Drop your best SaaS pricing tip here
Hey indie hackers,
There is a lot of clutter out there as to how to charge my SaaS customers and it easily gets confusing.
What's your best advice when it comes to pricing your product?
Appreciate any tips!
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This helped a few of my clients increase their conversion 30%+
Decoy Effect - People change their preference between two options when presented with a third option (the decoy) that is “asymmetrically dominated”
Pricing - if you offer just 1 price, a customer has 2 choices: either to buy or not.
If you offer 2 choices of pricing, a customer has 3 choices: To buy the cheaper one, the more expensive one, or not to buy.
When you add the third pricing option, a much more expensive one, now the second price (the previous expensive one) looks like a bargain.
I write more about it here https://www.indiehackers.com/post/6-cognitive-biases-in-marketing-copywriting-to-help-you-make-a-few-extra-bucks-in-2022-79e2ff61dd
Makes total sense. But as long as the second option is competitive with other similar SaaS products' pricing
What do you guys think is the max number of pricing tiers, though? I see some SaaS products have up to 5 tiers, is it too many? How would you decide what/how many tiers to have then?
I usually do about 3 pricing tiers. More than 3 and people get confused. Too much information to process.
With 3 pricing tiers there are at least 2 psychology effects you can use, like "the decoy effect" (mentioned above) and the "center stage effect".
pricing depends on your buying personae - if you have 5 - 5 pricing tier make sense
This works really good in consulting. Haven’t tried it for saas but I guess the same would be true there.
Great strategy 👍🏻
It works reeeally well in SaaS. This helped both me and multiple of my clients. And the conversion rate went up 20%+ every time
I love this!
Adding a very expensive option to existing ones adds an "anchoring" effect.
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Generalising a bit here, but if your product can be used by multiple team members (has some kind of multi user functionality) you should be charging > $100 / mo for that.
If a company has more than one employee and they are using your app, $100 is nothing.
Fully agreed. How would you go about determining the max price, though? We are working on our product's enterprise pricing but we have a lot of assumptions as to how much max $ we should charge. I see startups like Ahrefs charging up to $1K then some do charge $199 max. Any advice?
Depends on the geography though. If your market is primarily US or Europe then it works. Else it is too expensive for even a 4-5member start-up in other regions. Where a lot of the new market is
You can always implement geographic pricing like games do; certain areas are cheaper than others, so the software, being a fungible product, can be cheaper in those areas. You just have to watch out for abuse.
Just to throw in another tip, something that worked for us: offer an unlimited plan at a high price point. It offers your customer predictable costs so they don't have to worry about future changes to their pricing plan (e.g. when billing X/user/month and for you it's a way to incentivize users to commit to a larger plan.
I don't know if you're looking at B2C or B2B, but in our case we offer a $999/month plan with unlimited users (B2B obviously). That's a great deal for customers and for us, and those teams also onboard quicker because they don't need to debate each extra license.
Oh and this is all very low-touch btw: free trial with a few emails at most (no sales calls or anything). Not saying that works for every market, but it's worth experimenting with higher price plans.
Pricing is a never ending part of growing a SaaS business :). Believe me you'll never make it perfect... Until point that even your customer don't know how your pricing works, yet they'll just keep paying you (check Intercom, Hubspot, etc)
I'll drop a few links below that will help:
https://www.profitwell.com/recur/all/value-based-pricing -- maybe it's hard to start with a value based pricing, but the trend (PLG) is going this way.
https://medium.com/inside-personio/developing-a-data-driven-packaging-for-your-saas-product-703a67648dc4
https://baremetrics.com/blog/saas-pricing-models
https://userguiding.com/blog/pricing-page-best-practice/ -- disclaimer: this is from our blog. not to spam or anything. pricing page design is very important as well
Charge More 😄
Flat rate pricing is probably the simplest way to sell a SaaS solution: you offer a single product, a single set of features, and a single price.
Yes, this worked really well for our product.
In my experience, I prefer SaaS solutions with at least two pricing options, because that way I feel like I'm getting the best deal/price! Obviously, I can't choose the best deal/price!
