Strategies For SaaS Pricing

When you launch SaaS model for your software business, pricing is absolutely critical. Too low and large enterprises won’t have room for sourcing organizations to negotiate discounts for what you’re offering. Too high and your proposals won’t make the short list on RFPs. This is why it’s critical for you to establish a strategy. Often times we see fast growing firms adopt a tiered pricing model with 3 levels for example, started, professional and enterprise.

There are several strategies for you to consider.

Establish a “Low”

You will want to establish a low price that identifies the minimum at which you will charge. This could be based on the features or based on whether people are going to pay by the month, quarter, or year. It’s important to offer a competitive “low” price as a gateway for people to gain interest.

If your low is too high based on the niche you are trying to enter, you may not get enough people interested. You also don’t want to get into the habit of continuously lowering your price in order to obtain more users because it devalues what you’re offering.

Establish a “Premium”

You also need a premium or high price as this will be your money maker. The goal is to entice enough people to sign up for the premium so that you can offer a low price as well without hurting your bottom line.

Identify the Features

There is a lot to be said about being competitive with your pricing. You may want to consider the different SaaS products that are being launched by your competition.  Also perform research with industry analyst firms Gartner, Forrester and others. However, you also need to identify the features that you have to offer and how those are offered and supported with different product levels.

If you are offering more features than what the competition has to offer, you can easily increase your price. This is because many people are willing to pay in order to obtain more features.

You also want to look at differentiating price points based on adding more features. This means that you may start with an “introductory price” for all of the basic features. Then, you can offer more features for another price point and even more features for a higher price point.

It can be dangerous to have a free vs. paid model because people will see it as you withholding features from them. While it’s true that’s what you’re doing, you need to review how you’re going to communicate. As you make adjustments to the SaaS over time, some of the higher paid features will be placed into lower-priced tiers. At some point, people aren’t going to want the free model and they won’t pay for the paid model, leaving you without any customers. However, by offering differentiating price points from the very beginning, you will ensure that people are paying at least something for the service.

The Future of Software Pricing

By exploring the future of software pricing, you can be sure that you’re being as innovative as you need to be based on the price that you are charging.

You need to stay in touch with the latest trends and make sure that you are always aware of what your competition is doing. If you are savvy about your pricing strategy, you will adjust your pricing model periodically in order to establish a win-win scenario. As long as customers see the value in what you are offering and it helps with their business processes, you can ensure they will sign up for recurring subscriptions.

As such, your goal needs to be to establish the value in the SaaS and show people how you are able to reduce their internal costs.

Learning how to build a pricing model is critical as it will impact how you market your products. You can be an economy-based or a luxury company.  Find out more about developing a strategy for SaaS pricing by contacting Birst Group today.

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