March 9, 2019

Trying to set pricing

I’m looking for advice around pricing for my very niche SaaS product. I’ve settled on an annual subscription model, and I’m going to have 2 different plan levels.

Some background. I am a genetic counselor (GC) and my husband, @Anorak, is a software engineer. We are building a product to help GCs keep on track with their continuing education requirements to maintain their licenses. There are about 4,000 GCs in the US currently. We’ve put up a landing page got 30 emails on our list in the first few days just from posting on social media.

The alternatives to this product are spreadsheets and a free tool that our professional society provides but is extremely basic. There are some paid continuing education trackers out there, but not targeted to GCs and the functionality is very different than our product. They vary greatly from free versions to $5/mo to $99+/year.

We settled on annual subscription since this is a product that will probably only be actively used a few times a year. We don’t want to remind people that they are paying for something every month if they’re only logging in once a quarter. This is also a product for professionals, so they may be able to expense to their companies. An annual invoice would make that process easier for them.

I would rather go high and do promotions if needed than start low and try to raise it later. We’re thinking $95/year for the basic and $145 for the higher tier. I keep switching between worrying those are way too low or way too high. I’m considering bumping both of those up by $50, but worried people will scoff at it.

Any advice would be appreciated!

https://www.meetelsie.com

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    It is very hard to get useful information from just talking about the price. People say and act in completely different ways when there is money involved.

    However, there may be some hints. For example, you may ask them how much time they spend organizing the information. Or even how much money they spend on other software to solve the problem, etc. If they are spending 10 hours a month, and for them an hour is 100U$, then, you know, charging 10U$ a month seems like a bargain to them. The same if they are replacing software.

    On the other hand, you have to be realistic about the costs you have. If you can't go below 100U$ a month because of the infrastructure you need to maintain, etc. The sweetspot is very hard to find. Start with a number that makes you feel comfortable. Once you have it running, try to see if you can slowly increase it and maintain the customer interest, or try to lower it and see if the numbers go up.

    Your product seems to have a natural long-term behavior. It doesn't seem to be something that I could use one month and discard. Renewing certificates is a continuous process. Therefore, charging annually may seem natural. However, you also have the guarantee that people using your software will stick to it. Offering monthly plans, especially before you are popular, probably will lower the barrier for someone who just wants to try, etc. You can quickly test that if you offer the two pricing options to different sets of customers and you see if there is any impact on your conversion rates...

  2. 1

    Your price needs to be:

    • lower than the perceived value of your product to the customer, and

    • higher than the cost of acquiring and maintaining/running the product for the customer

    Since it's early days, you're guessing at the second point (cost of customer acquisition).

    As such, you need to work out what the value to the customer of your product is.

    Then talk to potential customers - do they agree with your value assessment? Or do they think it's higher (probably not)/lower (probably yes)?

    Choose a price slightly lower than the perceived value your customers tell you.

    If the real value (or your opinion of it as an expert) and the perceived value are very different, you have a communications or product problem.

    Good luck!

    1. 2

      Thank you! I have been talking to potential customers about the product, but have shied away from pricing. How do I bring up the subject? Should I just ask and let them give me a number or suggest different price points to see how they react?

      1. 2

        Annual sounds like the right play here. Seems like you found a great start for testing!

        IMO - The only way to determine how a customer feels about a certain price is to ask them to pay it. Picking different price points for different conversations can help move faster.

        I've found getting feedback on pricing is pretty useless. People make buying decisions on emotions (and back them up with ROI/logic) which is hard to quantify in conversation form. Plus, in an ideal world, customers will "feel" like your pricing is expensive but still pay it happily.

        You will move faster if you just pick price points, go, and continually test/iterate.

        Get em!

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          Thanks!

      2. 1

        Agree with other comments that you should set the price.

        Ideally, you walk them through the quantified value of your product first. If you can get them to the point where they agree "we'll save/make $X/year with your product" then that's the time to say "and it only costs {less than $X}!"

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