What's your go-to SaaS pricing strategy?
Hey IHers!
When building your SaaS, what's your go-to pricing strategy?
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Hey IHers!
When building your SaaS, what's your go-to pricing strategy?
My 2 cents: I am currently running something on pay as you go, and though it is quite normal B2B I think it makes consumers a bit nervous. I chose it because my cost base is totally pay as you go, and this allows me to make a pure model (no data hanky panky or hoping for users that pay but not use the product). But, again, users don't like it.
I had a B2B SaaS that was per user, and large companies really gobbled that up. I tried to price that tiered but that felt a little hacky.
Per feature can work.
LTD's are a cool tool to start, to gain lead users.
Talking about LTD's , what if after 1 year it did not work out for you, and you have to shut down the SaaS. Would you feel obliged to refund your LTD's? I know that this may be a stupid question, but think about the customer's feeling of buying 3 years of a SaaS that does not exist anymore.
I have no first hand experience on that, but a friend of mine has. He recently told me that early users and their investment were a big stressor in his decision to close the door.
Turned out that, in his case, all those users were cool with it. But for total comparison his early users were all contacted directly with an investment/early use proposition (so more kickstarter-like than appsumo-like)
So it's not just a "fund me" price. It's an "I'll give you premium attention" price.
Thanks!
To be clear: his was more a fund me price (and I pay you in kind). And it turned out to be ok to default on it.
If you make it more special deal, it might be harder to do that. Even though you’ll probably be less acquainted with the customers in this case.
Got it! I went through something similar with my customers, I open-sourced the product, but I sent an email with a 100% discount for a new product that I'm working on. I don't know if I should not do that, but I would feel miserable otherwise.
Well, the risk of an LTD is always that you might not be around in a year or I might never use it. That’s why it’s bargain-priced.
Yeah! IMO pay-as-you-go is the most transparent way of telling your customers how much would they pay, they should know (or at least make an estimate) how much Invoices/Files/... they will create/use.
Do you consider the following to be pay-as-you-go?
Invoice pricing
0-100 - $10 - $0.10
101-300 - $27 - $0.09
301-1000 - $80 - $0.08
1001-5000 - $250 - $0.05
Or is this per-feature pricing (being the $10 as the Basic plan)?
It is very comparable with my plan as it was designed, even though we skipped the staffles. I did that to make it compatible with Apple Pay. That costs me 15%, but it is now super integrated in iOS.
Per feature would be like this in my mind: usage is free, but if you want to unlock cloud storage that is X, if you want to share it online Y, etc.
Perhaps the most important pricing strategy is value pricing. This considers how valuable, high-quality, and important your customers consider your products or services to be.
Do you mean premium pricing?
Value pricing is customer-focused pricing, meaning companies base their pricing on how much the customer believes a product is worth. Value-based pricing is different than "cost-plus" pricing, which factors the costs of production into the pricing calculation.
For example: Say a coffee shop, Company A, charges twice as much for a cup of coffee than their competitor, Company B. Although their prices are double what others charge for similar products, people are willing to pay more for coffee from Company A.
I agree. Also, better to have 100 valuable customers than 10,000 regular ones. It’s better to focus on those who actually see your company/product’s value.
Indeed!
Experimenting with your pricing is so important. The main thing you want to do is charge based on the value you provide. So if a company gets more value the more users they have, then charge per user.
We have a freemium offering for PriceWell so customers can use the product for free but we charge a transaction fee. Then certain features require an upgrade (because we can't charge a transaction fee for them). It took a lot of experimentation to get something that worked.
You can use a tool like PriceWell to make it easy to switch pricing without having to change any code :)
I m still not sure about that!
https://www.indiehackers.com/post/how-to-decide-on-pricing-the-custom-project-for-my-first-prospective-customer-e3eb9abfef
My side hustle isn't SaaS but I work with a lot of SaaS clients in my day job and we've always found tiered pricing with three options (with the middle option being the target option) to be the most viable when trying to gain traction.
Interesting, so plan 1 and 3 are marketing fillers?
"Weber's Law" could be an interesting Keyword on this Topic.
