Your SaaS product's ready to go to market and it's time to get your users to pay for it. But where do you start? How do you determine your first pricing? Pricing decisions influence your entire business: from sales, to marketing, to product, to customer success and even to development (they have to build in the pricing mechanisms!). They can determine whether your business fails or succeeds: saying they're important is an understatement.
Since it's such a big deal, we're happy to share 10 steps to guide you and your team in the process of figuring out your very first SaaS pricing strategy.
Confirm your user persona and the most strategic use case you want to encourage and price. This will guide all your pricing strategic decisions and make the whole process much more efficient.
This is probably the most important step. You need to have a clear understanding of your product value to find the relevant pricing value metric aka where your user perceives value from your service. This is essential for your pricing strategy to stay coherent with your users' behavior and expectations. To determine the value your product brings to your targeted users, go through these three criteria:
Is your value metric:
Keep in mind that the more your product is integrated in your user's day to day work, the more value you'll deliver and the more you should price.
There are many different product-line pricing strategies and models to explore to help you come up with your SaaS pricing strategy.
There isn't an infinite number of pricing models and each one has pros & cons depending on your value metric. These are some of the most common SaaS pricing models:
It feels misleading at first but the distinction is pretty simple. Freemium is a marketing strategy, unlike Free trial. Indeed, if you opt for freemium it is because you to make it part of your acquisition strategy among others channels. A Freemium plan is here to help marketing attract and convert more customers as active users. You offer a free access to your product in a certain limit which is not time. If it's about time it is a free trial.
Freemium drives more traffics, more users more feedbacks and data but keep in mind that it doesn't mean it will generate more revenue and more qualified users. A lot of users are never likely to convert.
It also implies that you need a strategy about how to convert these users into customers later in your app. You have to put your cursor at the perfect balance. Don't offer too much and they will never convert, don't offer too less or they won't be convinced by the value they get.
Free trial offers a full experience of your product but in certain limit of time. The difficulty here is to know if you offer enough time to make your product convince. As timing is not always perfect for testers, it is usually frustrating when you reach this limit but your decision is not made. Free Trial should easier secure a revenue stream. Think of how long it takes for your users to adopt and feel the value of your product. Ask yourself do you want to generate traffic, do you want to secure revenue,..? This is adapted to the target you want to sell?
For example at Slite, we set these criteria. We want a pricing that:
Get more insights and possible cases that you didn't think about by involving your team. Especially marketing (positioning), sales (pricing), product (packaging), management (pricing strategy). If this is your first pricing strategy, chances are that your team is small: take full advantage of that and get everyone involved: this what you're all working towards, after all.
Then it's time to get insights from your best asset: your users! By the time you launch a pricing strategy, you'll probably already have a base of loyal first users. Present the pricing strategy and model ONLY to the users you want to be your customer and interview them. Stay as objective as possible in order to avoid influencing their choice cause the truth is, they'll be on their own the day they decide whether or not to pay. Here are some guidelines:
Here are some question examples:
If you feel like you already got clear insights by talking to some of your most representative users, this isn't crucial but it can be great to get actionable answers and insights without the fluff of conversation. However, this means your questions need to be straightforward and lead to clear conclusions. You wouldn't bungee jump without verifying if the rope holds your feet right? Do the same with this survey and pricing in general.
Questions should allow you to pinpoint who your user is, their use cases and ask closed questions, dropdown lists, yes/nos etc.
Verify if what you come up with matches with your criteria and proceed to the pros and cons. You can also A/B test your pricing.
Easier to say than done but stay confident and keep a step back from customers opinions.
Most of all remember: this is just your first pricing strategy! It is not forged in forever, nor is it eternal. As your product grows, the value you deliver will increase and your strategy will likely evolve. But at least now you ripped the band-aid and went through your first pricing strategy!
Brieuc Sebillotte is our Sales & Customer Success lead. Working closely with customer facing teams, his role is to make sure every prospect and customers enjoy the async life. Brieuc lives in Marseille, France. He often rides his Renault Kangoo to discover the best spots on weekends and holidays in Europe! Find him @Brieuc1 on Twitter.