Why Real Costs Matter More Than Averages in SaaS

Why Real Costs Matter More Than Averages in SaaS

Why Real Costs Matter More Than Averages in SaaS

Jul 9, 2024

Lily D

4 minute read

Cost decisions shape every aspect of software businesses. The choice between tracking real costs per customer or using averaged figures affects everything from pricing to feature development. Getting this fundamental decision right can mean the difference between sustainable growth and costly miscalculations.

Understanding Real vs Averaged Costs

Averaged costs spread total expenses evenly across your customer base. A platform charging £100 per user monthly might calculate £40 averaged cost per user. Whilst this approach seems straightforward, it often fails to capture the complex reality of how customers use and consume resources. Real costs track specific expenses tied to individual customers - server time, support tickets, and feature usage. This granular approach reveals patterns that averaged costs simply cannot detect.

A subscription platform discovered this difference dramatically when they analysed their customer base in detail. Whilst their averaged cost per customer was £50, real costs ranged from £20 to £120. Some customers rarely used advanced features, whilst others maxed out API calls and needed frequent support. This revelation prompted a complete revision of their pricing structure, leading to a 35% improvement in profitability within six months.

The Impact on Decision Making

Cost Masking

When a rapidly growing platform noticed declining profits despite steady revenue growth, their averaged costs painted a deceptively simple picture of stability. Only after implementing real cost analysis did they uncover the truth: new customers from recent marketing campaigns required significantly more resources. These customers needed extensive onboarding support and gravitated towards resource-intensive features, creating a cost burden that averaged figures completely missed.

Resource Usage

Real cost tracking excels at revealing which features drain resources most heavily. One platform's engineering team spent months optimising features based on averaged usage data, only to discover through real cost analysis that their image processing service consumed 40% of computing resources whilst serving just 15% of customers. This insight prompted a targeted optimisation effort that cut infrastructure costs by 25% without affecting the majority of their user base.

Pricing Alignment

The assumption that one price fits all customers often stems from relying on averaged costs. A data analytics platform learnt this lesson after implementing real cost tracking across their customer base. The analysis revealed that enterprise customers generated costs three times higher than small business users, primarily through increased storage usage and API calls. This insight drove a pricing revision that improved margins whilst actually reducing costs for smaller customers.

Infrastructure Reality

Server costs rarely follow the linear patterns that averaged calculations suggest. A video processing platform gained valuable insights when they examined their actual usage patterns. Their small business customers typically processed around 100GB monthly, whilst mid-market companies consumed 2TB. Enterprise users regularly exceeded 20TB, with usage spikes during key business periods.

These dramatic variations demanded a complete rethink of their infrastructure and pricing strategy, leading to:

  • Custom caching solutions for enterprise clients

  • Predictive scaling for mid-market usage patterns

  • Optimised storage tiers for different customer segments

Support Impact

Support requirements vary significantly across customer segments, creating cost differences that averaged calculations often miss. A detailed analysis of support patterns revealed fundamental differences in how customers engage with support services. Basic users typically submit one ticket monthly, focusing on straightforward usage questions. Premium users generate three to four tickets, often exploring advanced features. Enterprise customers frequently log more than fifteen tickets monthly, many requiring specialised technical expertise.

This variance in support needs means enterprise customers actually cost 2.5x more to serve than averaged calculations suggested. Understanding these patterns enabled the company to improve support efficiency whilst maintaining service quality.

Making the Switch

Moving to real cost tracking requires careful planning and systematic implementation. Success depends on identifying and consistently tracking key cost drivers:

  • Server usage and infrastructure consumption

  • Support time and ticket complexity

  • Storage space utilisation

  • API calls and feature usage patterns

A B2B platform embarking on this journey discovered that certain third-party integrations cost 2.5x more than their averaged calculations suggested. This insight led to revised implementation fees and more accurate forecasting for new client onboarding.

Using unmess for Cost Analysis

unmess simplifies the transition to real cost tracking by automatically monitoring customer behaviour patterns and resource consumption. The platform provides continuous visibility into cost drivers whilst identifying opportunities for optimisation. Through advanced analytics and pattern recognition, unmess helps companies understand exactly how different customer segments impact their bottom line.

The platform's automated monitoring reveals crucial insights about feature usage patterns, customer segment behaviour, and resource consumption trends. These insights enable proactive decision-making about pricing, feature development, and resource allocation. Whether you're working to improve margins, reduce serving costs, or scale efficiently, unmess helps translate complex usage patterns into actionable business strategies.

Real costs tell the complete story of your business, enabling decisions based on actual customer behaviour rather than assumptions. Understanding these patterns doesn't just improve profitability - it helps build a more sustainable, customer-centric business model.

Analytics and insights for each customer and make decisions using data to improve your gross margins.

Analytics and insights for each customer and make decisions using data to improve your gross margins.

Analytics and insights for each customer and make decisions using data to improve your gross margins.

Analytics and insights for each customer and make decisions using data to improve your gross margins.