In our final post of this series, we’d like to address 2 key action items of an operational or organizational nature that should be considered when adopting UBP.

Redefining Sales and Customer Success Roles

After choosing the price and pricing mechanism, companies must redefine sales and customers success functions roles. These two functions have very different roles in traditional subscription SaaS versus usage-based SaaS. If in traditional subscription SaaS, sales is the main lever to increase revenue through contract signing, in UBP the situation is different. Contract signing is just the start for both sales and customer success, and both these functions are pillars for growth. In traditional subscription, sales mostly engage at initial bookings, while customer success mainly focus on product adoption. In a UBP approach, sales maintain the customer relationship after initial booking for some duration and customer success focus on utilization rate and expansion.

Overall, in subscription, self-serve is considered a secondary if not minor growth driver, whereas in usage-based, it is a main growth driver for the organization.

Addressing operational challenges

3 main operational challenges emerge when adopting UBP:

1. Addressing revenue recognition challenges in the hybrid approach,

2. Developing sales compensation structure

3. Improving predictability of revenue forecasting and budget planning.

The first challenge revolves around revenue recognition in the hybrid approach. It is a complicated topic and we won’t dive here into the depth of the relevant governing accounting principles (such as ASC 606 and others). However, we would like to touch on the main business challenge. As revenue is recognized based on usage occurrence, discrepancies can emerge between initial bookings and actual usage. There are different approaches to dealing with these differences between initial booking and actual usage and how to recognize them in the financial reports.

The second challenge revolves around structuring sales compensation. Several competing forces will need to be balanced.

Key questions to address in this regard would be around quota setting (such as against what to retire quota – actual usage or bookings – and how high should it be?) and timing (such as when to pay commissions?)

The third challenge revolves around demonstrating predictability by accurately forecasting revenue. This challenge is multi-faceted and — based on our experience we must say that there is no silver bullet. There are multiple ways to improve forecasting and planning: starting with building a strong FP&A team, investing in robust systems, leveraging multiple rounds of iterations and others.

As we come to the end of our UBP series, we’d like to stress that UBP is far from being a theoretical or research only topic. It has implications on all aspects of the organization and should be top of mind to managers of SaaS companies.

We hope that we were able to codify our learnings on the topic to date and that they will help the broader ecosystem.

And remember – Growth is the new king and UBP is THE enabler for growth.

See All Parts

Usage Based Pricing What Is Usage-Based Pricing and Why Should You Care About It Usage Based Pricing Aligning on Terminology – What Is UBP Usage Based Pricing Why and When UBP Outperforms Traditional Subscription Usage Based Pricing 5 Key Action Items to Consider When Deploying UBP