SaaS Pricing: You're Too Cheap If You Never Lose Customers
How much do you value your software? SaaS pricing isn’t black and white, and a lot of companies are afraid to raise their prices because they don’t want to lose customers. This logic makes sense. If you price yourself too high, you’re bound to lose some customers who aren’t willing to pay that much. What these companies don’t consider is that this is a good thing.
Yes, losing customers is a good thing. Losing customers gives you a chance to learn insightful feedback and to improve your overall value. You want the best customers, and that means pricing yourself accordingly. Your customers should understand the unique value of your software, and they should be willing to pay the right price to get this value. This guide will discuss the complex world of SaaS pricing and why you should never lower your price!
Know Your Value
Value and pricing go hand in hand. No matter how great your product is, if you price it incorrectly you risk losing your whole business. Pricing is confusing, there’s no doubt about that, but it all comes down to value. There is no one-size-fits-all answer to SaaS Pricing. All you can do is know your value and use that to decide a competitive price.
What do you offer customers?
The best and only way to decide how to price SaaS is to recognize what you offer to customers. How do you stand out from the competition? Do you have the best live-chat software to offer 24/7 support? Are you investing in quality testing? Do you have competitive features that aren’t seen anywhere else on the market? Articulate these ways you make yourself different. These are things worth value, and this is how you should face SaaS pricing.
Don’t look at the competition.
It doesn’t matter what your competitors are charging. They don’t have the same product, so you shouldn’t expect your pricing to reflect theirs. Looking at the pricing of your competitors is like cheating the whole process. In the end, you’ll only hurt yourself not your competition.
Avoid price pressure.
There is a lot of pressure in today's SaaS marketplace to keep prices low if you want to be competitive. Your competitors might lower their prices which in turn makes you feel like you need to lower your own prices. Stay firm in these moments and avoid changing your pricing. When companies rapidly lower their prices to stay competitive, it’s nothing but a race to the bottom. Instead, focus on ways you can improve your own value.
Create a Strong Pricing Structure
As stated before, SaaS isn’t a one-size-fits-all pricing situation. The same might even apply to your particular business. You might offer different services or different benefits that require different pricing. This is a good option since it encourages people to choose the package that’s right for them depending on their unique needs.
Your pricing structure might also include different pricing models to make it easier for customers. The most common pricing models in the SaaS marketplace include pay-as-you-go and subscriptions on a monthly or yearly basis. You should choose the pricing model and structure that makes the most sense for your users without compromising value.
Listen to Feedback
Your customer feedback is your biggest source of information for how to improve. If you don't have a system for gathering feedback from current and past customers, you’re letting cutting-edge information slip down the drain. You also need to listen to your product and the information it’s giving you for further improvements. One way to have an “ear” for your tech product is by implementing error monitoring, so you can catch any errors and bugs before they actually reach your customers.
When your prices are high, you’re going to get a lot of comments.
People will say things like “Your service doesn’t offer enough value for the price.” It’s easy to read this kind of response as a cue you should lower prices, but that’s not actually the case.
When you listen to feedback, you have a chance to respond. You can either do nothing, which will lose you customers in time, or you can make changes.
In response to the comment about not having enough value for the cost, you should reconsider your value points. Return to what you do differently.
What edge do you have on the competition that people should be willing to pay for? Is your uptime better than the rest? Are you using some technology that gives you an advantage? If you can’t think of enough things, it’s time to boost your value through new initiatives.
It’s scary to price your product in a premium range. It might make you feel out of your comfort zone, and that’s exactly where you want to be. Nothing changes if you live your life in your comfort zone. You’ll never know just how much you can make if you never try.
The SaaS marketplace is a marathon, not a sprint. It’s about creating value for your customers and continuing to provide value. It’s not about choosing a competitive pricing structure that devalues your product.
If you want to be taken seriously, price yourself high with a smart pricing strategy. You don’t have to alienate customers by raising prices. However you choose to implement new pricing, whether it’s through grandfathering in current customers or offering a new pricing structure, you can do so with confidence in your value.
Realize you’re always going to face objections to high pricing. You’d probably hear the same objections to lower pricing. That’s just the nature of the market in any industry. Learn how to listen to feedback and recognize when there is an actual problem and when there is not. As long as you’re always improving your customer experience and adding value, you should feel secure in your pricing choice.
The Reality of SaaS Pricing
The reality of SaaS pricing is that there is no right or wrong. This is a relatively new marketplace, and things are always changing. All you can do in this whirlwind of a time is stay true to your value. Only you know the value of your product, and you can use customer feedback to ensure you’re charging a fair price.
Realize anxiety and perfectionism will only get in your own way, and finding the right price isn’t something someone can choose for you. Don’t let the competition decide how you price your product. If you’re providing high-quality value, you have the freedom to price accordingly.
About the author
Wendy Dessler is a super-connector who helps businesses find their audience online through outreach, partnerships, and networking. She frequently writes about the latest advancements in digital marketing and focuses her efforts on developing customized blogger outreach plans depending on the industry and competition.