In a recent YouTube video titled "The World's Simplest SaaS Packaging (Pricing) Approach," published by the channel "AI, SaaS & Agentic Pricing with Monetizely," the speaker presents a straightforward methodology for creating effective product packaging strategies. This approach focuses on aligning features with market segments to develop pricing tiers that meet customer needs while maximizing revenue potential.
Why Most SaaS Companies Struggle With Packaging
Creating the right packaging structure for your SaaS product can be overwhelming. With so many competing methodologies—good/better/best models, feature-based tiers, usage-based pricing—how do you know which approach will work best for your specific product and customer base?
The beauty of the framework presented in this video lies in its flexibility and focus on customer needs rather than dogmatic adherence to any single packaging philosophy.
Starting With Market Segmentation
The foundation of effective packaging begins with a clear understanding of your market segments. As the speaker explains:
"Let's start with our market segmentation in mind. Let's map our needs. Let's make sure we have an understanding of the segmentation and then let's use some basic principles about how we want to do packaging to create our initial packaging hypothesis."
This customer-centric approach ensures that your packaging aligns with what different segments actually value, rather than arbitrary feature groupings.
The Spreadsheet Method: A Practical Approach
To demonstrate this methodology, the speaker walks through a hypothetical example for a product called "Acme AI," an AI-based contact center solution targeting multiple market segments.
Step 1: Create Your Segment Matrix
Start by creating a spreadsheet with:
- Your market segments as columns (e.g., SMB, Mid-market, Enterprise)
- Your product features listed as rows
Step 2: Define Your Segments Qualitatively
For each segment, develop a qualitative understanding:
"What you can do when you have any product is you can list out your segments as columns in a spreadsheet and list out your features on the left… Then what you want to do is write down qualitatively what is the SMB segment. Are they companies more than X amount of revenue maybe up to so many employees?"
This qualitative definition helps create a mental model of each segment's characteristics, challenges, and needs.
Step 3: Map Feature Importance Using T-Shirt Sizing
Next comes the critical evaluation of which features matter to which segments:
"Use t-shirt sizing like small, medium, L, XL and so on to denote the importance placed by different segments of different features on your product."
This visual approach makes it easy to see patterns in what different segments value, which becomes crucial when designing your tiers.
Establishing Your Packaging Principles
Before finalizing your packaging structure, the speaker recommends defining clear packaging principles to guide your decisions:
"Understand what are your key packaging principles. These are the ones that we ensure to take care of at Monetiz. We make sure that all packages are going to be tailored and designed for specific market segments."
Some principles mentioned include:
- Tailoring packages to specific market segments
- Designing for average selling price while accommodating high-willingness-to-pay customers
- Ensuring differentiation between packages
- Allowing for account growth through upsell and cross-sell
- Potentially differentiating between new and existing customers
Converting Segments to Tiers
With your feature importance matrix and principles in place, you can now design your actual packages:
"You can convert those columns into tiers or packages and based on that t-shirt sizing you can say out of these features which ones are included, which features do you want to have included as add-ons that improve your monetization."
This is where strategic decisions happen:
- Which features are table stakes across all tiers?
- Which features should be premium add-ons?
- How do you ensure sufficient differentiation between tiers?
- How do you balance meeting basic needs while creating upsell opportunities?
The Art and Science of Packaging
The speaker acknowledges that perfect packaging isn't purely formulaic:
"This is where it is a little bit more art than science. You will have to club your understanding of how the product works and then the perception of the different segments as well as their willingness to pay."
The goal is to create an initial packaging hypothesis that can then be tested with actual customers, whether through in-person research or more formal methods like conjoint analysis.
Testing Your Packaging Hypothesis
Importantly, the methodology doesn't end with creating packages. The speaker emphasizes that this approach "forms the basis of my hypothesis that is later on taken to the testing stage whether it be through in-person research or conjoint analysis."
Your initial packaging should be viewed as a hypothesis to be validated with customers, not a final decision.
Why This Approach Works
The strength of this methodology lies in its focus on customer needs rather than internal company perspectives. By starting with what different segments value, you avoid the common trap of packaging based solely on development cost or arbitrary feature groupings.
Additionally, the framework is adaptable to any SaaS product or service, regardless of industry or complexity. It provides structure without being overly prescriptive, allowing teams to incorporate their unique market knowledge into the process.
By following this straightforward approach, SaaS companies can develop packaging structures that resonate with customers while maximizing revenue potential through strategically positioned features and add-ons.