How to Set Up a SaaS Discount Strategy

To effectively set up a discount strategy for your SaaS business, you need to carefully plan and structure your discounts to attract customers while protecting your profitability and brand value. A nuanced discount strategy may impact customer acquisition, retention, and revenue potential. Our guide provides you with a process to systematically create and enhance a discount program for your SaaS business.

What do you want to achieve with your discounts? Be specific about your customer acquisition goals.

• Increase trial sign-ups by 20% in Q1.
• Reduce churn by 5% by year-end.
• Boost annual plan subscriptions by 15% next quarter.

Specifying clear and quantifiable goals provides guidance for your discount strategy while enabling evaluation of its effectiveness. To make sure your objectives are on point:

• Current Performance: Identify any areas where you can make improvements. Are trials low, churn high, or monthly plans dominating?
• Market Conditions: How tough is your competition? Are you launching a new feature needing early adoption?
• Financial Goals: Is your revenue model based on easy acquisition or long-term value?

The target audience, with specific goals established, can be considered for customized discount offerings. Go beyond basic demographics. Consider:

• Punti critici: What problems are they trying to solve with your software?
• Prezzo: Are they a startup on a tight budget or an enterprise with flexibility?
• Purchase Behavior: Would they prefer monthly flexibility or have the ability to commit to annual deals for savings?

To visualize your ideal customer, create a detailed persona:

There’s no discount that is for everyone; instead, align the type with your objectives and customer profile.

New Customer Acquisition: To attract new customers, consider these options:

• • Prove gratuite: Let your shoppers experience value before committing (Example: Slack’s freemium model); trial length (7, 14, 30 days); consider features included (full access vs. Onboarding support is available within specific guidelines).
  • First Month/Year Discount: Reduce the initial cost to encourage sign-ups (e.g., HubSpot’s starter package discount); percentage or fixed amount discount; applying it to specific plans; setting a minimum subscription term.
  • Early Bird Discounts: Offer a lower price for early adopters of new products or features; time-sensitive nature; exclusive access to beta versions; creating a sense of urgency.
    

While offering discounts can sometimes effectively help you maintain your existing clients, there may be other effective alternatives you may want to consider:

• • Loyalty Programs: Recognize dedicated members through tailored pricing (e.g., discounted yearly renewal for Adobe Creative Cloud), offering incremental benefits alongside longer subscription periods, or providing access to unique perks or early availability of upcoming features.
  • Pre-paid Annual Plans: Offer a lower monthly rate for upfront commitment (Example: Asana’s annual plan savings); calculate the discount to incentivize annual payments; highlight the overall cost savings.
  • Reactivation Discounts: Win back churned customers with targeted offers; understand reasons for churn; offer a customized discount to address their needs.

To potentially raise Average Revenue Per User (ARPU), consider exploring these options:

• • Volume Discounts: Incentivize larger purchases or higher-tier plans (Example: Zoom’s tiered pricing based on participants); tiered pricing structure; offer progressively larger discounts for higher usage or user counts.
  • Upsell Mark Downs: Create price cuts on premium features or add-ons (Example: Canva’s discounted Pro plan for existing users);  features that have been bundled; consider time-limited promos on upgrades; stress the advantages of premium features.
  • Cross-sell Price Cuts: Entice customers with products or services on the house; give price reductions on similar products; bundle packages; boost complementary solutions.

Promotional Campaigns: For short term promotions and broader marketing initiatives, consider these possibilities:

• • Limited-Time Offers: Bring urgency to drive immediate action (Example: Black Friday deals on software subscriptions); provide an exact deadline; boost the offer through various channels; highlight a sense of shortages.
  • Coupons: Work with affiliates and influencers to give unique codes (Example: Referral programs with coupon rewards); trace coupon usage; partner with influencers; offer beneficial rewards.

Types of Coupons:

• • • Public coupons: Valid to anyone who has the code.
    • Private coupons: For specific customer segments only (e.g., new subscribers, loyal customers).
    • Cart-level coupons: Applicable on the entire purchase amount.
    • Product-level coupons: Relevant only to some products or plans.
    • Shipping incentives: Offer free shipping or shipping discounts 

Coupon Code Best Practices:

• • • Short and memorable codes: Easy to recall and type.
    • Consistent format: Keep brand identity and clarity.
    • Clear expiration dates: Promote urgency and prevent abuse.
    • Monitor coupon usage: Track performance and identify trends.
    • Personalize coupons: Adjust discounts to better reflect preferences.
•  
  • Flash Sales: Give deep discounts for a brief period; create a sense of urgency; promote through email and social media; offer limited quantities.

