What is feature gating? How is it a key revenue driver in 2024?

9 Mins Read
Smuruthi Kesavan
Published On : 09/08/2023

TL;DR

  • Think of feature gating as a selective access system in software that lets you introduce features in a controlled manner, perfect for A/B testing and gradual rollouts.
  • Feature gating enables innovative business models and pricing strategies, which is particularly beneficial for startups.
  • By gating features, you can cater to different customer segments with tailored pricing plans, encouraging upgrades as their business needs expand.
  • Feature gating not only focuses on customer satisfaction but also acts as a scalable monetization strategy, as seen with platforms like Slack.
  • Despite the technical and strategic challenges of feature gating, solutions like Togai offer dynamic pricing and billing tools to streamline the process.
  • Togai's solution significantly reduces launch time, from months to days, by simplifying pricing and billing needs.

In the software development world, evolution and adaptation are the names of the game. It's a continuous race to stay ahead, provide better value, and capture customer interest. But every now and then, a strategy emerges that is more than just a trend - it’s a game changer. Feature gating fits this bill perfectly.

Not only does it allow for efficient and risk-controlled feature deployment, but it also opens up possibilities for innovative business models and pricing strategies. Especially for startups, this approach can be transformative. Let's dive into what feature gating is and how it contributes to business innovation and growth.

What is Feature Gating?

At its core, feature gating is a practice in software development where access to certain features is controlled and provided selectively to users. Think of it as a 'gate' that opens or closes access to specific functionalities based on certain criteria - user role, subscription tier, or even the part of the world the user is in.

Feature gating is invaluable for several reasons. It allows businesses to perform A/B testing, roll out features gradually, manage beta releases, and prevent overwhelming their support teams with potential issues from a full-scale release. However, the benefits of feature gating go far beyond risk mitigation. Feature gating also serves as a powerful tool for enacting new business models and pricing strategies.

Want to learn more about how to monetize by gating your features for specific audiences? Read on here to uncover new strategies for your business growth.

Feature-Based Pricing and Feature Gating: A Perfect Pairing for Business Innovation

Let's say you've developed a software product, ready to disrupt the market. It's brimming with amazing features - some of which are unique and could be the sole reason for a customer to choose your product.

However, not every customer might need or want all the features, and paying for the whole suite could be overkill for them. This is particularly true for startups or small businesses that are budget-conscious and have specific needs.

Instead of a one-size-fits-all approach, you can utilize feature gating to create tiered pricing plans, offering features based on what customers need and are willing to pay for. This approach is more commonly known as feature-based pricing and is gaining momentum as an innovative and flexible business model.

Consider a SaaS product that offers data analytics, automation tools, and CRM capabilities. A small business might only need CRM features initially. Instead of expecting them to pay for the entire suite, a feature-gated lower-tier plan that provides only CRM capabilities could be the perfect fit.

As the business grows and needs to evolve, it can upgrade to access additional features, making your product a part of its growth journey.

Feature Gating as a Revenue Driver and Monetization Strategy

Feature gating isn't only about customer-centricity - it has a significant upside for your business as well. It provides a monetization strategy that scales with your customer's growth.

Imagine a basic plan user continually hitting the maximum limit of what their plan offers. They may need access to premium features that could streamline their workflow. This need creates an opportunity for an upgrade, and with a well-implemented feature gating system, you can highlight this upgrade opportunity at the right moment - like when a user tries to access a feature beyond their current plan.

An example of this is Slack, the widely-used communication tool. The free version of Slack provides access to the most recent 10,000 messages. For a small team, this might be enough, but as the team grows, older messages become inaccessible. This limitation forms an incentive for users to upgrade to a paid plan to access their complete message history.

Monetizing feature-gating businesses can retain customers and keep them glued to the platform as they grow.

Overcoming the Challenges of Feature Gating

Implementing feature gating comes with its own set of challenges. It requires an understanding of your user's needs, a technical infrastructure capable of managing access to features, and strategic decision-making for pricing and packaging your product.

How do you determine which features should be in each plan? How do you price these plans to both reflect the value and encourage upgrades? When a user decides to upgrade or downgrade, how seamlessly can you adjust their feature access?

Here's where solutions like Togai come into play. Togai doesn't sell itself but offers tools for dynamic pricing and billing, including entitlement management that can be utilized for feature gating. It simplifies the process of defining, managing, and altering feature access based on business decisions.

Intrigued to read more on feature gating? Here’s a blog that you shouldn’t miss.

Conclusion

Feature gating is more than just a tool for software deployment. It's an avenue for business innovation, enabling companies to implement flexible pricing models, cater to diverse customer needs, and grow revenue alongside their customers. While it comes with challenges, with the right understanding of your customers and the right tools, feature gating can be the key to driving business growth and customer satisfaction.

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Nikhil Nandagopal, Founder
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WRITTEN BY
Smuruthi Kesavan
Product and Content Marketing at Togai
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