesses and products may encounter is whether to set up a lifetime membership, which means that after the user buys a membership, they can enjoy membership services for life, which is very attractive for some long-term users, for this issue, my personal understanding is as follows:

First of all, what do you think of the strategy of setting up lifetime memberships in the business, I personally think that the main purpose of this approach is to stretch revenue in the short term, let some loyal users overdraw the paid income in the next few years, it must be admitted that this way, in the short term stretch of income, the effect is very obvious, taking a SaaS product in China as an example, its lifetime membership income accounts for 10~15% of the overall member income, the proportion is not low, but I personally feel that this method and the principle of continuous renewal adhered to by SaaS is contrary to it If there is no problem, the next 3~5 years may continue to use you, lifetime membership may allow you to recover your income for several years in advance, but in the future, you lose the value of this part of loyal users, if you can’t continue to subscribe for a long time, this is already contrary to the principle of subscription, so I personally don’t agree with the lifetime membership package.

2. How are the subscription packages of the Enterprise version divided?

Compared with the subscription of individual members, the subscription package of the enterprise version is usually simpler, on the one hand, there are not so many subscription packages, on the other hand, there is no such thing as automatic renewal, for most enterprise-level SaaS, usually there is only 1 subscription package, that is, a 1-year package, the main reasons include the following:

From the perspective of product officials, the sales of enterprise SaaS usually rely on salespeople, and the sales personnel usually have a high time cycle and cost to obtain a lead and convert a customer, so once the order is completed, it must be purchased annually, if purchased on a monthly or quarterly basis, the revenue that may be recovered is not as high as the cost of sales, so it is not very cost-effective, so most of the enterprise customers pay annually;
From the perspective of enterprise customers, the procurement budget of enterprises is generally applied for once a year, so the enterprise itself is not very willing to subscribe on a monthly basis, because it has to apply and settle the budget internally once a month, which is very cumbersome, so from the perspective of budget application, the enterprise itself is also willing to purchase according to the annual subscription;

Of course, some large customers may have a longer purchase time, such as a purchase of 3~5 years of orders, and there will be a similar situation in many large enterprises such as state-owned enterprises.

At this point, I will share here about how to design the subscription package, and the next question we need to discuss is how to price the subscription package, which is also a problem that plagues many peers.

2.3.2. How is the subscription package priced?

In this section, I will share a common reference plan for pricing subscription plans.

In the process of product pricing, we consider four core factors: cost, target, competitive product situation, and customer acceptance, and think about the pricing strategy of subscription packages from these four dimensions, which can be summarized as follows:

Based on the recognized principles of SAAS products: LTV (Customer Lifetime Value) > 3CAC (Customer Acquisition Cost), the price range is set from the perspective of the relationship between user lifetime value and customer acquisition cost or whether the pricing is reasonable;
Based on the principle of user price sensitivity testing, the price range is set from the perspective of user price acceptance or whether the pricing is reasonable.
setting and adjusting pricing based on competing product references;
Based on the goal of maximizing the profit and commercial value of the enterprise, through price experiments, continue to do price adjustment tests to find the pricing that maximizes commercial income;

The details are as follows.

1. Calculate the reasonable pricing of members based on the principle of LTV>3CAC

Step1: Calculate CAC, based on LTV needs to be greater than 3 times CAC, derive the target value of LTV,CAC represents the sum of all sales and marketing costs for each new paying customer acquired, so CAC is calculated as:CAC = sales and marketing costs paid by new paying customers÷ The number of new paying customers, of which the cost items mainly include

Marketing expenses (advertising, content creation, SEO, etc.)
Salaries and commissions for sales teams
Customer acquisition related tools and software costs
Support costs associated with conversions

For example, suppose that the current unit customer acquisition cost of the product you get is CAC=30, then according to the principle of LTV>3CAC, the LTV of your product needs to be greater than 90, which is a commercially healthy SaaS product;

Step2: Derive the monthly membership price through LTV

According to the industry’s formula for calculating LTV, when the customer churn rate of the product remains stable,

LTV=ARPU/Churn Rate,;

Then you need to calculate the churn rate, according to the formula for churn rate, churn rate = (number of customers at the end of the previous month – number of customers at the end of this month + number of new customers at the end of the month) / number of customers at the end of the previous month, we can calculate the churn rate; Suppose that through calculations, we calculate that the churn rate of customers is 30%;

Then, based on the formula,ARPU = LTV * churn rateWe calculate the target value of ARPU, which is the average monthly value per customer, which can also be almost equivalent to the lowest price of a monthly member.

