The right guidance to help you grow

How to price your SaaS

We hate to be the ones to burst your bubble, but the truth is that in this great big world of business, you are not all that special. Just like everyone else living on this planet, everyone running a business that is, you need profit to survive. It’s just how things are. And even in the odd situation, in which things were made just for sake of making, gaining a profit wouldn’t be all that bad, right? So, apart from marketing and customer acquisition guides what else do you think would be worth reading about?
Well, even though we tend to ignore this aspect ( huge mistake), correctly pricing our SaaS product is among the most relevant pieces of reading you could get your hands on. Yes, the thoughts running through your head at the moment are that you don’t need someone else to tell how to price your product. You know best, right? Or do you? This guide is not going to tell you the exact price of the product, but merely the aspects to keep in mind when creating that price. Having breadcrumbs that may lead to the correct pricing of your product should help you a great deal. Hopefully, they will help you more than they did Hansel and Gretel.

Finding the price for a SaaS product is the adventure of the new SaaS developer industry. While starting a business was an easy-to-do task, back in the old days, and entrepreneurs didn’t have to fight off the competition with a stick, today you are faced with an impressive number of challenges. It’s just as much about your product, as it is about your customer. Creating that perfect mix is a necessity, so let’s take one matter at a time and for the time being, let’s look towards pricing.

Facts about pricing you need to KNOW

The number 1 mistake start-ups make is that they do not treat pricing for what it is, a vital element in any company growth strategy. It is either an afterthought or a pesky element that can be dealt with by adding a tag from the top of someone’s head.

The first thing you need to keep in mind at all times is that PRICING MATTERS!

This is a key element in the evolution and growth of your company and it is not something that can be identified simply by reading a few reviews here and there. Pricing can easily become a highly complex matter and it can be used as a trigger within a sales strategy.

Why do we keep repeating that pricing cannot be attributed in a matter of seconds? Well, first off, you can’t. Secondly, you shouldn’t. Thirdly, because the price your SaaS product is not a sole standing element. It is the result of research, both customers and competition, it is the result of all your marketing endeavors, as well as technical efforts. Plus, you need to consider that pricing reflects the work you and your team put in, before and after the sale.

Turn the price of your product into your biggest ally. It is crucial to use the price of your SaaS in various strategies, supporting other on-going strategies to ensure strong, level-headed growth.Use price in your customer lifecycle, allowing them to get from the awareness stage to the buy one and beyond. Different pricing phases can attract different customer groups, which is always good news. After all, customer loyalty is not something you can build in one day.

HOW TO PRICE strategy unraveled

Now, we’ve been talking about how important pricing is and that you need to treat this aspect attentively. Perhaps it’s time we got down to business and discussed the aspects you need to bear in mind when setting your price.

Yes, competition matters.
We did mention that starting a business was simpler back in the days because of the lack of competition. Now, things have changed and competition becomes your no. 1 priority. After all, you might have selected a market based on the level of competitiveness. The lower, the better right?

When thinking of price, you could look at your competition to set the correct starting point. If your competitors have subscriptions of $100, you could consider setting your price around that value. Of course, your job is not over just yet. You need to consider other aspects, but this is a good starting point, giving you a clue about where to start your research. Eventually, you might end up here, choosing a subscription that is more or less similar to your competition, but as always, the price of your SaaS product needs to be thoroughly argued. Simply looking at your competition just won’t do.

Yes, customers matter..
Competition goes hand in hand with your customers. It all comes down to them, really, it’s a fact. But how can they influence your price? Well, at the end of the day, they are the cardholders, they are the ones investing in your product. So setting a price that they believe is too high will do your business more harm than good. You don’t want to keep on testing your limits and driving your sales team crazy, placing them in impossible situations like selling an expensive product to the wrong crowd. So, once again we get to that one pressing issue, the buyer persona. Identify your target audience. What do your customers do for a living? What would their budget be? Can they sustain this investment?

And here is a funny thought. Since you are in the subscription business, you could try an audience segmentation. You could have various subscription prices based on needs, features or member access.

Usually, when creating that buyer persona, you need to use data, data you have previously collected, which is ideal, of course. But what happens when do you not own data? Because this is the situation in which a start-up finds itself. Of course, this doesn’t mean that a price shouldn’t exist as well.

It’s a good thing that we can use landing pages to test prices. Test a number of options, as well as prices and start collecting data. It is important to gather data because all these elements will allow you to create the profile of your customer. And once you have that perfectly established audience, you can plan strategies that can have real effects and allow you to better monetize your product.

Yes, features matter.
In the world of SaaS, there is this game of features. If you have just begun climbing your stairway to success, surely you have crossed paths with one particular strategy that seems highly relevant to marketing your product. There are a lot of developers that start off with a free version of their product and go up from there (obviously, since going lower than free isn’t exactly an option, right?). They start pricing features, gaining an overview of the preferences of their customers. Having a SaaS product means constant updates, novelties in terms features, you have all sorts of opportunities to change your pricing. Let’s face it. Today’s world really puts pressure on developers to never let their guard down and improve their product constantly. You need to quantify your work and pricing in a way that allows you to do just that.

Freemium vs premium – the long debate

When it comes to SaaS pricing, there is one debate you can’t really shake off. On the one hand, you have the word free and in the digital world, we all know that it’s the sign for turning heads or clapping big time.

On the other hand, however, there is the premium side of the story, which obviously means money, which leads to profit, which makes developers smile in a joker kind of way and rub their hands. But it can’t all be black and white.

You cannot serve two masters, right? You could try, but it might just blow up in your face. And that’s never a good thing. So, what happens next? You don’t want to be Santa Clause, but it may not be such a good idea to become Grinch right from the start, either. So, instead of choosing one role, go for a one-man show and learn all the lines of the characters. In other words, go for freemium and premium, in the same package.

Starting off with Freemium is a good choice, especially when we’re talking about a first product. You need to create awareness you need to build an audience, you need to get your name out there, so people know that you are on the market. If you look at things from this perspective, freemium no longer seems like such a bad idea. It’s your only option, after all. You build our audience first and then you start monetizing it. Freemium to Premium.

You need to consider this strategy from the very beginning. In other words, when creating your freemium plan, you need to make it good, obviously, so it can turn heads, but not too good. You want to leave your audience wanting for more. If you are a website design tool, your customers will look for you when building templates. Offer enough features to allow your customers to create a basic, yet nice looking template, that can be created in record time, even by users that have zero knowledge in website design. However, offer them build-in paid options that look much better than their free versions in order to convince them to pay. The idea behind this example is pretty simple. Focus on building an enticing free offer for your users, but not too good. Give yourself the possibility to create paid offers significantly more attractive. Remember, the goal is to monetize.