One of the most difficult parts of SaaS sales is getting pricing right. SaaS companies face a conundrum: price too low and risk lower revenues and higher churn rates, or price too high and risk stunting growth. In this post you’ll find 6 easy steps you can take to improve your pricing strategy plus a list of the best pricing resources for SaaS companies.
6 Quick Tips to Improve Your Pricing Strategy Today
1.Create buyer personas: The foundation of any effective pricing strategy is a complete understanding of your target customer’s wants and needs. If you’re not sure how to create a buyer persona, checkout these examples:
2. Collect feedback from potential customers: Surveying potential customers can get you invaluable information about which value propositions and price points are most appealing to your target market. However, long, complex surveys often get lost in the fray or provide little valuable information. Instead, focus on a single value-driven question. See this super simple survey created by First Round Review:
3. Determine your business goals: Your business goals should be the foundation of your pricing strategy. Whichever strategy you choose will have short and long-term effects on your company’s revenue and growth. Openview Partners outlines some examples of business goals:
- Conversion: maximize new customer growth.
- Market share: establish market share.
- Profitability: sustainable margins to support the business model.
- Long-term value: optimize for LTV rather than for conversion or quick cash.
- Cash in hand: maximize up-front cash to fund the business.
4. Choose a pricing strategy appropriate for your business goals: Once you’ve determined your main business goals, you can pick a strategy to help achieve them. This post by Bowery Capital explains a few of the most popular pricing models for SaaS companies:
- Freemium/Trial: This is the most popular pricing model for SaaS companies. It involves offering a free version of the product with limited functionality, or offering a limited trial of the fully-functioning product.
- Skim: In this strategy the seller sets a high price for a high-quality product and targets large contracts.
- Penetration: Companies offer a high-quality product at a competitive/lower-than-average price point for the market. This strategy is used to gain a large share of the market in a short amount of time, then later offer further features or upgrades at a higher price point.
- Free offering: The seller offers a product for free to capture a large portion of the market and then monetizes later using upgrades, cross-promoted products, or other up-sells.
5. Consider scalable pricing: Did you know a single-price-point strategy may be leaving money on the table? David Skok makes a great case for scalable pricing, which he demonstrates can help you attract more customers and grow revenues. He explains a few different ways you can create scalable pricing:
- Product features
- Number of users
- Depth of usage
- Other: number of leads/emails/contacts, number of websites created, quality of technical support, etc.
6. Create an awesome pricing page: If you don’t have a publicly available pricing page, you may want to reconsider. Open View Partners makes a case for transparent SaaS pricing, citing that over 50% of the most successful SaaS companies (unicorns), publish their pricing online.
The Ultimate List of Pricing Resources
How to Find the Best Pricing Strategy for a SaaS Product
There Are Only 3 Pricing Strategies for Your Startup
Best Product Pricing Practices for B2B SaaS
The Top 10 SaaS Pricing Strategies
Pricing Strategy Framework for SaaS Startups
Creating a Pricing Page
Lessons From the Top 5 SaaS Pricing Pages
SaaS Pricing Best Practices From 90 Companies: Why the Hottest SaaS Businesses Now Put Their Pricing Online
4 Pricing Page Details That Increase Value and Reduce Friction
4 Tips That Take Your SaaS Pricing Page From Complete Dud to Total Stud