Bottom-up SaaS: A framework for mapping pricing to customer value

A few years ago, building a bottom-up SaaS company – defined as a firm where the average purchasing decision is made without ever speaking to a salesperson – was a novel concept. Today, by our count, at least 30% of the Cloud 100 are now bottom-up.

For the first time, individual employees are influencing the tooling decisions of their companies versus having these decisions mandated by senior executives. Self-serve businesses thrive on this momentum, leveraging individuals as their evangelists, to grow from a single use-case to small teams, and ultimately into whole company deployments.

In a truly self-service model, individual users can sign up and try the product on their own. There is no need to get compliance approval for sensitive data or to get IT support for integrations — everything can be managed by the line-level users themselves. Then that person becomes an internal champion, driving adoption across the organization.

Today, some of the most well-known software companies such as Datadog, MongoDB, Slack and Zoom, to name a few, are built with a primarily bottom-up product-led sales approach.

In this piece, we will take a closer look at this trend — and specifically how it has fundamentally altered pricing — and at a framework for mapping pricing to customer value.

Aligning value with pricing

In a bottom-up SaaS world, pricing has to be transparent and standardized (at least for the most part, see below). It’s the only way your product can sell itself. In practice, this means you can no longer experiment as you go, with salespeople using their gut instinct to price each deal. You need a concrete strategy that aligns customer value with pricing.

To do this well, you need to deeply understand your customers and how they use your product. Once you do, you can “MAP” them to help align pricing with value.

The MAP customer value framework

The MAP customer value framework requires deeply understanding your customers in order to clearly identify and articulate their needs across Metrics, Activities and People.

Not all elements of MAP should determine your pricing, but chances are that one of them will be the right anchor for your pricing model:

Metrics: Metrics can include things like minutes, messages, meetings, data and storage. What are the key metrics your customers care about? Is there a threshold of value associated with these metrics? By tracking key metrics early on, you’ll be able to understand if growing a certain metric increases value for the customer. For example:

  • Zoom — Minutes: Free with a 40-minute time limit on group meetings.
  • Slack — Messages: Free until 10,000 total messages.
  • Airtable — Records: Free until 1,200 records.

Activity: How do your customers really use your product and how do they describe themselves? Are they creators? Are they editors? Do different customers use your product differently? Instead of metrics, a key anchor for pricing may be the different roles users have within an organization and what they want and need in your product. If you choose to anchor on activity, you will need to align feature sets and capabilities with usage patterns (e.g., creators get access to deeper tooling than viewers, or admins get high privileges versus line-level users). For example:

  • Figma — Editors versus viewers: Free to view, starts changing after two edits.
  • Monday — Creators versus viewers: Free to view, creators are charged $10-$20/month.
  • Smartsheet — Creators versus viewers: Free to view, creators are charged $10+/month.

People: How do your customers fit into a broader organization? Are they mostly individuals? Groups? Part of an enterprise? Does value go up with every additional user added? The value you deliver may be based on how you handle groups of people and how they interact with each other. For example:

  • Asana — Small team versus big team: Teams of <15 people can use for free and >15 start to pay.
  • Notion — Individual versus team: $5/month for individuals, $10/month for teams.
  • Gitlab — SMB versus enterprise: $19/user for SMB (Silver) and $99/user for enterprise (Gold).

Tiered pricing

Once you take a look at your MAP — metrics, activities, people — and you determine which component delivers the most value to anchor your monetization, the next question is what pricing tiers you want to establish. Chances are not all of your customers will pay the same thing. Again, tiered pricing must align to value delivered.

For the most part, tiered pricing today is standardized across SaaS applications, usually falling in three buckets: individual, team and enterprise.

  • Individuals typically pay the lowest overall price, but the highest price per user.
  • Teams pay more, but the price is cheaper per user.
  • Enterprises pay the highest overall price, but often pay the least for each individual using the product or service.

