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3 Comments

How did you decide the price for your SaaS app?

Hello,

I'm currently working on a SaaS web app, but I still can't figure out how much I should charge my potential customers.

Are there any formulas I should follow ?
How did you find the right price for your application ?

  1. 2

    If there are existing players in the market then try to use their pricing. If they are successful then that means the market is accepting the prices they are setting.

    It's harder when the market is smaller or non-existent. You can visit forums or community pages where your potential customers talk and tell them what you're working on and if they'd be interested. If you get any positive responses ask them privately what they would pay for the SaaS you're envisioning.

    This will help you shape your proposal to customers and learn what is truly valuable to them.

    Finally, you can always change your prices so don't worry about getting it right the first time. I've changed prices on my SaaS (packetriot.com) several times. The enterprise side of business had no clear market pricing so I entered blindly and have had to rethink pricing again and again.

  2. 2

    It was actually really difficult. We needed to investigate what the unit/value cost was for managing a service. After a long history for our team of working with a bunch of companies that all tried to write their own authentication/authorization (so many mistakes made), we had some good starting ideas about cost to run over time (TOC).

    (Reference product: Authress)

    We know most of our users ended up having a dedicated team to build this. Then it was just a matter of breaking down the costs associated with the team and understand which parts of that we actually provide value for.

    The unit value, wasn't number of users for their products however, since some users can cause a high amount of cost, so we don't charge by user. A lot of companies are spending $1M USD a year supporting the technology with a fully functioning team, if they want to do it right. Sure there are lots of ways to bring that down (and we expected many Indie Hackers will never hit that number). So what was reasonable?

    It was clear what is important became: what does our market look like?

    We found out there are a couple of segments, with vastly different usage and necessary layers to support their products. We picked the segment we felt we had the most to offer and modeled it (spoiler alert: Indie Hackers). As such we adjusted for the types of usage in that segment and our expectation of team sizes, attention to security, growth potential, etc...

    The result was a table of calls/usage/users/costs. We expect X calls per day/per user in Y scenario and compared that to standard spend to get that functionality based from our research. Then we cut that number down even further, since it was too high for us.

    Another aspect is hidden numbers, we believe everyone should pay for what they need. Why would using more usage cause us to charge less? Our pricing is meaningful, there is no hidden up charge. You get a large number of free calls to start, then pay a fixed easy price based on scale that matches your unit value. Our "higher" plans, offer additional features, like priority support, but it is always $0.0011 per call.

    ----

    If you have further questions and want to chat, I'm always available: [email protected]

  3. 2

    This is the most asked question by many SaaS founders. And it's understandable how it feels where you want to stand with competitors and at the same time you should get profit. Here are my tips on how you can price your SaaS Product.

    1. Cost Plus Pricing

    Add your margin to the overall cost you spent on the product which includes hours invested, equipment cost, travel cost, etc. If it cost you $100 to make the product and you decide your gross profit should be 30% then charge $130 to the customer.

    1. Competition Based Pricing

    Check out how much your competitors are charging in the market. Don't price too high or too low then your competitor price. Take a middle range where you can also meet your aimed profit.

    1. Value-Based Pricing

    In value-based pricing, you will determine how much profit your customer will make if they use your product. So if the customer can save $100k in costs per month, you charge them $10k per month for your product. In this case, Decide the product price at 10% of the total value delivered.

    If you are a beginner you could seek help from some SaaS marketplace like saasmantra.com to feature your product and get exposure from it.

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