It's one way to go about but remember that, depending on the nature of your SaaS, usage-based pricing might also work pretty well. I would test and see which works better.
Usage-based pricing is great but I'd say keep it simple (1 rate) and offer the customer an easy way to model their total expected cost upfront.
For usage based pricing you will be using stripe subscriptions right? Or anything else?
Simplest but not most optimal if you're trying to increase revenue. One of the most surefire ways to increase revenue is to create price tiers based on different demographics of customers.
For example, let's say your product is 99 a month, for all users. Some may not be able to pay, but they may pay 49 a month, while others might be willing to pay even more, maybe 199 a month. So you stratify, by having something like a beginner, pro, enterprise type plan set up, and you'll see your revenue skyrocket in many cases if done correctly.
Localize your Pricing
Adapt your prices and currency regionally
Revenue per customer is ⬆️30% when you use the proper currency symbol
Use different prices in different regions because
Demand and Purchasing Power Parity is not equally distributed (U.S. vs. Africa)
Another one I found really interesting!
Celebrate your early adopters by dropping in half the price of your product, for their early trust.
I post a SaaS Pricing Tip per day on my Twitter
I'd love to meet you all!😁(following back)
I would say - keep tweaking your pricing.
During the past seven years building Postcode API (https://www.postcodeapi.nu/), we've changed pricing regularly👇
Each update grew our revenue.
No idea what you're working on, but I say - keep working on the pricing of it 😉
Always try to price based on value for your customer.
Also, charge as high as possible. Higher price might mean less users, but also less support and less scaling for the potential same amount of profit.
Less support will allow you to focus on growth and pampering your users so that they will never want to leave.
I found this link very helpful when looking at prices from a psychological perspective. It goes to great depth about perception and display of pricing and how we can use the oddities of the human brain to our advantages.
https://www.nickkolenda.com/psychological-pricing-strategies/
Make it easy to test your pricing.
I've always been nervous about raising prices but it's always worked out. I've also made it easy to grandfather our customer base and roll back pricing just in case we've gone to far (which hasn't happened yet). Just having that piece of mind has made it easier to raise prices and run tests.
An easy framework I recommend to all my SaaS customers is to only base their pricing on a maximum of 2 variables out of:
Using all 3 variables makes a pricing tier way too difficult to understand.
Another tip is that the pricing should go up if:
For example: there's no point increasing the pricing for an email platform when someone adds more users, since your infrastructure goes doesn't really go up + they don't get more value because of that. The pricing should go up if they send more emails (higher cost to serve) or use more advanced features (more value).
The key is to tie your pricing to your product's value; the more value it delivers, the higher the price. Note: this is HARD to achieve.
So:
❌ An Unlimited plan is never a good idea, even at a high price point.
✅ Raise your prices as you release more features (w/ grandfather clause)
This is great advice!
In my experience, especially with a lot of competition, I've kept prices low until I felt I was providing enough value to raise prices. I also start with a price point in mind so I knew what I need to offer to make myself feel comfortable charging what I want.
I agree about Unlimited plans, never a good idea! You have no idea what unlimited means to your customer and it's probably a lot more than you think.
Freemium or bust :)
You're probably not charging enough is a common problem. YC recommend you charge more is "the number one piece of advice [they] give to most startups to fix their pricing".
Here is a video from YC discussing it: https://www.ycombinator.com/library/6h-startup-pricing-101
When it comes to pricing, do your best to keep it really simple at first.
I've seen (and been a part of) plenty of projects that have attempted to optimise pricing too early, only to realise that the model wasn't right, or nobody wanted to use the product.
Complex pricing models (with several tiers, discounts, referral programs, affiliate programs, starter programs) cost a lot of developer time, so only allocate it when you're sure it's worth it.
Validate a simple pricing model first.
First, you'll want to make sure that your pricing is in line with the competition. Take a look at what similar products are charging and price your product accordingly. Second, you'll want to consider the value your product brings to the customer. pricing your product too low could imply that it's not worth very much, while pricing it too high could make it seem out of reach for many potential customers. Finding the right balance is key to success.
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