Value-Based Pricing for SaaS Broker Business Model

Company Confidential

Our client has a multi-million dollar on-line business that matches vendors with customers in a traditional broker business model.  Their on-line platform does not facilitate transactions on behalf of their vendors as they believe it not the right fit for their industry and cannot justify the increased operational overhead it would require.  This has made it difficult for our client to understand the true return their product provides to their vendors.  As a result they could not gauge the value their product delivers to vendors nor could they easily compare the value delivered to the value delivered by competitors.  Our client suspected they could raise prices for some market categories but were worried about overpricing in others.  Additionally, they were looking for a consistent methodology to identify specific price-points across markets.

We solved this problem by first creating a custom survey for vendors and conducted vendor interviews to identify the vendors' return on investment.  We conducted an intensive data-mining effort to understand average leads per vendor for each market and category over a 2-year period.  The data-mining effort also included reviewing vendor transactions such that we could align the investment for each product type with the leads they obtained.  Using information from the customer interviews and information from the data-mining effort, we were then able to understand the value (Vendor Revenue, Vendor Investment, Leads, Conversion rates) across all markets and categories.  This was the first time anyone in their organization had seen this information and they didn't always see what they expected.We identified products that were delivering high value to their vendors with respect to what was being charged.  We also identified markets were vendor investment was high but the value being delivered was low.  Based on this information along with competitive intelligence we put together, we built a dynamic model and made specific pricing recommendations for each of their markets and product categories.  In this first two quarters of the new pricing, revenue increased by 9% with a trajectory putting them up 12% for the year!

It was a fantastic project and we loved working with them!


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