The Email Service Provider SaaS Pricing Penalty

email costs

We've had some ups and downs as we look for a good email service provider. Many email service providers simply don't have the integration tools we need to automate our email sends (we'll have some news on that soon)… but the biggest problem we've had with our email program is the ability to match monetization with the cost of the application.

To get directly to the point, some SaaS pricing structures are just plain stupid… penalizing your company's growth rather than rewarding it. My expectation as a business or consumer is that the more I use your service, the cost benefits should remain flat or improve (in other words – the cost per usage stays the same or goes down). This doesn't work with the stair-stepped pricing that you find – especially with email vendors.

Here's one vendor's public pricing (Monthly Price and Subscribers):

$10 $15 $30 $50 $75 $150 $240
0-500 501-1,000 1,001-2,500 2,501-5,000 5,001-10,000 10,001-25,000 25,001-50,000

At first glance, it appears rather consistent… more subscribers adds a greater monthly cost. The problem is at the transitions, though. Let's say that I'm sending to 9,901 subscribers. That's $75 per month. But if I add 100 subscribers, I'm in trouble. My monthly cost doubles to $150 and the cost per subscriber increases 98%. Per subscriber, the cost of using the system almost doubles.

SaaS Email Pricing

This was so bad with our current vendor that I literally stopped sending to my entire list. Our costs went from $1,000 per month to about $2,500 a month because I had 101,000 subscribers. It's not that I mind paying more for sending more… it's literally that there's a stair-step in costs that I can't recoup via our marketing efforts or sponsorships. Per subscriber, my costs would have more than doubled. And I simply can't recoup that expense.

Software as a Service providers should truly take a closer look at pay-per-use systems like Amazon or hosting packages that have thresholds where the price drops when you grow your business. You should reward a growing business, not penalize it. If I have a list of 101,000, another client who has a list of 100,000 shouldn't be paying less per subscriber than I am. That's just plain dumb.

Promoting Email Segmentation and Personalization

Another issue with these systems is paying for the number of contacts in your system rather than how much you actually send with it. If I have a database of a million email addresses, I should be able to import it, segment it and send to just the portion I know will provide the greatest performance.

Many of these systems charge by the size of your database rather than your use of the system. With that in mind, how can you blame companies for batch and blast campaigning? If you're going to be charged for every subscriber, you may as well send to every subscriber!

Forced Turnover

As a result of this pricing, these companies are forcing my hand. While I might love a vendor and appreciate their service, the business expense dictates that I take my business elsewhere. While I'd love to stick with a good vendor, I don't have a pot of money to go dip into when I add 100 subscribers to my database.

What do you think?

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