In a recent YouTube video titled "When to Bundle vs. Charge for Features: SaaS Pricing Formula," Akhil Gupta from Monetizely addresses one of the most common dilemmas SaaS leaders face: whether to include a new feature in existing packages or charge more for it as a separate offering. Gupta presents a practical decision framework that has helped numerous SaaS companies optimize their feature monetization strategy.
The Critical Question That Can Make or Break Your Revenue
Feature monetization decisions might seem simple at first glance, but they can have profound impacts on your revenue strategy. As Gupta points out in his video, "This seemingly simple question can make or break your revenue strategy."
Making the wrong choice can lead to leaving money on the table or creating pricing complexity that turns customers away. That's why having a systematic approach to these decisions is crucial.
The Two-Factor Decision Framework
According to Gupta, the key to making effective feature monetization decisions lies in understanding two fundamental factors:
- Market Demand: "What percentage of your customer base actually wants or needs this feature?"
- Revenue Potential/Willingness to Pay: "How much additional value customers place on this capability."
These two factors create a decision matrix with four distinct scenarios, each calling for a different strategic approach.
The Four Monetization Scenarios
Scenario 1: High Demand, Low Willingness to Pay
When your feature has broad appeal but customers aren't willing to pay much extra for it, the best approach is inclusion in your existing packages. As Gupta explains, "This strengthens your value proposition and helps with competitive positioning without leaving money on the table."
Features in this category might include basic integrations or interface improvements that customers expect but won't necessarily pay extra to obtain.
Scenario 2: High Demand, High Willingness to Pay
This is the ideal scenario for tier differentiation. Gupta advises, "Include it only in your higher price packages to significantly drive upgrades and increase average subscription value."
These high-value, broadly appealing features can serve as powerful incentives for customers to upgrade to premium tiers, effectively increasing your average revenue per user (ARPU).
Scenario 3: Low Demand, High Willingness to Pay
When only a specific segment values your feature but is willing to pay well for it, this creates an opportunity for targeted monetization. In Gupta's words, "This is perfect for creating a standalone add-on rather than forcing all customers to subsidize a feature. Only some will use monetize it directly from those who value it most."
This approach ensures you're capturing value from the customers who truly need specialized capabilities while keeping your core offering streamlined.
Scenario 4: Low Demand, Low Willingness to Pay
The final scenario represents features with limited appeal and limited monetization potential. Here, Gupta recommends you "reconsider your development priorities or delay monetization until you have enhanced the feature's value."
This pragmatic advice helps product teams focus their efforts on features with clear revenue potential rather than pursuing capabilities that neither strengthen the core product nor drive additional revenue.
Real-World Application
To illustrate this framework in action, Gupta shares a client success story:
"One of our clients built an advanced data visualization capability. Through research, they discovered about 25% of their customers were intensely interested. Customers indicated that they'd pay up to 15% more."
Following the decision framework, they created a targeted add-on rather than building it into their base package. The result? "This generated 8% additional revenue from existing customers without complicating forcing price increase on customers who did not need this capability."
Beyond Short-Term Revenue
Gupta emphasizes that effective feature monetization isn't just about maximizing immediate gains. "Remember, feature monetization isn't just about maximizing short-term revenue. It's about aligning your pricing with actual customer value to create sustainable growth."
This alignment between value delivery and pricing strategy creates a foundation for long-term success, allowing SaaS companies to grow sustainably while maintaining strong customer relationships.
Putting It Into Practice
For SaaS executives, this framework provides a practical tool for making more strategic feature monetization decisions. By evaluating both market demand and willingness to pay before determining how to package and price new capabilities, you can create pricing structures that better reflect the actual value you're delivering to different customer segments.
As Gupta notes in the conclusion of his video, "By deliberately choosing when to include features and when to charge more, you can optimize both customer satisfaction and revenue generation." This balanced approach helps SaaS companies avoid the common traps of either underpricing valuable features or creating unnecessary complexity through excessive add-ons.
For more insights on SaaS pricing strategy, Gupta recommends checking out his book "Price to Scale," which contains additional real-world examples and pricing frameworks for scaling SaaS businesses.