Create Your Pricing Plan

Learning Objectives

After completing this unit, you’ll be able to:

Explain what the four AppExchange pricing models are.
Describe pricing best practices.
List some tiered pricing methods.

Get from Strategy to Specifics

Having a pricing strategy is a great start. But having a detailed pricing plan is even better. Next, Leung analyzes specifics for her Cloudy Health app.

Get Cloudy Consulting’s marketing manager Leung Chan at a chess board planning her next move

What Are AppExchange Pricing Model Options?

There are hundreds of app types on AppExchange. But did you know there are just four basic app pricing models? Pricing models range from free (and we mean 100% free) to paid to a couple of options in between.

App Pricing Models	Details
Paid App	Your app is free to download, install, and use during a trial period. Payment is required after a trial period.
Paid Add-On Required	Payment is required for some type of third-party service or product.
Freemium	Your app is free to download, install, and use to a limit. Payment is required after the limit is reached. Examples of limits include: count of users data volume feature limits
Free	Payment is never required. External or third-party products may be required, but they also must be free.

Leung thinks this is pretty straightforward. Free is free, paid is paid. Got it. For Cloudy Health, Leung is leaning towards a freemium model so she can create tiers of payments to use its full functionality.

Leung talks to colleagues about pricing options, and she reads a bit more about the art of AppExchange listings in AppExchange: Salesforce Pricing Guidelines.

Leung asks herself these questions to determine how to monetize her app. You can, too.

What units will you use in your pricing options, such as per org, user, or data volume?
Will you price your app in tiers by number of users or per company licenses? A custom blend of the two?
What customer billing frequency is fair to your customers but also allows you to monetize? Consider one-time, monthly, and annual payment options.
Where are your customers located and what currencies will you support?

Leung realizes she needs to know more about three pricing plan concepts: units, frequency, and currency.

Units

A unit is another measurement for slicing and dicing your pricing models. For example, you could charge your customers by user. Or by org. Org is one kind of unit and user is another kind. Customers who are already familiar with Salesforce product pricing understand by-unit pricing: By-unit pricing is the most popular at Salesforce.

Here are some things to consider when choosing your unit.

Unit	When to Use this Unit	Unit Use Case
User	Each user in an org gets distinct value from your app Supported by the License Management App (LMA), which helps you keep track of customer licenses	Users generate their own customized documents from a template.
Org	Each org gets distinct value from your app Supported by the LMA	Data is deduped at the org-wide level on behalf of all users.
Custom	More complicated to manage Not supported by the LMA Requires your engineering team to build a management solution	Usage data dashboards are provided org-wide, but charged on a user-level basis.

Frequency

Frequency is simply how often you get paid. You have two choices on AppExchange: monthly or annually. Both can be good options, depending on your needs.

Keep in mind, per your Salesforce agreement, you must pay Salesforce monthly for any licenses that you sell. You can sell licenses to customers on a yearly billing cycle, but you still owe Salesforce monthly.

We recommend that you bill your customers annually upfront, then pay Salesforce the percentage of net revenue (PNR) monthly from your reserves. Learn more about PNR and your contractual obligations to Salesforce in the next unit.

Currency

Fact: our economy is global. Supporting your customers in widely available or their native currencies can make a real difference to their buying decisions.

Leung returns to that customer analysis she performed earlier. She looks at where her customers and potential customers are located. She also considers what currencies their payment method might support. Answering these types of questions can help you to determine which currencies your app supports.

Leung has learned a surprising amount about her app, her customers, and her pricing plan so far. But Leung has one major decision left: what dollar (or pound or yen) amount to charge? It turns out that question can have many answers.

Leung looks into pricing tiers next.

Plan Your Pricing Tiers

Get Cloudy Consulting’s Leung Chan and a customer with small, medium, and large-sized porridge bowls

Offering pricing tiers to your customers is a lot like Goldilocks finding the right-sized bowl of porridge. For some people–or bears–a small bowl of porridge is perfect. But for others, only that medium or large bowl satisfies.

How do you satisfy your customers’ different-sized needs? Some common methods are by:

Consumption: Also called usage-based pricing, consumption pricing tiers are based on how much the customer ingests. Examples include data consumption, data storage, or the volume of users on a network.
Functionality: Your one app likely comprises many functions and features. Consider offering functionality-based tiers. For example, allow small customers to use up to 10 basic features, medium customers up to 20, and your largest customers to use all your app’s features.

Tiered pricing is also tied to customer longevity. When a customer feels like they paid the right price for the right combination of services, they’re more likely to stick with a purchase. And as your customers’ businesses grow, they can choose a different pricing tier that suits their changing business needs.

Since the Cloudy Health app offers many features–including environmental, health, mapping, and employee components–Leung feels that functionality-based pricing tiers are ideal for her customers.

Here’s a summary of Cloudy Health’s pricing model details.

Pricing Model	Freemium
Units	Per org
Frequency	Monthly, billed annually
Currency	USD, CAD, pounds, yen

And here are Cloudy Health’s pricing tiers.

Plan Name

Description

Per Org Monthly | Annual Price

Features

Individual

For smaller-sized companies who want to use a limited set of features.

$15 | $180

Project management and employee data

Small-Medium Business (SMB)

For medium-sized companies who need a larger set of features.

$30 | $360

Individual tier features, plus:

Standard, regional weather forecasts
Standard transit management (rail, bus)

Enterprise

For large-sized companies who need access to the full Cloudy Health feature set.

$45 | $540

SMB tier features, plus:

Worldwide weather forecasts
Worldwide transit management (rail, bus, air, sea, shipping)

It’s a beautiful plan, isn’t it?

Next, you might be wondering where you input your pricing plan details so that the options are clear to your customers. We won’t cover all of the details in this module, but at a high level, you use a combination of AppExchange features to list and manage your app.

Feature	Pricing Model	Purpose
AppExchange Partner Console	All	Create and manage your listing.
AppExchange Checkout	Paid	Manage billing and collect payments powered by Stripe.
Checkout Management App (CMA)	Paid with AppExchange Checkout	Manage relationships with customers using automated email notifications. Monitor your offering’s performance.
License Management App (LMA)	All	Manage your customers’ licenses.
Channel Order App (COA)	Paid Add-On Required Freemium	Create, submit, and track all of your AppExchange orders.

Since Leung’s app is freemium, she uses COA to track orders and her own payment system to collect Cloudy Health’s functionality-based tiered pricing payments.

Circle Back to Salesforce

Next, Leung shifts her focus from pricing models to learning about contractual arrangements. She and her team must get on the same page with Salesforce and AppExchange. Keep reading to learn along with Leung.