Charge based on value, not seats. You shouldn’t be charging the customer based on the number of seats/users they have on your platform. You should be charging based on the value and ROI you’re generating for the customer, materially discounted of course so they can realize that value. Then, you should allow the customer to onboard as many users as possible onto your platform. This creates strong evangelism at the client and prevents you from losing the customer because the “champion” left the company. The more users on your platform, the higher the stickiness, so don’t dissuade usage with your pricing.
What’s the right way? It’s by offering new features, new integrations, and new functionality to your platform, then upselling based on the new ROI generated for your client. This is how the big software players do it. Below are examples:
Sentinel One which went public states “As we enhance our platform functionality and value proposition, we expect many of our customers to adopt additional platform functionalities and Singularity Modules to address all of their cybersecurity use cases through the same platform and agent. We have architected our single agent such that we can immediately activate additional modules for our customers on the already deployed agent, so adding increased functionality is seamless for us and our customers. This gives us the ability to show in-product promotions and trials and to drive the expansion of our Singularity Modules, The power of our land-and-expand strategy is evidenced by our 119% and 117% dollar-based net retention rates as of January 31, 2020 and 2021, respectively.” No mention of upsells via expanding seat count.
Powerschool says “Many of our customers begin their journey with us by using only two of our 15 products, on average, as of December 31, 2020. As customers begin to appreciate the benefits of an integrated software platform across student data, classroom learning, office functions and talent management, they increase the number of solutions they buy from us over time, with over 1,000 customers owning 5+ products and over 3,000 customers owning 3+ products as of December 31, 2020. Our future revenue growth is dependent upon our ability to expand our customers’ use of our platform, and our go-to-market efforts are designed to drive cross-sell growth.”