As part of an early access program (EAP), you can now build standard and advanced editions of Marketplace apps in the cloud that are Paid via Atlassian. During this stage of the EAP, participants can build and test editions of non-production apps in development, staging, and production environments.
EAP features are available to select users for demand, viability, and suitability testing. Releasing a feature as an EAP helps us gather insights that inform future development decisions.
Pricing and packaging guide
This guide will provide a strategic overview of pricing and packaging app editions.
Introduction
Pricing is a key growth lever for your business, and making the right pricing decisions is essential for your app editions strategy. To set the right price, you'll need to address critical questions, such as:
- What price should I charge for each edition?
- What factors should I consider in making these decisions?
- What kind of revenue and demand can I expect at different price points?
Determining the optimal price can be complex, but a pricing and packaging strategy that’s well thought out is essential to your success.
This guide will focus on:
- Helping you understand how Atlassian approaches pricing
- Providing you with information on the factors that impact pricing and packaging
The suggestions below are only one possible approach based on our experience. We hope you find it useful as you develop your own pricing and packaging strategy, but please note that results may vary.
Atlassian's approach
When evaluating your pricing and packaging strategy, it's crucial to consider the unique value you provide to your customers. Effective software pricing reflects this value, charging customers for the distinct improvements they can't find elsewhere.
Customer focus should be the cornerstone of your strategy. As you edition to monetize and package your editions, aim to develop clear and straightforward principles that effectively communicate value to your customers.
At Atlassian, our pricing philosophy is grounded in a few key guiding principles:
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Drive clear and simple customer value propositions: Customers should intuitively “get” what edition is the right purchase for them and why.
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Package customer value in groups of features over individual ones: Provide clear upsell drivers by packaging groups of features that address a use case together. Regardless of feature differentiation, end-user experience must be equally good across all editions.
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Monetize advanced features by targeting value for advanced customers: Provide features most relevant to advanced use cases in advanced editions, as customers would be willing to pay. Conversely, Free or standard editions can be used to introduce customers to your features and grow your user base.
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Understand how you can differentiate: Regularly analyze and benchmark your features and pricing against those of competitors to stay ahead of the curve. Identify unique propositions and opportunities for innovation to offer distinctive benefits to your customers.
Atlassian empowers teams of all sizes to deliver innovative solutions with flexible tools for collaboration and creation. The Atlassian Marketplace enables customers to extend their unique Atlassian ways of working in a trusted way.
At Atlassian, our goal is to maximize the number of users of our software. With over 300,000 customers, the demand for cloud solutions is growing, presenting a significant opportunity to provide additional value through innovative Marketplace solutions that enhance team collaboration. Thus, we must invest in Marketplace functionality to cater to the needs of all customers so they can get the most value from their Atlassian experiences.
| Category | FY23 | FY24 | YoY growth |
|---|---|---|---|
| >$50k/year | 12769 | 15169 | ~19% |
| >$500k/year | 886 | 1223 | ~38% |
| >$1M/year | 358 | 524 | ~46% |
Over the last few years, we have tried to understand enterprise customers and their niche needs. These have ranged from additions like advanced admin controls and security to unlimited automations. We’ve invested more in the features that these customers require, which has thereby resulted in growth in the customer base with a significant increase in these specific categories.
Factors impacting pricing and packaging
When developing a pricing and packaging strategy, it is helpful to conduct a holistic assessment of the impact. Consider two different scenarios that you might find yourself in:
| Scenario 1 | Scenario 2 |
|---|---|
|
There is an opportunity here to monetize admin controls. As one of the first movers in this space, you could consider launching a higher-priced advanced edition to upsell existing customers and maximize value capture. |
As a new player among many, it is important to gain customer traction, build a brand, and prove your app is better. In this scenario, it would be helpful to launch with a free edition to get customers into the funnel and offer a standard edition for those willing to pay for differentiated features (and some admin controls). |
While these sample scenarios are vastly different and illustrated for your understanding, maneuvering them will involve a staged process to understand your customers, competitors, and financial impact.
1. Customer need
Who are your customers?
Before launching a new app (or new edition), it is vital to identify your target audience and segments within that audience. This will inform the pain points they face and help you define how you can add value for your customers.
Even within the target customer, it is important to identify the specific segment(s) you are targeting. The questions below provide a starting point for customer segmentation.
| Who is the customer? | What are they looking for? | What is their behavior? |
|---|---|---|
| Simple customer demographics:
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How much are your customers willing to pay?
