5 Elements To Help You Determine Your SaaS Pricing

Whether your software as a service (SaaS) is the most unique product on the market or head to head with dozens of competitors, pricing your SaaS is one of the biggest challenges for business heads. Not only will your SaaS pricing have to hit a certain sweet spot with consumers to persuade them to buy, it will have to set you up for your company’s growth in the future.

Here are five elements to help you determine your SaaS pricing:

1. Surveys of Customers and Prospects

A critical part of market research is a survey of leads and current customers, such as from an online study or focus group, to shape everything from pricing to content marketing campaigns. Gaining quantitative and qualitative data from these surveys is significant to developing your pricing strategy, including your chosen subscription model, in order to maximize revenue.

Ask questions like:

• How much are you willing to pay for this product or service? What is the most you will pay?
• Would you be willing to pay for this product or service if it were priced at X amount of dollars?

Depending on the responses you receive, you may have to adjust your pricing or subscription model to meet the range of what customers are willing to pay.

2. Personas and Target Audience

Additionally, information provided from customer surveys and questionnaires is usually how marketers create personas of their target audience - another way you can price your product depending on types of consumers. Personas are important in your SaaS pricing not only because they are crucial in forming your marketing strategy, but they offer clues to how much to charge based on your target customers’ goals and motivations.

Persona profiles may include:

• Job role/company title

• Gender

• Age range

• Household income

• Goals

• Challenges/pain points

• Objections

Attributes like income and job role offer clues to price your SaaS, depending on whether you are a business to consumer or business to business SaaS provider. Knowing the range for income is valuable because marketers can factor in how much disposable income individual users potentially have. And seeing which job role users have notes whether they are in charge of business decisions like how to spend the budget, allowing marketers to tailor the pricing of the product and wording of content like landing pages specifically to them.

3. Subscription Model

There are different ways to price your SaaS to entice users to sign up, including, but not limited to:

Flat rate: Charge all subscribers who sign up for your SaaS at the same price, usually by month.

Pay as you go: Charge subscribers based on how often they use the SaaS based on a particular metric, such as gigabytes of data used.

Tiered: Charge subscribers depending on how much they are willing to pay for a product or package at different prices.

There are advantages and disadvantages to each pricing strategy, but asking consumers questions related to these pricing models in a survey will help you narrow down which one to pick. Furthermore, you will naturally want to crunch the numbers and compare them to projections for revenue growth before deciding.

4. A/B Testing

To further take out the guesswork of SaaS pricing, gather data from A/B testing for various prices to record how visitors respond. Since A/B testing best practices call for changing one element of your site at a time, modify just the prices of your SaaS. Collect this information and see which prices were the most clicked on.

Once you have determined the right pricing strategy, you can move on to improve other design elements like button sizes and text color that will boost the number of clicks related to your SaaS.

As you come up with your type of pricing, make sure your landing page clearly states the features that come with that price and package, such as by using bullet points or check marks and descriptive language like “premium features.” Some users are willing to pay more for “premium” features as opposed to “basic” ones because they perceive them as having more value or they address their pain points.

5. Business and User Growth

With the cost of maintaining servers, bandwidth and other expenses intended to support your customer base, ensure your SaaS pricing changes as you capture more of your market. Some subscription models like tiered pricing are easy to move with you as you growth. However, other models like flat rate pricing may be more of an adjustment for customers. Beware of sudden price changes in flat rate pricing that could turn some consumers off, which was the case when CNN reported Netflix was raising its prices for video streaming.

Whatever your pricing, set yourself up for successful down the road than simply focusing on how much consumers will pay for your product now.