Pricing: Key Recommendations
Ed Shelley analysed over 100 B2B SaaS pricing pages and shares the key lessons learned in this post.
Fantastic overview of B2B SaaS Pricing pages - really thorough, well researched and with extensive examples. A must read for anyone looking to optimise their B2B SaaS pricing. Alan
Scalable pricing is a powerful tool to grow revenue in a SaaS or software business. It allows you to capture more of the revenue that your customers are willing to pay, without putting off smaller customers that are not able to pay high prices. It also provides a great way to continue to grow revenue from your existing customers. This post looks at how to create scalable pricing using multiple pricing axes, and discusses the different types of axes that can be used.
Pricing is one of the most central parts of your business. Everything from your marketing and sales to your product and operations is used to either drive people to your pricing page (or rate card via a salesperson) or support the retention of that customer once they’ve cross the purchase threshold.
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You can grow your SaaS business in three ways:
- Get more customers
- Get customers to stay longer
- Get customers to pay more.
I believe that the last one, pricing, is an underrated lever of growth. We tend to focus on acquisition and, to a lesser extent, retention.
Thomas outlines how to think about pricing, using a mix of market research and testing to use price as a means to drive additional revenue.
Conceptually, performance pricing is very rational. The buyer should be willing to pay between 10 to 15% of the revenue or cost savings for the use of the product. And as classical economics instructs us, this type of pricing mechanism optimally aligns the incentives of the buyer and the seller. But the reality is more nuanced.
Another point worth adding to the mix is that it can also cause problems for buyers. Most Finance departments are simply not used to this sort of pricing mechanism and the inherent uncertainty it contains so are often not keen on it!
Decisions regarding pricing are of crucial importance for SaaS businesses. The first decision point usually relates to whether you are contemplating a Freemium offering or choosing to charge from the off. The pro’s and con’s of launching with a Freemium offering are well documented but regardless this decision warrants some thought.
Your pricing page is your goal line; the almighty point at which a buying decision is made and you as a business leader either put numbers up on the scoreboard or flounder under the weight of another sale lost.
In the early 1990s USI said, “let there be the ASP” and at that very moment the cloud was born, fulfilling the dream of IBM’s 1960s experiments with utility computing. For the first time, the small seeds of SaaS began to grow. Developer collaboration reached new heights and features could be delivered almost instantly, leading the charge for Salesforce, Oracle, and the ever ironic “No Software” movement.
Whether you’re marketing a new product, selling items on eBay, or negotiating a deal on your house, you’ll learn 42 psychological tricks to make your price seem lower, and motivate people to purchase.
SaaS pricing page design is always evolving, and when I created the Pricing Page Success Formula for SaaS and Web Apps in 2009, the jury (me) was still out on whether placing the high priced version of your product on the left and moving lower to the right really mattered.
Late last year, I combed through the Montclare SaaS 250 — a directory of the biggest SaaS companies in the world — to find common trends in what I thought would be a significant dataset. As it turned out, 80% of the 250 biggest SaaS companies didn’t have a pricing page at all.
Nothing is more critical to a software-as-a-service (SaaS) business than pricing strategy. Pricing is the moment of truth for a new product … and doubly so when it is a company’s first product. But far more often than not, I’ve observed new startups leaving “money on the table” when it comes to pricing enterprise products.
You’ve just released your latest photo-organizing software. Through some mechanism which will be left as an exercise to the reader, you’ve managed to actually let people know about it. Maybe you have a popular blog or something. Maybe Walt Mossberg wrote a rave review in the Wall Street Journal.
Pricing. Is there any word that confers some whisper of dark arts than pricing? Or any question that instills less confidence than, “How did you derive your pricing strategy?” Many times, startups replicate and tune competitors’ pricing strategies. If everyone else prices per seat, then so should we.
Pricing is one of the most challenging decisions for any startup. One of the simplest ways of discovering customer willingness to pay is simply to ask them.
Startups struggle to set the right price for their products because pricing dynamics in the field don’t obey the laws taught in the classroom. The standard supply and demand curves, drawn above, imply that as price increases demand decreases; that buyers act rationally and that this law is immutable. But this simply isn’t the case. Buyers in the market place violate the traditional supply and demand model all the time.
n 1999, Vistaprint, a four-year-old French startup, launched its internet-based printing services in the highly competitive US market. Going against the popular advice to target the bigger companies (who would spend more money on printing), the Vistaprint team went for the micro businesses (who were then considered as a terrible market, as they were close to impossible to reach).
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