Growing with Your Customers
The above image is the SMB Willingness to Pay (WTP) for the Shopify service as described in an excellent post by Profitwell: https://www.profitwell.com/recur/all/willingness-to-pay/
The article is an excellent overview of the concept of WTP, from definition to factors affecting it. I highly recommend to anyone, but mainly to SMBs in the throws of trying to figure out their pricing model. Do not expect a magic bullet, a recipe for calculating your optimal pricing structure however, this read will give you a good perspective on how to approach the problem. Ultimately, it will come down to the tedious but oh so important work of interviewing customers, of learning what modulates their willingness to pay.
The article discusses the case of Shopify as an example of a company who understands their customers well and their WTP. Shopify charges $29/mo for starting SMBs (under $1mil in revenue), $79/mo for their premium accounts (SMBs making between $1mil and 5 mil in annual revenue) and $299/mo for Enterprise accounts (companies making more than $15mil per year in revenue). It is easy to see from the image above, Shopify hit the WTP bullseye in each of those segments. The pricing model aligns with the growth trajectory of their customers as well.
Even though we are a Shopify app, we followed similar principles in defining our own pricing model well before we got certified by Shopify. We followed the same principles described in the article, we talked with many, many … maaaanyyy SMBs and we ended up in a similar place, a pricing model that accommodate SMB’s WTP at every stage of their growth. Shopify simply confirmed our approach.
Hopefully the article will will help you right-size your pricing model to your customer’s WTP. Good luck!