In a recent educational video "How Your Market Dictates Your Packaging" from Monetizely, pricing expert Ajit Pal Ghuman shares valuable insights on how companies should structure their product packaging based on their target market dynamics. The video presents a strategic framework for understanding when to use simple versus complex pricing models, with real-world examples from companies like Netflix, Figma, and ServiceNow.
The Lego Block Approach to Product Packaging
When it comes to packaging your SaaS product, there isn't a one-size-fits-all solution. As Ghuman explains in the video, "Packaging is a little bit a function of your market, right? And based on your market dynamics, you're going to want to pick different type of packaging structures."
The strategy ranges from simple, monolithic packaging to highly complex structures. The right choice depends entirely on who you're selling to and the variation in their willingness to pay.
Simple Packaging: The Netflix Model
For companies targeting mass consumer markets, simplicity is key.
"Netflix, for example, wants to reach the whole world, right? If you want to reach the whole world, you're probably going to want simple packaging so it's easy for people to understand you and adopt," Ghuman explains.
The reasoning is straightforward: when targeting individual consumers or households, there typically isn't a dramatic difference in willingness to pay. While there might be minor variations between different US demographics or between different countries, the range is relatively narrow.
Complex Packaging: The Enterprise Approach
On the opposite end of the spectrum are companies targeting enterprise clients with significantly different needs and budgets.
Ghuman illustrates this with a clear example: "Let us say you are selling to only retail banks or financial services industry in the US. So you're primarily going to make money from Fortune 500 or global 2000 institutions… within Fortune 500 institutions, these deals could range from half a million to three to four to 5 million in revenue."
With such enormous variation in deal sizes, a simple pricing model would leave money on the table. As Ghuman points out, "You cannot do the Netflix model because that means I have just one thing… I'm selling one thing at one price or maybe it scales a little bit."
Instead, companies selling to enterprises need to offer numerous options so that clients can find something tailored to their specific needs. This customization allows vendors to "maximize that $5 million budget they had for something like you."
Finding Your Place in the Spectrum
Most B2B SaaS companies fall somewhere between these extremes. Slack, for instance, serves a diverse customer base including SMBs, mid-market, and enterprise customers. This middle position requires a thoughtful approach to packaging that offers enough options without becoming overwhelming.
"Pricing is then a function of the nature of your business," Ghuman summarizes. Understanding your market allows you to determine "where you want more simplicity where you want more complexity."
Figma: The Good-Better-Best Model Done Right
Ghuman highlights Figma as a company that implements tiered pricing effectively:
"I picked Figma because Figma has a packaging structure that is very that just does not take good, better, best and blindly applies it. Figma understands that this is what a professional is really going to value. Figma understood that this is what an organizational is really going to value and therefore these additional features will offer them more value and we can charge for it."
Rather than arbitrarily sorting features into tiers, Figma tailors its packages to the specific needs of different customer segments:
- Starter plan for basic needs
- Professional plan with collaboration features and team libraries
- Organization plan with design systems, centralized teams, private plugins, and SSO
This approach shows a deep understanding of customer segments and their distinct value requirements—something Ghuman notes many companies fail to achieve: "This is an example of good, better, best done well. I will mark 'done well' because most people do not do it well. They just slot features blindly."
ServiceNow: The Complex Enterprise Pricing Model
For companies targeting large enterprises with significantly varied needs, a fully customized approach may be optimal. Ghuman references ServiceNow as an exemplar of complex enterprise pricing:
"Service Now does not disclose product pricing. If you're interested, your deal could be 10K or even 5 million per year. As a pricing person, I am saying good job."
This approach challenges the common belief that pricing should always be transparent. Ghuman argues:
"There is a dogma in pricing where says everything should be transparent. Why should everything be transparent? If I'm selling to JP Morgan and I'm selling to the retailer down the street, it should not be transparent because JP Morgan is going to pay me 5 million. I'm not going to have the same pricing."
ServiceNow's complex model includes:
- Core modules (ITSM, ITOPM, HRST, SEC ops) that scale per user
- Add-ons and integrations priced as a percentage of the base license
- Professional services, training, and certification options
The percentage-based pricing for add-ons is particularly strategic. As Ghuman explains from his experience at Narvar: "I said it is percent of percentage of base and not a fixed price add-on because then I can scale the volume, scale the add-on based on the customer… It allows me to capture the willingness to pay from a large whale like a customer that is a whale and I capture all of the price point."
Choosing Your Packaging Strategy
The key takeaway from Ghuman's presentation is that your packaging strategy should be directly informed by your target market. If you're selling to consumers or a broad market with limited variation in willingness to pay, simple, transparent packaging makes sense.
However, if you're targeting enterprises with vastly different needs and budgets, more complex, customized packaging allows you to capture the maximum value from each client.
Whichever approach you choose, it should be an intentional decision based on market dynamics rather than a reflexive adoption of industry trends or pricing dogmas. As the video demonstrates, the most successful companies align their packaging structure with their unique market position and customer needs.