For example, if LTV=90 and churn rate = 30%, then the minimum price of monthly membership should be 90*30%=27 yuan, which means that when the customer acquisition cost of the product is 30 yuan, the LTV of the product should reach about 90 yuan to be a healthy level, because the churn rate is 30%, so the minimum monthly price of the member should be 27 yuan.

Setp3: Calculate the price of annual membership and quarterly membership based on the monthly membership price

For example, if the minimum price of a monthly membership is 27, then the minimum price of an annual membership should be 12 times the monthly membership price, that is, 324 yuan, and the lowest price of other duration packages is a corresponding multiple of the monthly membership price. However, in actual business, usually in order to highlight the price discount of high-duration members, the actual price of annual membership will be less than 12 times the price of monthly membership, so that users have the motivation to buy annual membership, and the specific can also be adjusted according to business needs.

2. Based on the principle of user price sensitivity testing, set the price range from the perspective of user price acceptance or judge whether the pricing is reasonable;

Earlier, we mainly made a preliminary setting of pricing from the perspective of CAC and LTV, but the enterprise may cause the price to be higher than the customer acceptable level because the customer acquisition cost is too high, so whether the price is reasonable also needs to be tested through user research to test the user’s acceptance of product pricing, usually this can be tested by price sensitivity test, the process of research and inspection is as follows:

First of all, it is necessary to select and batch target users who have sufficient understanding of the product, and launch a survey of the price range to them, which should include the following four questions:

Which price range will make you feel too expensive, and you will definitely not buy it
Which price range will make you feel a little expensive, but will consider buying
Which price range will make you feel particularly cost-effective and willing to buy
Which price range will you think is too cheap and you will doubt the quality of the product

Through the above research, we count the cumulative percentage of different price ranges in the above 4 questions (pay special attention to the cumulative percentage of each price range rather than the proportion of users), and draw a percentage curve, the expected data result may be as follows, where the dots of each curve represent how many users think it is too cheap or too expensive when the price is set to N: Through the figure below, we can see the intersection of the 4 curves, each intersection representsLowest price, best price, sub-best price, highest priceFrom the perspective of users’ sensitivity to price, the price sensitivity test gives us some pricing references.

3. Set and adjust pricing based on competing product references

Another way to refer to pricing is to compare the pricing of competing products, which is also a factor that must be considered in the pricing process, because from the user’s point of view, when the product homogenization is relatively high, users will compare the pricing of you and competing products to see who is more cost-effective, so when setting the price, in addition to their own actual situation, they should also compare competing products.

4. Based on the goal of maximizing the profit and commercial value of the enterprise, through price experiments, continue to do price adjustment tests to find the pricing that maximizes commercial revenue

Finally, the pricing of the product cannot be separated from the profit target of the enterprise, so after comprehensively considering LTV, CAC, customer acceptance and competing products, the pricing also needs to be combined with the profit target of the enterprise, and continue to do price adjustment test experiments with the goal of maximizing commercial value, to see how much the price is adjusted to maximize sales, so as to continue to update and iterate pricing.

2.3.3. Pricing case: Take a domestic SaaS product individual member as an example?

Next, I will take the individual members of a SaaS product in China as an example to share how to finalize the pricing of its subscription product according to the above whole idea.

1. Calculate the reasonable pricing of members based on the principle of LTV>3CAC

Through accounting, we can count that the CAC of the customer acquisition cost of acquiring a new paying user of the product is about 25 yuan, and the churn rate of paying members is about 45%, from which it can be calculated that the target LTV of the product needs to be at least 105 yuan (3 times the CAC), and the average monthly revenue generated by a customer needs to reach 33 yuan (LTV * churn rate), in this way, first of all, it is determined that the pricing of monthly members should be at least 33 yuan.

2. Price sensitivity test

Next, in order to verify whether the price meets users’ expectations, we launched a price survey for users who have recently registered and frequently used the product, and the content of the survey questionnaire is as follows:

If the price of individual membership for 1 month is set as follows, what is your evaluation?