Once you determine your discount types, be sure to structure them effectively. Ensure pricing strategies are well-considered, and carefully define the parameters of each discount.

1. Duration: First, determine how long the discount will be available:

• Available on an ongoing basis: Accessible when certain conditions are met, such as price reductions based on volume.
• Limited-Time: Creates urgency (e.g., holiday promotions, early bird offers).
• Seasonal: Aligned with specific times of year (e.g., back-to-school, Black Friday).

2. Frequency: Next, decide how often the discount will be offered;

• One-Time: Used only once per customer (e.g., first-purchase discount).
• Recurring: Offered at regular intervals (e.g., monthly, quarterly, annually).

3. Eligibility: Then, specify who is eligible for the discount:

• Limited-time opportunity for new customers: Can influence sign-ups.
• Existing customers: Rewards loyalty or encourages upgrades.
• Specific plans/products: Targets specific segments or promotes certain offerings.

4. Stacking: Can the discount be combined with any other offers:

• Mix and match: Can be used  in conjunction with other promotions, such as combining a coupon with a volume discount.
• Not allowed: Stops excessive discounting.

5. Code mechanics (for coupons): If you’re using coupon codes, define the mechanics;

• One Time codes: Unique use per customer.
• Reusable codes: Can be used often by multiple customers.
• Action-triggered codes: Given after specific actions (e.g., signing up for a newsletter, referring a friend).

6. Clear communication: Be sure your discount offer is clearly communicated;

• Transparency: Give the discount value, duration, and any restrictions.
• Value proposition: Stress the benefits of the offer and why it’s valuable.
• Call to action: Promote for immediate action (e.g., “Sign up now,” “Claim your discount”).

Once your discount structure is defined, you can proceed with putting your thorough discount strategy into action. This is where your subscription management platform plays a crucial role. The platform provides functionalities for discount options implementation, performance monitoring, and coupon code administration. Key features to look for:

• Flexible Discount Creation: Your platform should allow you to easily create different types of discounts, such as percentage-based, dollar-value, or volume discounts.
• Coupon Code Management: Ensure your platform supports generating unique coupon codes, setting expiration dates, and tracking their usage.
• Targeted Discounts: The ability to target discounts to specific customer segments (e.g., new subscribers, specific plan types) is essential for maximizing effectiveness.
• Discount integration: Integrate discounts with the platform’s checkout process, enabling automatic application to eligible customer purchases based on predefined criteria.
• Analyze Discount Performance: Use comprehensive reports to review the impact of discounts on coupon usage, conversion rates, and revenue.

Clearly communicate your discounts on your website and within your app. Highlight the value proposition to encourage customers to take advantage of the offer.

Track key metrics to measure your discount strategy’s success:

• Percentuali di conversione: Are discounts leading to more sign-ups?
• Costo di Acquisizione del Cliente (CAC): Is it becoming more cost-effective to acquire customers?
• Customer Lifetime Value (CLTV): Are discounted customers staying longer and spending more?
• Churn Rate: Are discounts helping retain customers?

Use analytics tools (e.g., Google Analytics, your billing platform’s reporting) to gather data. Regularly review and adjust your strategy based on insights.

• Discount Code Abuse: Implement measures to prevent abuse, such as limiting coupon usage per customer or IP address, setting clear expiration dates, and monitoring for suspicious activity.
• Value Perception: Explore the relationship between discounting practices and potential shifts in customer perceptions of your brand’s value. Focus on strategic, targeted discounts and clearly communicate the value proposition.
• Unprofitable Discounts: Regularly analyze your discount performance to ensure they are contributing to your profitability goals. It’s crucial to evaluate the impact of discounts on customer acquisition costs and long-term value to ensure sustainable growth.

Developing a comprehensive discount strategy involves considering these steps to achieve business goals while managing financial stability. Remember to regularly assess your strategy and make necessary adjustments to maintain its effectiveness and alignment with your overall business goals.