SaaS Pricing Tips

Is it possible to generate leads through your product’s price alone?

Absolutely, it is.

But here’s the thing: Getting the price right is notoriously difficult. There are a lot of factors that go into choosing the perfect price for your SaaS product. Beyond the actual dollar amount, pricing also relies on structure and presentation.

If you’re looking to attract new customers through your price, you can’t simply charge the lowest price. Low prices can even repel some customers. 

You must ensure that your price reflects value and supports future growth.

How do you do that?

In this post, we’ll discuss how to find the right pricing strategy for your SaaS.

Why is Pricing Your SaaS Product so Dang Difficult?

Choosing the right price for your product isn’t easy. Here’s why:

First, you’re assigning a cost to a digital good. You don’t need to account for raw materials when formulating your price.

Second, your product costs the same to “manufacture” whether you have one customer or one thousand. 

Third, you’re using a subscription billing model. This allows you to spread your product’s cost over a period of months or longer. 

That’s just the tip of the iceberg. There are a lot of reasons why it’s difficult to nail your price. You also need to factor in product features, customer lifetime value, usage, competitor pricing, and acquisition and retention costs when coming up with the ideal price. 

The dangers of bad pricing

SaaS Pricing Tips

If you choose the wrong price for your SaaS product, you could:

  1. Leave money on the table – No business wants to settle for less when they could make more. Undercharging may be attractive initially and also pull in a lot of customers, but ultimately, it will hurt your business and your industry. 
  2. Alienate your ideal customer – If you charge too much, your ideal customer won’t be able to afford your product. If you charge too little, your ideal customer may not trust you.
  3. Limit growth – If you don’t have enough revenue coming in to support growth, you won’t be able to scale your business.

It may surprise you that making more money is better than having more customers.

Don’t choose a price only to attract a large pool of customers. Choose a price that is sustainable and can support your future growth.

How to Choose the Right Pricing Strategy for Your SaaS Products

The pricing strategy contains your product’s price and the way that you package that price (model)

Choosing your price is an individual decision beyond the scope of this article. What we can help with is how to find a pricing strategy that will allow you to generate new leads while also enabling you to scale your SaaS.

Here’s a list of common SaaS pricing models to choose from.

Define Your Customers

Begin by identifying your target customers. 

Who is your ideal customer? Define their demographics, pain points, behaviors, and objectives. Why would they be attracted to your solution?

How does your product help them? Align your product with their challenges. How does your product match their needs?

How much are they willing to spend on a solution? This is the tricky one. Use their demographics as a guide. 

Define Yourself

Now that you know who your target customers are, take a look at what you offer as a Saas.

Would you like to be the budget option or the premium one? There’s demand in every industry for every price point. Some customers want a high-end solution and are willing to pay for it. Others need an affordable option. There’s also demand in the middle for those who need more features and flexibility. 

Can you strip down your product and offer less? Can you add more to your product and charge accordingly?

Define Your Biggest Obstacle for Growth

Before you identify your pricing strategy, you need to answer this one question:

What has prevented you from growing?

Are you struggling with converting prospects into customers? Perhaps they poke around, and even sign up for a free trial, but ultimately, they don’t convert. Could your pricing strategy be the problem?

Are you struggling to retain customers? Perhaps your customer is churning due to price. This is often the case if you lured them in with a lower, unsustainable price.

Are you struggling to attract customers? Maybe you’re charging too much and not communicating your value. Perhaps you’re not charging enough and repelling customers who expect to pay more.

Whatever the case, it’s important to identify your biggest obstacle to growth before developing a pricing strategy. Your pricing strategy should provide a direct solution to the problem. For examples:

If you want to attract new customers, be sure that your price is competitive but sustainable. 

If you want to convert those prospects into customers, educate them on how your product saves them time and money. 

If you want to keep current customers, continue to nurture your relationship. Show them how your product benefits them by giving them individualized data.

See Your Product From Your Customer’s Perspective

What is your solution actually worth to your target customer?

In other words, if your customer decided to DIY the solution, how much would it cost them?

Of course, the answer to this depends on your customer’s skill level. Do they have the technical skills to create a workable solution themselves and just don’t want to? Or do they have absolutely no clue on how to do it on their own? Customer skill level is yet another factor in price.

You must truly understand what your solution offers your customers in terms of dollars and sanity saved. Remember that people will justify spending if you can prove value from the customer’s perspective.

You can attract more prospects by positioning your product as a solution to your customer’s specific problem. Emphasize how much your customer saves by using your ready-made solution.

Analyze Your Competitors

SaaS Pricing Tips

We all have competitors. Even if you don’t keep up with your competitors, your customers do. In other words, you need to be competitive in your pricing.

That doesn’t mean that you should just copy what your competitors are doing in terms of price. And it absolutely doesn’t mean that you should undercut your competitors. Instead, analyze what they charge, who they serve, and what features they provide. Remember that your competitors aren’t those who offer the same type of product that you do. Rather, your competitors are those who offer the same product to the same customers.

Your customer has likely shopped around and will come to your solution with a set expectation for price. Choose a price that fits within your industry, remembering to secure and defend your position yourself along the spectrum of providers (from budget to premium).

Justify the Purchase

Customers are hesitant by nature. In order to generate leads and convert them into customers, you need to do one thing: Figure out what drives them to click “buy now.”

The decision to purchase a product is never based on logic alone. It’s almost always an emotional response. The customer is motivated by fear, status, ambition, etc. For example, your customer may want to position themselves for a future promotion or do what others are doing or get the admiration from others, etc

Whatever the case, you’ve got to use emotion as part of your marketing strategy. Customers will justify purchasing a higher-priced product if you’re able to understand their motivation for purchasing.

Final Thoughts

Creating the perfect product isn’t the biggest hurdle. Pricing is even more important. Use the above tips to find the ideal price for your SaaS product so that you can attract more customers.

Before you go, check out these related posts:

Don’t forget to download this list of 5 common pricing models for your SaaS business.

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