1.10~20: A. The price is very affordable, cost-effective B. It is a little expensive C. It is too expensive D. It is too cheap

2.20~30: A. The price is very affordable, cost-effective B. A little expensive C. Too expensive D. Too cheap

3.30~40: A. The price is very affordable, cost-effective B. A little expensive C. Too expensive D. Too cheap

4.40~50: A. The price is very affordable, cost-effective B. It is a little expensive C. It is too expensive D. It is too cheap ·········

After collecting the data from the user survey, the data statistics are as follows (the following data are examples, not real data):

The following is the proportion of users in each price range, but it cannot be directly used for the drawing of the price sensitivity curve, we also need to convert it into the cumulative percentage data of each price range, because we need to know that when the price is 20~30, how many users will feel that the price is very affordable, using the following data as an example, if the price users above 30 feel that the price is affordable, then when the price is 20~30, this part of the users will also feel that the price is affordable, so when the price is 20~30 In fact, the cumulative number of users who think the price is affordable is 73%, not 48%, and when drawing the price sensitivity curve, what we need is to know how many people will find the price range affordable.

The following is the cumulative percentage data after conversion, enumerating the data of the price range 10~20 as an example, indicating that when the price is positioned at 10~20 yuan, 100% of users think the price is very affordable or too cheap, only 5% of users think it is a bit expensive, and 7% of users think it is too expensive.

Then we draw it into a price sensitivity curve as follows: through the price sensitivity curve, when the price is 20~30, it is the most satisfactory price for users, the suboptimal price is 30~40, and the highest price is 40~50;

Combined with the previous based on LTV and CAC, we calculated that the pricing of monthly membership must be more than 33 yuan, so combined with the price sensitivity test, the pricing is set at about 33~40 is relatively more appropriate, although we cannot give users the most satisfactory price, but considering the goals of the enterprise, it is also reasonable to take a balanced price.

3. Refer to the pricing of competing products

Then, we analyze and compare the pricing of the core competitors of the product, for example, the price of their reading members is about 35, combined with the evaluation of many users, they feel that the differentiation between our products and competing products is not very large, so if we choose a higher price, customers may give preference to competing products, from this point of view, our pricing should also fluctuate around 35 yuan, or 35 yuan is also a direct optional price;

4. Combine profit targets and price testing

Finally, through the calculation of the profit target, the price of 35 yuan may be in line with the expectations of the company’s profit target, and through a longer period of price testing, the price can indeed meet the goal of maximizing the sales target, so the final price is defined as 35 yuan/month, and the price of the corresponding annual and quarterly members is also calculated and adjusted based on this price.

2.4. Design of paid touchpoints, conversion guidance, and upgrade links

When the product pricing has been finalized, we will start to design the user’s payment touchpoints, conversion guidance, and upgrade links, which mainly include the following issues:

Payment window design strategy: How to design a payment window to improve user payment conversion rate?
Payment Contact Strategy: In what scenarios and entrances to trigger the payment window?
Upgrade guidance strategy: How to guide users to upgrade to a higher commercial version?

2.4.1. Payment window design strategy for SaaS products

1. How should the payment window of SaaS products be designed?

Regardless of how the payment window interaction of SaaS products is designed, these elements are essential for payment window products:

Product information: including package duration, price, and promotional information;
Equity information: including equity description and equity comparison;
Payment information: including payment buttons, payment methods, and order information;

How to lay out and present this information interactively and visually depends entirely on the experience and understanding of the product manager, but in this process, we must pay attention to a few points:

Visual flow design: that is, the route for users to obtain purchase information from the payment window through vision, it is necessary to let users quickly know what they are buying, and what they can get after successful purchase, the design of the visual route should be in line with the user’s visual browsing habits, such as users are usually accustomed to browsing content from left to right and from top to bottom;
Value perception: let the user feel the value of the goods he is about to buy, and find a way to make him feel the value for money through comparison;
Shorten the funnel: In industry parlance, the payment window is a conversion rate “game”, so it shortens the funnel of payment conversion to the greatest extent and reduces user bounce and churn.

Based on the above information summary, I will give you an example of my optimization and adjustment in my product AI Quick Research Man, and share some optimization experiences of my visual design adjustment of the payment window before and after, so that everyone can see if it is more reasonable.

The first design idea: The design result is as followsI don’t know what you think of the problems in the current plan, after running for a period of time, when I re-examine the solution of this payment window, I feel that there are several problems with the existing plan:

The user’s visual route does not conform to the user’s visual browsing habits: for example, the visual route of the current scheme, the user is from right to left, from top to bottom, which does not conform to the user’s habit from left to right, and at that time when designing the vision, I was still in the instinctive habit, seeing that some products adopted this design method, so I copied it directly, ignoring the user’s browsing habits;

The value perception is not strong: For example, at present, the value is highlighted through the discount information, which is completely “self-righteous”, because these instant discount information, users can not feel the discount at all, more like the routine of the payment window, after synthesizing some of the above thoughts and interviewing some friends’ suggestions, I plan to make a simple experimental adjustment to the payment window, see the second design idea part.

