SaaS pricing models: transaction-driven (ChartMogul) vs volume-driven (Chargebee)

ChartMogul is the number 1 SaaS solution to track subscription metrics. If your business requires monitoring things like churn, CTLV, ARPA and the like, then ChartMogul is the tool of choice. Chargebee is the number 1 SaaS solution to manage recurring billing. You will use Chargebee if you want to set up international invoicing plans for your clients on a recurring basis. I know a few companies that use one or both of them, and  the feedback is generally great in how they support the operations and their value for money.

However, ChartMogul and Chargebee are hugely different in their pricing model, and this can lead to radically different client buying and adoption patterns.

ChartMogul bills on a transaction basis

So each transaction is charged a fee, and the more transactions the higher the fee.

Chargebee bills on a volume basis

A percentage of the economic value of what you bill through the platform

The implications appear basically at the level of your ARPA (or average cost per seat times the average number of seats per transaction). Let us take two examples to illustrate this:

Company A

Sells enterprise SaaS, has 200 clients and an ARPA of €4,000. This represents a monthly recurring revenue (MRR) of 80K and as you can easily see the number of transactions is very small. These guys will typicall pay something like €60 per month for using ChartMogul. And Chargebee should charge about 0.6% of the volume, about €360.

The automatization of billing and metrics for Company A will cost them about EUR 420 per month

Company B

is more into longtail SaaS, has 2,500 clients and an ARPA of €36 because most subscriptions are typically B2C,  and the cost per seat is lower. Company B's MRR is 90K and transactionally a lot more complex. Chargebee will not charge them more because they issue more invoices, the cost will still be 0.6% of the volume, which means €540. ChartMogul, on its side, will charge at least €200 because of the higher number of users/transactions.

The automatization of billing and metrics for Company B will cost them about EUR 740 per month

On a dollar basis, the difference (740 vs 420) may seem relevant or not - that is not the point here. On a percentage basis, Company A will have 76% lower costs than Company B. The point is how these pricing models will impact the clients' buying decision. Suppose your subscription-based company starts to grow.

Where do you see the greatest complexity, and what do you think is more strategic to your company...

... Tracking an increasing number of subscriptions and their status?

... Billing more and more of your clients, especially if they are international?

Depending on the answer, you will be more or less inclined to adopt ChartMogul's pricing model, or to use the basic reporting functionalities that Chargebee also includes.

I suppose ChartMogul has studied the price points very well, and I suppose the price will plateau when you reach a certain number of clients, which is definitively good (Chargebee does not offe, I think, flat fees). But it is in this intermediate life phase where you are neither big nor small when the decision can be dramatically different because of these two pricing models.

The metric that affects this decision is ARPA. I am not sure all of ChartMogul's clients take this rational approach to the buying decision. But I would be interested to know how ChartMogul factors ARPA into their price strategy.