Pricing Models and Revenue Streams for Digital Products

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SaaS (Software as a Service)

SaaS is one of the most popular and effective ways to monetise a digital product. With this model, you charge a recurring fee for access to your software and, in many cases, the data within it. This could be billed on a weekly, monthly, or yearly basis—often with discounts for longer-term commitments. Most often it’s monthly and one offers a yearly discount i.e. pay for 10 months for 12 months access.

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While SaaS pricing may seem cheaper upfront compared to one-off payments, over the course of the product's lifecycle the recurring fees tend to add up. There is, though, a caveat: this model requires you to continuously maintain, update, and improve your product to ensure that users continue to find value. It's a long-term relationship where the product must evolve alongside customer needs.

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Recurring Revenue Model

Think of this as a hybrid between SaaS and a more traditional subscription model. You charge a recurring fee for the product and data access, but the key difference here is that there is no ongoing expectation for updates or improvements after the product is sold.

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While SaaS businesses are expected to continuously improve, recurring models offer a simpler setup. The revenue is predictable, but unlike SaaS, it doesn’t tie you to constant product iteration and updates.

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Freemium/Pay-to-Play (B2C/Enterprise)

Here is a model that thrives in the B2C space: the freemium model. At its core, your product is free to use at a basic level - but to unlock premium features or extend usage limits, users need to pay.

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Let’s say you allow users to access your product five times per month for free. After that, they pay for each additional use. Or maybe the base product is free, but deeper analytics come at a premium.

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The majority of your revenue will likely come from a small subset of users—the "whales" who rely on your premium features - but even those users who are not paying upfront can still be valuable; you can, for example, monetise the data from non-paying users as an additional revenue stream.

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SLA (Service Level Agreement)

SLA-based pricing models are typically found in the enterprise world, where you offer not just software but a whole solution or platform. Alongside that, you’ll perform additional duties for your clients—things like out-of-hours support or extra consultative services. These relationships are close, often strategic in nature, and require a higher level of service.

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Because you’re offering more personalised attention, the price of the product is higher. The expectations are greater, and the service must be tailored to meet client needs. An SLA model can be highly profitable, but only if you focus on a narrow segment of clients that require this level of attention. For most companies this isn’t a one-size-fits-all solution, and it tends to suit businesses that thrive in a high-touch environment.

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Tech-Managed Services

Think AWS or other cloud infrastructure providers. This model sits between the basic support offered by SaaS and the full-service approach of an SLA. Tech-managed services are essential for infrastructure solutions, and they fill a key gap—helping clients avoid the headache of hiring their own database administrators or system administrators.

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Tech-Enabled Services

This model is for service-based businesses that use technology to drive efficiency and scale. Tech-enabled services allow businesses to accomplish more with fewer resources, thanks to the flywheel effect of technology.

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As an example, think about how accounting firms are increasingly leveraging tech to scale their services. By using software to automate data entry, they can serve more clients with the same amount of staff. As a result, these services can command higher monthly revenue, driven by increased productivity.

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Additionally, tech-enabled services offer opportunities for consultative revenue—helping clients optimise their operations through better use of technology. The possibilities here are huge, and this model can quickly scale if done right.

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The Open-Source/Managed Service Model

This model is tech-focused and involves offering open-source software while providing additional paid services around it. Think about tools that everyone in tech uses—tools that can be optimised for specific use cases. The company behind the open-source product then offers consulting, deployment, or support services to help businesses get the most out of that tool.

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It’s a great model for those who can develop highly useful open-source products but also have the ability to generate additional income by providing expert services. Open-source models can attract a large user base, while your consultancy services drive revenue from those who need help implementing the software effectively.

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So, which pricing model is the right fit for your product? That depends on a number of factors—your product, your target market, and how you want to scale your business.

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