Visual flow design: First of all, I think that when users open the payment window, the first thing they see must be (1) part of the product, such as whether it is a 12-month membership or a 1-month membership, and what is the corresponding price, so this needs to visually catch the user’s attention first; Then I need to let the user know what he has bought, so I tell the user what benefits he can get after purchasing a membership through the (2) sidebar, and then the user knows the comparison of the rights and interests of the member and the free user through (3).

Value Perception:What I mainly highlight here is the information of discounts, that is, through the discount corner mark in (4) to make users feelThe price is affordable

Shorten the funnel: Instead of putting a “pay now” button in the payment window like many products and then triggering the payment QR code, the QR code is directly presented to reduce the one-step click operation.

The second design idea: The design result is as shown belowI will share the effect after the adjustment, in any case, at least in terms of visual experience and information delivery, I think it is better.

Visual flow design: First of all, on the visual browsing route, put the product information on the left, and put the equity information on the left, so that it looks more comfortable;

Value perception: secondly, change the instant discount information to the information of the rights and interests that users can obtain after purchasing goods, so that users know what the core of 199 yuan per month has obtained;

2. Case study of payment window design

Next, I will share several payment window design cases of SaaS products that I often benchmark and research, and we summarize and accumulate some insight thinking and experience in designing payment windows through these cases.

Case 1: WPS Individual Member Payment Window

The business of WPS individual members has been developing for many years, they have put a lot of thought into the payment window, and at present, WPS is also the largest office SaaS product with the largest scale of individual members in China, so it is worth paying more attention to and studying, the following is its current payment window design, the overall feeling is that the sense of promotion is very strong, of course, because the screenshot is at the time of their 618 promotion, there are a few points worth paying attention to:

Points worth learning from

The visual flow is also from left to right, from top to bottom, and the layout of the core elements is in line with the user’s browsing habits;
Enhancement of discounts and promotional information: including the presentation of discount corner tags, text chains, purchase and gift information, and preferential information in orders, displaying discounts and promotional information in multiple places;
The membership rights comparison adopts the method of scrolling display in the payment window, which reduces the operation of a click to jump to the rights comparison page, and the display efficiency is higher, which is worth learning from and referring to;

A point to be debated

Users need to click the payment button before they can trigger the payment QR code: the main reason here is that too many products, rights, promotions, and order information are directly displayed on the payment window, and directly exposing the QR code will make the payment entrance “out of focus”;
There are many exposed products, including monthly, continuous monthly subscriptions, multiple years, etc.;
Displaying promotional advertisement banners in the payment window is dazzling, and there is too much price-related information;

Case 2: Tencent Meeting subscription payment window

Tencent’s emphasis and professionalism in visual design and products can be called an industry model, so it is necessary for us to understand how the payment window of their SaaS products is designed, in Tencent’s SaaS products, Tencent Documents, Tencent Meeting, Enterprise WeChat are undoubtedly the largest products, here I chose Tencent Conference as the main research object, because the complexity of video conferencing products is relatively higher, so let’s look at the payment window design of Tencent Conference this product case.

Points worth learning from

Version switching does not use tab switching like many products, but adopts the version grid method, which exposes more core rights and value information of each version, which is relatively rare, but reasonable.
The number of products is streamlined, and only three members: monthly, monthly, and annual are exposed, and there are not many choices;
Directly expose the payment QR code, no need to click again to trigger the payment QR code;

Debatable

To be honest, there are not many flaws for the time being, and the only problem that may be easy to pick may be too much text information;

Case 3: Subscription payment window for Microsoft, Zoom, and Canva overseas products

The first two are payment windows for domestic SaaS products, and then we look at the subscription payment windows of several overseas products, which are different from domestic subscription products, the payment window of overseas products is basically very simple, on the one hand, there are no many subscription package options, such as zoom and canva only focus on monthly and annual packages, and Microsoft even only sells annual packages; On the other hand, there is not much price promotion information exposed, unlike many products in China, which need to constantly attract users to buy and pay through promotional information, the overall is very simple, here it can only be said that the user habits of different countries are different, there is no distinction between advantages and disadvantages.

