Money February 16, 2021

Please educate me on SaaS pricing. It's super hard!

thebigk

I currently have a few potential target clients who are evaluating my MVP and they 'say' it's good. But unless the card is swiped; it's not swiped!

All of my questions to them are targeted at understanding how big is the pain; and figuring out if they're willing to pay for it.

Turns out that they acknowledge the pain; but didn't know how to solve it. This is either really good - or really bad; because the pain may not be big enough that they'd want to pay to fix it.

Also, I'm wondering if I should offer PPP (Purchasing Power Parity) pricing. Do you have any experience with that?

  1. 3

    Researching is good of course, but you might find yourself drowning in a lake of expertise without much to actually get out of - per @steveprocter comment.

    I'd look at what your competition - or closest thing to it - is doing, to get a feel of the pricing model, price range, etc.

    Then of course, you can widen this search, by looking at what your industry is doing by enlarge - which type of payment tiers, price range, inclusions in the plans, etc.

    In the end, a tip to try out your pricing can be to publish a price you "feel" is right, and have in your sleeve and 'early days' rebate ready if you feel the price is too hard to stomach for your prospect. This way, you get to try and see the reaction, without potentially loosing a client.

    As a rule of thumb for early days of a SaaS product, you should make it so that the amount is 'painless' - for instance, $15 or $20 on a credit card monthly is relatively painless for something that helps solve a pain.

    As you grow your users and paying customers, you can always re-visit by creating premium plans, with dedicated features and of course a higher price tag.

  2. 3

    I recently searched "saas pricing" on Medium ... and 97 articles later ... I still don't know.

    I sometimes think it's more an art than science. So when I see "purchasing power parity" I just wonder if we're tring too hard and after doing a reasonable amount of research and talking to potential customers, it should be more of a gut feeling of the founders to finalise the pricing.

    But I know there are some real pricing pro's on here who will be more scientific about it than me - you can tell I'm a tech guy not the marketing guy ;-)

    1. 1

      Totally agree with the art over science point! Pricing has to take into account financial reality, but in the end its the marketing department responsibility to optimize it to the brand image, public, etc.

      But I respectfully disagree about purchasing power adaptation: We're used to the 1-price-fit-all because Internet feels like there are no borders. But its a romantic lie:
      You will sell next to $0 to people not speaking your language, with low purchasing-power, or with different cultures.

      They might have the need, the internet connection, and the hardware, they just won't buy it.

      I'm working full-time on proving this. I can't way to back that up with data ;)

  3. 2

    I recommend you get yourself familiar with Lenny's article on SaaS pricing (https://www.lennysnewsletter.com/p/saas-pricing-strategy) and Kevin's talk (https://www.ycombinator.com/library/6h-startup-pricing-101)

    It should give you a pretty good understanding of the basics which you can apply in your product.

    1. 1

      Super interesting, thanks.

    2. 1

      I was about to recommend Kevin’s talk too! My main takeaway from that talk was “keep increasing your pricing till you see a 20% drop off in sales.” I know that sounds painful to experiment with, but getting pricing right is the most impactful thing you can do to increase your revenue.

  4. 1

    Hey Big K,

    @steveprocter is right: Pricing is more an art than a science.It's based on a mix of rational factors (costs, competitors price, value to customers, purchasing power), and psychological factors (perceived value, brand image, expectations).

    I don't know anything your product so I can't pick a price, but here is my 2 cents:

    • Make sure to make a profit. Obvious? You'd be surprised..
    • Pick a price you're comfortable with... then increase it. We tend to be scared and self-limit ourselves. Wait for your prospects to tell you its too much.
    • Listen to their actions more than their words.
    • Don't be scared, you're not carving your price in stone. Its OK to change it as you grow.

    Pricing is EXTREMELY but also a huge lever of growth. And the fact you mentioned PPP goes straight to my heart: I'm building exportator, a purchasing power parity coupon provider, and I have tons of ideas on how to improve pricing.

    At the moment, it can help you optimize your pricing:

    • Exportator adapts your prices dynamically to the optimal purchasing power price in each country.
    • Protected from proxies and VPNs so you're sure no one's cheating
    • It tracks visitors, coupons created, and coupons redeemed, an,d lets you customize your prices on a country by country. Basically, you can do Price A/B testing, and yes, it's legal.
      Do you wanna try it? I'd love to trade a free beta account for your feedback and feature ideas.

    About help with your pricing feel free send me the details of your product and offer (jules [@] exportator.com ) if you need a neutral opinion on it!

    -Jules
    I help digital goods makers sell to emerging countries more efficiently on exportator.com
    Let's talk about Purchasing Power Parity! Reach me out on Twitter @julesmaregiano

      1. 1

        I reached out to John Marbach from Modern Pricing, as well as Danny from Parity bar; I loved what they did but they didn't seem to wanna take it to the next level...

        I have the background (studied Import/export, worked as solo marketer for a fast-growing Saas to 7-figure ARR), the technical skills (at least enough for a solid proof of concept), and the passion (love to meet new culture, lived abroad 50% of my adult life), so I wanted to give it a shot.

        Oh, and Exportator already has all the modernpricing and paritybar features (Sorry for bragging but its true! 🙈)

        1. 1

          it "might" be something we'd look at for www.clickacall.live - hopefully about to finalise some funding and then we're revamping and building out a new version. global pricing (or whatever you call it) could be interesting as we do already have a wide reach having done an appsumo campaign. keep us in mind.

          1. 1

            That'd be awesome Steve! I've scheduled an email to refresh your memory in 1 months :) You can also follow our progress on Twitter.

            "Global pricing" sounds better than "purchasing power adapted pricing", may I borrow that?

            Good luck on your funding!

            1. 1

              "global pricing" - you're more than welcome ;-)

      2. 1

        This comment was deleted 13 days ago.

Recommended Posts