Once you have identified your target customers and understand their behaviors, you can determine their willingness to pay for your app. The criticality of your app to the customer’s needs directly influences this willingness; the more crucial the problem your app solves, the higher the customer’s willingness to pay.
To gauge how much you can charge for your app's value, one of the simplest indicators is the Atlassian edition the customer is subscribed to. This information helps you identify which features your app should support and estimate the customers' budget for enhancing these features. For instance, if your app provides unlimited automation runs, it will likely appeal to advanced enterprise customers who have a higher willingness to pay.
Additionally, you can use the pricing ratios of different Atlassian product editions as a benchmark to price your app’s advanced features. Be cautious, though, as significantly higher charges might deter customers who use Atlassian’s pricing as a reference. Aligning your pricing strategy with Atlassian’s can help you set appropriate and competitive prices.
How can you get the customer input?
While your choice may be determined by time and effort, budget, or other factors, the key piece is to get customer input.
If you’re wondering how to get input with limited resources or having difficulty engaging the customer, here are some creative ideas Marketplace partners have used:
- Use your support channel by targeting customers in their 30-day evaluation period and encouraging them to ask questions/give feedback
- Consider in-app messaging to elicit feedback which can be shared with the service desk for customer response
- Tap Solution Partners and set up a regular meeting cadence (async or in-person) to get their feedback from customers
- Get enterprise customer feedback by having your Product Manager share a general roadmap with customers on a quarterly or semi-annual basis, to get their feedback
These methods can help to identify more “engaged” customers and the feedback can be used to prioritize your roadmap.
Once you understand who your editions are for, determining their pricing and feature allocation becomes easier.
For example, enterprise customers typically have higher budgets and specific needs for data protection features. While meeting these needs might require additional investments, knowing that these customers are willing to pay for these features will help you set the right prices.
2. Competitive landscape
Market dynamics also play a key role in shaping your pricing and packaging strategy. As you build your app and develop GTM editions, it is helpful to benchmark your competitors and understand the landscape.
Specifically, some things to keep in mind are:
Who are my competitors?
- List direct and indirect competitors.
- Use tools, industry reports, and market research databases to identify competitors.
What are they offering?
- Compare the features offered by competitors in their different product editions.
- Examine the pricing models used by competitors.
- Understand how competitors package their features into different editions.
What are their customers' feedback and reviews?
- Analyze customer reviews to understand customer sentiment and pricing sensitivity.
- Monitor discussions for insights into customer opinions on competitor pricing and packaging.
What is their market positioning?
- Assess how competitors position their products in the market and their unique selling points.
- Review competitors' marketing materials, case studies, and customer testimonials to understand their go-to-market strategies.
What are their sales and promotional tactics?
- Identify any discounts, promotions, or special offers competitors use to attract customers.
- Analyze the sales channels used by competitors.
What do their finances look like?
- Understand the revenue models of competitors and their financial performance if publicly available.
- Estimate the cost structure of competitors to understand their pricing flexibility.
What are they doing right and what are they not?
- Conduct a SWOT (strengths, weaknesses, opportunities, threats) analysis for each competitor to identify their competitive advantages and potential vulnerabilities.
3. Business case
How much money will my app make?
As you prepare to launch editions, it’s helpful to estimate how much revenue they will bring in, and the tradeoffs for this revenue. There are a few steps you can take to help inform the analysis:
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Define your business objective: Are you looking to build a long-term business or are you more interested in near-term financial success?
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Identify key success criteria: The business objective should inform the success metrics. For example, if your objective is near-term financial success, then your metrics are likely to center on revenue.
Once you have defined these, you can build your financial case. Consider the levers below to grow the business and move towards profit. Depending on your time and resources, the financial case could be a simple estimate of expected revenue and costs or more detailed estimates that model each of the relevant levers.
| Scenario 1 | Scenario 2 |
|---|---|
When launching a new edition, it’s helpful to conduct a sizing exercise to estimate the potential number of customers. Consider the following:
Based on the total cost structure and the number of customers you anticipate, you can estimate the break-even price (where total revenue = total costs). This sets a lower bound for pricing, i.e. a threshold below which there will be losses → unless you are willing to take on near-term losses to drive adoption. | When launching an advanced edition, it’s useful to consider the incremental benefit to your business. Consider the following:
Similar to launching a new app, performing a break-even analysis will help determine the minimum price for an advanced edition. |
Analyzing these factors will be a good starting point for you to understand how to price and package your features. Remember, there is no set formula on how to go about this. It depends on your understanding of your customers, the market, as well as your own business and the value you are bringing in with editions.
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