2.4.2. Payment contact strategy for SaaS products

What is a payment contact, payment contact refers to the scene and entrance that triggers the payment window, which is the key to improving the subscription conversion rate for the upper level of the payment window, on the one hand, it is to design the “commodity window” of the payment window, and on the other hand, the key is to display the payment window in the appropriate scene and entrance, so we focus on the payment contact strategy in this part.

1. Common payment contact methods

Trial mode:The trial mode is the earliest subscription product commonly used, which is characterized by providing users with a certain free trial duration, such as 7 days or 15 days, and then continuing to use it after the trial period ends. The good thing about this method is that it can allow users to fully experience the service of the product, but the disadvantage is that it is easy to lead to wool harvesting, and increase the conversion cost of the enterprise, which is more burdensome for products with higher experience costs.

In the early days, Internet products hoped to adopt the model of providing a 7-day free subscription and then automatically deducting the fee when it expires, but the experience of this method is very bad and can easily lead to serious customer complaints, so now fewer and fewer products adopt this model.

Experience mode:The experience model is currently one of the most common ways, which emphasizes the provision of a certain amount of free experience rights, users can use the paid rights and interests for free, but after exceeding a certain amount, they need to pay, compared with the trial model, it can effectively control the impact of the wool party and reduce the cost of providing trial payment.

Value-added model:The value-added model is also one of the common ways at present, common in some paid content products, such as PPT template products, copyright material products, etc., the product provides free content and also provides paid content, the quality of paid content is relatively better, users need to pay if they want to use paid content after experiencing free content. This method is important for the control and operation of the value difference between free content and paid content, and it is necessary to find a balance between the user experience of free users and paid conversions.

Unlocking mode: Unlocking mode means that a part of the paid service is delivered first, so that users have a certain perception of the service result, if you need to get a more complete service, you need to pay to unlock, this method is common in some products with very high cost of free services, because the cost of a single service is too high, can not directly provide complete services for free, so you can only use the way of delivering part of the service, and the user experience is relatively poor.

Direct payment model: This model means that the product does not provide trial and experience, if you want to use paid services, you must pay directly, such as the PLUS membership of ChatGPT in the early days, this method has high requirements for the product ability and brand confidence of the product, which means that through the reputation of paying users, and the influence is enough for users to pay directly, this method is not something that ordinary products can do, so it is generally not recommended for individuals to directly adopt this model, unless you can do products like Microsoft and ChatGPT.

2. Design of payment trigger scenarios

In addition to the triggering method, another thing to pay attention to is the trigger scenario, that is, when the payment contact is triggered, including normalized triggering and scenario-based triggering, where:

Normalized triggers represent some fixed entrances to guide payment, including subscription payment pages, fixed payment entrances in personal centers, permanent payment buttons, etc., the main purpose of which is to meet the needs of old users when they want to continue to renew and use, so that they can quickly find the entrance to purchase;
Scenario-based triggering means that it is triggered when users may need it, including when the equity limit reaches the limit, etc., which is a relatively accurate and suitable triggering method with a more suitable experience.

Here we focus on the problem of scenario-based triggering, that is, for example, when the user uses it, trigger the payment and then guide the payment, here are three personal ideas:

First of all, it is necessary to ensure that users complete the golden experience of the product at least once, so that users can go through the core process of the entire product, and before that, users should not be blocked from using it because of payment.
To ensure that users are familiar with and understand your product enough, and establish expectations for the value of the product before guiding payment, here you need to ask yourself a question, how many times users can use your product completely correctly after using it;
Analyze the relationship between quantitative factors related to the degree of use such as the number of experiences and the paid conversion rate, find the inflection point of the paid conversion rate, and analyze to see how many free experiences or usage the user can usher in the inflection point of the paid conversion rate, which can be used as the basis for limiting the trigger scenario.

2.4.3. Subscription upgrade guidance policy for SaaS products

For some relatively complex products, such as WPS, not only for individual subscription members have membership levels, but also for different levels of subjects to provide unused commercial versions, the user’s upgrade path may include: personal basic membership→ individual premium membership→ team subscription version→ enterprise subscription version, and for enterprise products that serve both the C-end and the B-end, there is often a conversion proposition, how to complete the user’s conversion from the C-end to the B-end, Therefore, in this part, we mainly talk about the subscription upgrade guidance strategy of SaaS products, because WPS is very suitable for explaining this part, so I mainly take this product as an example, mainly explaining the following 3 points:

How do I complete the upgrade of an individual member from a basic member to a premium membership?
How do I complete the upgrade from the individual to the team version?
How do I upgrade from the team edition to the enterprise edition?

