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What to do when your SaaS pricing is WRONG!

There’s nothing worse than changing the price of your SaaS product after your audience is used to your current digits. Oh wait. Yes there is: Failure. Bankruptcy. Going home for Thanksgiving dinner and explaining to your family why you moved back into your parents’ garage.

The stakes are high, and if you didn’t guess right the first time on your pricing, you could be driving away customers or scrambling to make a profit. It’s okay, really. Finding the right price point is challenging for all of us.

Let’s look at a few of the ways you may have gotten off track from the beginning.

“What’s a price like you doing on a product like this?”

1. You undervalued your product

I can’t tell you how many times I’ve heard this one. Think of it this way: If you can offer more value than your competitors and offer a slightly lower price point – you win! That “lower” price point doesn’t need to be the rock bottom. But, if you offer much more than your competitors, then you have earned the right to charge more.

Another factor that often influences our pricing decisions is if producing the product seemed “easy” to create, it’s tempting to price low because you don’t think anything easy could possibly be worth more. Here’s a more productive (and lucrative) perspective: How much value does your product offer the end user? If it took you 5 minutes to solve someone’s biggest problem in life, then good for you! Charge them top dollar and they’ll be delighted to pay.

2. Not so much a strategy as an educated guess…

Often, we try to find competitors and base our prices off of theirs. This is not a terrible way to start, but keep in mind that you don’t know all the facts of that price point. What is their overhead? What does their business model look like? Is that price point even working for them? But more importantly, if you just copy your competitor’s pricing, you’ve lost an opportunity to differentiate yourself.

3. You’re just trying to cover your costs and have a decent profit margin

I hear you. I do. It makes a whole lot of sense to create your price using a formula of how much you spent to create it, how much it takes to produce and market it, and how much it costs to pay everyone involved (including yourself). And then you may have shareholders you’d like to impress with healthy returns on their investments. Here’s the problem: your customers don’t give a flying fig about any of that. You have to find the price your market is willing to pay, and if that doesn’t cover your costs, then you’ve got some adjustments to make.

4. You tried “Freemium” and now you want out

Freemium can work great for some, but absolutely decimate others. Here’s the problem with Freemium: it doesn’t actually give you any indication of interest in your product. All it does is show you that people like things that are free. And that’s not news. Moving from Free to paid will require very gentle handling to ensure you don’t alienate your current freeloader user base.

Back to black

Let’s talk brass tacks here friends. When you raise your prices, you’ll anger customers. But, there are crafty ways you can get them to spend more money without directly saying “Yes, I’d like you to pay more for exactly what you’re getting now.” You have to change the offering by giving them access to upgrades, add-ons, or some other form of added value that doesn’t cost much for you, but will justify a rise in price for them.

Consider:

Creating a new edition, a bundle of new features, or a package with value adds can be a graceful way to increase your prices moving forward without alienating your original users. And, of course, you should offer (but not force) your current users the chance to upgrade.

Add-ons. If you’ve played Sims 3 (EA Games) recently, you’ll notice that there are some really cool-looking new pieces of furniture available (the furniture the game comes with is looking a little old-fashioned). But each of these décor items costs Sim Points (which translates to real dollars and cents). If you want a more fun gaming experience, you’ll pay for it. And it works. Facebook games use a similar model, like the infamous FarmVille that hooks you in and then charges money if you want to make your farm look as cool as your friends’ farms. Why not take a page from the game producer’s playbook?

Raising prices for new customers. Your old customers will be happy, and your new customers won’t know the difference.


perspective2Want to read more on SaaS Pricing, and get some inspiration from some of the most successful SaaS businesses? Check out this in-depth analysis of the top SaaS pricing pages.


3 values to keep in mind

  1. Keep your current customers happy. Your first thought might be to raise prices on them, but this almost never works out.
  2. Price to keep conversion rates high. This will require going back and figuring out your pricing strategy from scratch. Tip: your pricing strategy and your marketing strategy should be hammered out together. They’re more connected than most people think.
  3. Introduce your raised rates as an opportunity to add value – and you’ll sell more seats!

Don’t try to do everything at once

Once you’ve figured out that you’ve made a mistake, it’s natural to want to fix it fast. But these things take time – weeks or months. You’ll want to allow enough time to let your customers know what’s coming and reassure them that they’ll still be happy. You’ll also want to build up anticipation for your new offer/bundle/add-ons with marketing campaigns.

Changing your price structure should be a positive move for all involved. So take the time to train your customer service and customer success teams on how to talk to new and old customers about the changes, and help everyone become not only comfortable with, but excited about what’s to come.

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