We decided to go for tiers for our launch, giving 10 users in the base tiers allows for companies to fully try the product and invite their team members, instead of hesitating and churning at 1, 2, or 3 seats. We'll test and validate this, but the type of product (referral platform for startup recruiting) justifies this early decision! Good luck with your pricing. There's an excellent guide by "Pricing intelligently" that you should check out: https://www.priceintelligently.com/developing-your-saas-pricing-strategy
139 pages 😱! I'll read it this week since I want to write a blog post about SaaS pricing, and I'm currently working on an advanced plan builder.
Thanks a lot!
Pricing as you go to me is the most honest one as user will get some value and in return and will pay for the amount of that value.
Pricing per user can be a tricky one as users can share the same account.
True but if you limit to one login at a time, it would be difficult for users to choose the one user pricing plan. Case in point, where we pay per user for SEMRush, and it works because our marketing team is small (2 people) but if we were to expand, I doubt it would be effective for us to pay for the one user.
Do you really think so? I have 2 things to say about this:
I've heard that Firebase/Auth0 and other pay-as-you-go platforms grow the bill massively.
I see what you mean by honest pricing, but I see the price related to the value that you provide, not the features, and sometimes explaining your value with pricing may come as not-so-honest.
For sure! Slack and Asana do it very well. But in terms of the actual implementation, it's tricky, for example, What if a member was removed on the last day of the month and added back on the 2nd of the next month? 🤣
You are right about the bills, good point. There are many blogs - ‘we are broke cause of Firebase bill’, but I think in the end when you look at it you got something and you pay for what you use. DigitalOcean has a nice feature to notify you if your monthly bill goes over some value which you define, to me this can save you I guess in those kind of situations.
Also one good thing with pay-as-you-go is that you get full product (most of the time), everything is unlocked compared to some other pricing models where there is one more feature you need but the monthly subscription is huge compares to the current one you use.
In the end I think pricing must be based on type of the product you are building.
100% agree. I'm working on a project that will be the first to offer pay-as-you-go pricing in it's industry. The cons most people mention are easily solvable by offering volume-discounts, billing portal with usage charts, and notifications.
DigitalOcean is an interesting example because they seem to use their pricing model (eg fixed per-month) as a competitive advantage to attract developers (compared to other cloud providers that are more usage based)
Totally right! It's our responsibility to warn our customers that they're reaching their budget. Forget what I said about Firebase/Auth0, I don't think they have an evil pricing model.
Why either/or? Why not "and"? I see many successful SaaS businesses offer many pricing options (pay-per-usage, pay-per-feature, lifetime deals, annual deals, etc.)
Yeah! I'm asking because I'm building an advanced plan builder, so a hybrid solution would be possible. But I wanted to know IHers most used strategy.
Do you think hybrid pricing is the best of all? (I believe so).
My gut feeling says this question is impossible to answer without more context 😂
I'm certainly no expert on this topic but let me comment on each. It'll be good to think about anyway.
Lifetime deal feels like something worth doing to get the first users under the expectation that they'll provide enough feedback to make the offer better. It might also fit certain 'once off' type products.
Per feature might work when users don't need everything but could benefit knowing they might want to add features later. Kind of a form of bundling I guess.
Pay as you go makes most sense for time or resource based products like hosting. Its even better in the usage is somewhat predictable.
Tiered makes a lot of sense when you're selling to teams especially if the tiers match well. When they break down is having a 5 / 10 / 15 user tiers but the prospect needs 6 or 11. They can call ripped off to have to but unneeded ones.
Per user is a pretty good all rounder. It works for a lot of cases and can be tweaked as needed.
I would also say that combining pricing with discounts can work well to alleviate some of the common objections. For example, you could offer the first month free or discounted based on usage
Definitely. There is no one size fits all when it comes to SAAS pricing. I would say it depends on the product and the target audience.
Thank you for the feedback!
It feels weird to me to offer lifetime deals for a Saas that may not work, but also a SaaS that could be the next "notion" and you need to support for life (maybe the LTD was 3 years price and your SaaS lasts 10 years).
Yeah, it's a great pricing strategy but it only fits to a certain point.
I believe Per feature pricing is THE pricing for B2B since a company that sees the value from Bundle 1 (features 1 and 2), will definitely upgrade to Bundle 2/3/4...
I see that, 67% from the poll results.
Or Hybrid pricing maybe? Yes, it creates a lot of new billing problems, but it gives 100% flexibility.
Monthly Active Users