This lessons learned series is part of our live SaaS resource list we're
building while launching a new product.
When it comes to pricing we've got it wrong, experimented, figured something
out, changed it again and eventually stuck to something.
What one lesson about pricing was the most important and why?
When we couldn't figure it out we guessed at the total value it might provide
someone and then charged a percentage of that.
Underlying it all the product provides a certain amount of value. We're in
tech and we're not dealing with tiny margins. The impact of our tech can be
enormous and well worth the price. We figured we'd charge at least 1/10th of
that value. So if we think we're saving someone $300 per month or making them
$300 per month then we should charge them $30. The saving could be a lot more
but this is a minimum starting point to anchor on.
What dumb mistakes did we make in pricing at the start of our SaaS
journey?
We tried unlimited agent pricing. Dumbest thing ever. It means a company with
1,000 agents would have been paying us $50 per month and yet that company
would not have signed up for Upscope because if we were the managers at that
company we would not trust Upscope to survive or provide a good service
because the pricing was so low.
What's the one thing we did that made a big difference?
We experimented with different pricing models fast enough to make mistakes to
learn from. At least we didn't suicidally stick to one dumb thing for too
long. Eventually we came to the value pricing model which made sense.
We also showed flexibility in pricing for some larger deals which matters a
lot in closing those deals.
What would we advise someone starting from scratch?
If you don't have any way to position it against a competitor's pricing and
features then make it 1/10th of your estimated value provided. Don't spend too
much time on questioning it after than until you've learned a lot more about
how you're positioned in the market.
The amount of time and energy we wasted on 'some' pricing discussions without
progress was just dumb. Better to go for it and find out.
If we had a magic wand how would we use it to improve our pricing
proposals for enterprise?
We'd wave the wand and instantly know their budgets, key concerns over pricing
and how much value they expect from the product.
The purpose is not to charge them a maximum amount but to understand what's
stopping them from buying.
For example, they might not know the full value they'll get so paying up front
for a year is putting them off and they're concerned they have to buy 300
seats but only 100 might end up using the product full time.
What would we do if we had this information? We'd offer them a 30 day proof of
concept followed by 6 monthly pricing and a grace period of a week for new
team members using the product as it takes a week for them to figure out if
they really need it for their particular job.
We want to be sure that our initial proposal alleviates their key concerns
over value and pricing.
How will we use our experience for our new product?
We have no idea how to price it yet because we're not even fully sure how the
product will be adopted and how it'll expand. If it's spreading fast then the
freemium model is essential.
Minimally we will study how similar products were priced and grew. We know we
can price it low at first and then raise it depending on the value it
provides.
Our focus will not be on pricing though. That does not lead, that follows.
We'll focus on quality of the product and distribution. If the pricing slows
the distribution then we'll sacrifice the pricing. However, we also need money
to further develop the product so we need a source of capital. It could be
that we raise funds rather than continue to bootstrap or we charge for premium
features. Overall we'll analyse and move as we learn more.
Resources
How 25 companies priced their product
There's a wide range of companies and pricing models mentioned in this list
including lessons learned along the way to achieving that pricing.
See how 25 companies priced their
SaaS
Patrick Campbell of Profitwell breakdown of pricing your SaaS
Patrick Campbell is one of the go to guys for SaaS advice and he runs a SaaS
business that does SaaS analytics so probably has a great deal of information
to base his advice on.