1. Upgrade from individual basic membership to premium membership: price difference upgrade strategy

WPS provides users with two types of members: super members and large members, the rights and interests of large members include the rights and interests of super members, to provide more membership rights, in order to better guide users to actively subscribe to higher-level large members, WPS has designed a strategy of price difference upgrade in the payment strategy, when users who are already super members, can supplement a price difference on the basis of existing members and then upgrade to large members, so as to meet the needs of users to upgrade their rights and interests, but also save costs, it is understood, The price difference upgrade strategy has played a big role in improving the conversion of WPS members and increasing the unit price of customers.

2. Upgrade conversion from individual to team subscriptions: Free team tenant strategy

In fact, there are many users who use WPS, and there is a certain organizational behavior behind them, such as a team or small and medium-sized enterprises behind them, they have the need for organizational collaboration, so products like WPS also have such a business goal to improve the conversion of users from C-end subscriptions to team subscriptions.

At present, WPS adopts the strategy of supporting the creation of free team tenants to achieve this problem, individual users can create an organization and team space for free, and then invite team members to join the organization, and then collaborate in the team space, when users need higher team spaces or advanced collaboration rights in the process of use, so the free team pays for the paid team version subscription, this conversion path realizes the conversion process from personal → free team → paid team version subscription. Compared with traditional methods such as telemarketing and manual sales, the conversion efficiency is higher.

3. Upgrade and conversion from team version to enterprise version: Obtain natural leads through team version

The sales of the enterprise version usually need to rely on offline sales, and it is difficult to directly transact through online transactions, so the most important way to convert team version customers to enterprise version customers is to naturally obtain leads that have the potential to be converted into enterprise versions through the team version, which is relatively easier than manual sales to obtain enterprise leads and convert them into orders, and the cost of leads is relatively lower.

End of Stage:

OK, due to the relatively long content, this content will be shared firstThe business model exploration of SaaS products and how to design the commercialization strategy of SaaS subscription are two partsIn this article, we mainly discuss the design of the business model, and how to output the commercialization strategy of SaaS products from 0 to 1, from top to bottom, we need to first think clearly from the top about how the commercial version and core value-added rights and interests should be designed, figure out what to sell, and what to sell products and services; Then discuss how to set up the package and the pricing of the package, and finally think about how to build a natural payment path in the product to allow users to successfully complete the payment conversion.

The Power of Subscriptions: How to Commercialize SaaS Products from 0 to 1?

1. Why do you want to write this article?

2. Summarize the content of this article in one sentence

3. Who is this article suitable for?

4. How will I write the entire article?

5. Overview of the full series of content outlines for “The Power of Subscriptions”

1. Exploration of business models of SaaS products

1.1 Common business models of Internet products and SaaS products

1.2 Why do many products like to do “membership subscriptions”?

2. How to design a commercialization strategy for SaaS subscription?

2.1 How to design a commercial version of SaaS?

2. Is it necessary to design a separate commercial version for a one-person user and a one-person enterprise?

2.2 Equity design of different commercial versions

2.3. Subscription Packages and Package Pricing Design

2.4. Design of paid touchpoints, conversion guidance, and upgrade links

JD.com vs. Meituan, Cudi won

Several variables affecting JD.com’s takeaway appeared at the same time

Exceeded expectations! Taobao flash sale opened up nationwide in advance, and joined forces with Ele.me to reverse the takeaway war

JD.com VS Meituan: The final deduction of the “takeaway war”

Why is a Hello bicycle more expensive than a bus?

Xiaohongshu Entertainment live broadcast sprints urgently, appearing in the background in early May, and the voice hall may appear, are you ready?

o3 In-depth Interpretation: OpenAI Finally Uses Tool Use, Is Agent Products Dangerous?

The Truth Behind AI App Hits: From Cursor to Arc, PMF’s Key Insights That Determine Life and Death

In-depth Interview Practical Guide: Say goodbye to awkward chats and superficial information, and dig into user treasures

How does AI programming choose the right large model? 4 stages + 6 recommendations

o3 In-depth Interpretation: OpenAI Finally Uses Tool Use, Is Agent Products Dangerous?

It’s been 3 years since I left Baidu, do I regret it?

Still doing demand analysis? This article will take you from 0 to 1 to learn to accurately tap your needs

a16z predicts: The AI era is rewriting the development logic, and these 9 new paradigms will determine the next technology decade

All businesses deserve to be redone by instant retail!