Updated on by Daniel Twigg
We got the chance to chat with John Griffin at SaaStock. He is the Co-Founder and CRO of m3ter. We wanted to discuss the increasing trend of usage-based pricing, the role of m3ter and how integration helps their product.
m3ter and John Griffin
Hi, my name is John and I am the CRO and Co-Founder of m3ter – a tool that makes it possible to help companies implement usage-based pricing. Recently, this has become a massively increasing trend in terms of how software is priced.
Usage-Based Pricing SaaS Trend
There are many trends driving this type of pricing structure, for example, the rise of automation, AI and Machine Learning. As well as the fact that most people like to sell software with product-led growth strategies and usage-based pricing is very compatible. This means customers can try the software and only pay for what they are using.
As a result, we have seen companies who are deploying usage-based pricing generally tend to get a much better net dollar retention than companies that are deployed with more traditional subscription models.
This is not to say that every company needs to move to usage-based pricing as it won’t suit everybody. For instance, many in the SaaS space, specifically the HR space are quite rightly priced based on the number of employees they’re solving.
For many other companies, usage-based pricing is a far better model for their customers. This is because it aligns the value that the customer is getting with the cost of service. This is why it is now such a big trend.
Are there any downsides to usage-based pricing?
Now, the one downside to usage-based pricing is it’s very hard to do. Rather it can be difficult for companies to try and self-build their own systems. This is because they typically end up spending about a quarter to half a million upwards on implementing their own infrastructure to enable it.
After the initial cost, it probably costs in excess of 100 – 200 thousand a year to maintain. This is where m3ter can help as a solution that is purely focused on enabling SaaS companies to deploy this kind of complex pricing model. It makes the process far more seamless.
Why use a usage-based pricing solution like m3ter?
At m3ter we deal with millions of records of usage data coming at us in real-time. We are then able to apply complex pricing rules and algorithms to that data. As a result, we can meter and rate the data in real-time.
But solving a billing challenge is only half the problem. This is because you need to get the necessary data to get all of the strategic value for your business.
This is because usage data possesses signals. These signals can indicate when a customer might be close to buying or inform you if a customer is going to receive a nasty bill shock. When this is the case you may want to head off up the path.
There is a lot more that can be done with usage data and that is really what m3ter is all about. It’s about the analytics that you can basically do with usage data. As well as cost data and pricing data when you bring those datasets together.
In other words, we liberate this data, and we put it in the hands of the people that need it most within a company. For example, a company’s finance department uses usage data for forecasting. As well as an organisation’s sales team, who needs usage data to help them understand how their customers are using your service. A customer success team also need access to usage data to address billing queries and so on.
Most importantly customers themselves receive and use the data. They can see exactly what they are using and why they are paying the monthly/weekly fee for it. This is typically displayed via a rich billing dashboard where they can see visually see their data and manage their spending.
Do you see the role of integration and accessing usage data as a growing trend?
The ability to integrate is incredibly significant to us and our product.
We have a very strong view that we’re not coming in to change the existing code to a SaaS stack. Rather we’re enabling it and we work very closely with systems such as CRMs for the front office side, where often pricing is configured. Then at the back end, we work with payment systems like Stripe, Chargebee and Paddle. As well as working with finance systems like NetSuite to make sure that basically they are getting sent the information they need to manage the invoicing and the AR processes.
Therefore, integrations are massively important for m3ter and I consider them to be the third leg of our product. For me, integration is at least as important as all the other components.
For that reason, we turned to Cyclr in the early days. This is because Cyclr has an API library with hundreds and hundreds of Connectors to all of these systems. More specifically CRM systems, finance systems and payment gateways. These Connectors are ready out of the box and you don’t have to build any yourself. Cyclr, in my view a great platform has already done it for you.
As well as pre-built Connectors, Cyclr allows us to embed integrations directly in our product. This enables us to continue building our product on top of it, and they are invisible to the end customer.
We get great benefits from Cyclr and what you have developed. Our end customer doesn’t necessarily need to know, but quite frankly we’re transparent and very happily share with them.
How has your experience been working with Cyclr?
Our experience with Cyclr has been fantastic and we’ve received great support from day one.
I first came across Cyclr at this SaaStock probably about two, maybe three years ago, and bumped into Fraser, who was a very nice, kind and genuine soul.
We hit it off straight away so when we went looking for vendors in the embedded iPaaS space I was very confident in Fraser and Cyclr and what you’ve been building. As a fellow UK business, we were also very keen to kind of shop locally and we haven’t been disappointed.
We’ve received great support, and brilliant service and Cyclr is a great platform.