Another way to think about this is:

  • Free = self-serve, limited functionality. Give the customers a taste of the long-term offering, enough to encourage them to pay up for more.
  • Pro/Paid = self-serve, unlock the full value of the product. This can mean high-usage bands, more users, or just premium capabilities, like automation.
  • Enterprise = sales team, customized solution with “enterprise-grade” capabilities, like single-sign-on and dedicated customer support.

Since enterprise pricing is typically the highest, and also the most complicated, below are a few more specific things to consider:

Enterprise pricing

When it comes to enterprise pricing, it’s important to make sure the incremental value the customer receives is higher than their incremental cost. Otherwise you risk creating the perception that enterprises are getting a worse deal versus SMB/midmarket. This can be particularly damaging since enterprises tend to drive the majority of revenues.

Many companies keep enterprise customers happy by offering a premium experience, including a dedicated customer support representative, single-sign-on integration, an admin console/user provisioning control and unique product-specific capabilities (think advanced automation for or data loss prevention for Slack).

You should also consider including end-user value in your enterprise plan (not just security features) so that individual users who embrace your product have a reason, and the underlying data points as support, to lobby their companies on your behalf. By focusing on individuals instead of just nonuser institutional buyers, you can create an army of “salespeople” to market your product for you.

An example of a sticky enterprise-grade feature is externally shared Slack channels, which are only available in the premium tier. If sales teams are initially captured as users, as product usage increases, these same sales teams will likely advocate to upgrade, so that they can use Slack to communicate with their customers and prospects.

To publish or not to publish prices

Companies differ on whether to include enterprise pricing on their website or leave it off in order to trigger a customer conversation.

In reality, there are clear pros and cons to both choices. If the enterprise implementation is straightforward, listing the price online can drive higher conversion — especially when customers would rather not talk to a sales representative. When the implementation is more complex and there is more room for error, many companies require a sales call to deploy the enterprise-grade solution rather than risk creating an unhappy customer.

If your product is hard for customers to adopt or if it takes longer for the average customer to buy, you probably don’t want to list your enterprise price. You really only want to promote self-serve enterprise if adopting your product is a decision that can be made relatively fast.

In addition, by not listing the price, you also give your sales team more flexibility. Early-stage companies often use these enterprise calls to figure out what their future enterprise features should be. Finally, omitting pricing can be used as a way to make sure your roadmap isn’t too focused on niche enterprises and reflects the needs of a broader group of customers.

When (not if) to hire a sales team

As we said in our post about the three most important questions that anyone hoping to use a bottom-up go-to-market model (Who? What? When?) product-led sales does not last forever.

The most well-executed bottom-up SaaS companies eventually reach a point where they start to think about how to reach bigger enterprise customers that require more handholding — or exist in a space where competitors are deeply embedded. Both situations require dedicated salespeople who can make the case for your product and build relationships with your most valuable customers.

However, the problem is that most bottom-up companies are so focused on building a great product that they wait too long to build the most effective sales team to help them succeed in the long term. As a result, they are then forced to play catch-up in a corporate environment that may be resistant to change. Investing in sales before you absolutely have to will allow you to take advantage of bigger opportunities when they present themselves and save you headaches down the road.

Below is a quick snapshot of how many of today’s newest leaders are approaching bottom-up SaaS pricing.

If the past five years are any indication, the trend toward product-led growth will continue to define the next generation of software leaders. As the cost of distribution disappears and buyers become more sophisticated, profits will be redeployed into product improvement, driving more and more value for the end customer.

For companies, this transition will require rethinking the traditional go-to-market playbook. Aligning pricing, product, innovation and customer value can be the best of all worlds, but it requires thinking carefully about who your customers are, what you have to offer, who you need to hire and how to execute.

Competitive advantage will go to the players who understand what truly motivates their customers and connect their pricing to that engine.

The information contained in this post should not be considered investment advice from Coatue. As of the date of publication, please note that Coatue currently has private investments in Airtable, Figma, Gitlab and Notion, all of which are referenced in this article. As of the date of publication, please note that Coatue may hold positions in the public companies referenced in this article and that other than in publicly available SEC filings, the federal securities regulations limit Coatue’s disclosure of public stocks in which it is invested.