SaaS Entitlements: The Basics
Apr 27, 2023
Every SaaS pricing page is made up of the same three components: the pricing model, the price point, and entitlements.
The pricing model is the packaging the product comes in. Flat rate pricing, per user pricing, freemium, tiers, and usage based pricing are all examples of pricing models.
The price point is the dollar amount that a customer expects to pay within the pricing model you have chosen for your product.
The least analyzed in the world of pricing are entitlements: the subset features and services enabled by each of the price points. It’s important to note that entitlements do not include every feature in your application. Just those that are turned on and off based on the billing state of a customer.
SaaS Entitlements Are Underrated
Entitlements are at the core of your value proposition
When a buyer reaches your pricing page, entitlements are the first barrier to purchasing your product. How or how much a user pays is irrelevant if the product doesn’t solve their problem.
The way entitlements are bundled together and stamped with a price are the customer’s next consideration. In an ideal world, a customer would arrive on your pricing page and you would have a plan with all of the entitlements they value most included. They would pay only for the features and services that solve their biggest problems and leave the rest behind.
Having pricing plans that include too much entitlement waste makes them feel like they’re over paying. Pricing plans that have too many moving pieces can make them unsure what they’re paying for and how much they expect to pay. Maximizing value for you and your customer requires understanding which entitlements matter and which don’t for making a purchasing decision.
Entitlements are used for comparison
Entitlements are how customers assess your product’s value against your competitors. There is a reason the entitlements section of the pricing page is typically unbundled into a comparison table somewhere on your product’s website. Even if you don’t acknowledge your competition, your customer will.
Entitlements are where your billing and product are integrated
On the technical side, entitlements are where your billing system and your product integrate. Depending on the complexity of your product, this integration can be one of the most labor intensive to manage over time.
Every entitlement is an authorization point for your application. Every click a user makes within your product relies on your product checking the state of your customer’s billing account to ensure they are allowed to take that action. As the customer’s billing state changes over time, this authorization needs to align with your policies around churn, re-activation, and expansion.
Managing this piece of your product is expensive both in terms of getting it right, but also in getting it wrong. Every bug related to billing erodes customer trust and increases the number of high priority support tickets.
Increase Revenue with SaaS Entitlements
Given that your entire pricing approach hinges on the entitlements within your product, it’s important to get them right. Or, at least, get them right eventually.
Much like your marketing and product development, your entitlements and pricing page should be iterated on over time. Staying flexible allows you to test which configuration of pricing model, price point, and entitlements lead to more revenue for your business.
To stay nimble, its important to put a little extra time into implementing entitlements within your SaaS application. Ideally you can completely decouple entitlements (”can this user take this action or not?”) from the billing system (”what plan is this user subscribed to?”). Over time, this investment in your entitlements system will reduce the number of billing related bugs and increase the amount of closed sales based on your experimental findings.
SaaS entitlements are a critical component of every SaaS pricing page. They are the features and services enabled by each of the price points, and are often used by customers to assess the value of your product against your competitors. Entitlements are also where your billing system and your product integrate, making them one of the most labor-intensive pieces of your product to manage over time.
To maximize the value for you and your customers, it's important to understand which entitlements matter and which don't for making a purchasing decision. By staying flexible and iterating on your entitlements and pricing page over time, you can increase revenue for your business and reduce the number of billing-related bugs.