How to define saas product price through experiments
Defining saas product price isn't an easy job, so here you can learn how to define price through experiments.
Strategically set pricing is just as important as your product or marketing strategy. Here, we'll cover how to experiment with your pricing strategy.
The challenge of pricing a SaaS product or service contains many variables, including psychological factors. Consumers, in general, tend to value higher-priced products more, as they are already used to a market logic that the higher the nominal price, the higher the quality.
In the case of B2B products, reaching a final decision on the price will become even more complex. Buyers are teams and organizations, you need to consider what your average budget is
Charge by Amounts of Business Users?
Monthly?
Discounted three, six or yearly plans?
Set or experiment with pricing?
When selling to final customers, prices are set only once and tend to rise following the loss of value of their currency. Global SaaS business has the possibility to model price according to country they are operating in.
Raising your price too much can decrease demand for your product, charge too little can create the idea that your product is substandard.
That's why experimenting with pricing is essential for you and your business to grow and reach as many buyers as possible, without slipping into the billing issue.
Pricing Types
There are three types of pricing: cost-based pricing, competitive pricing, and pricing based on customer value. Each one is different from the other and applies in certain business situations to most of the choices of products or services you sell.
Cost-based pricing and competitive pricing are not very interesting for SaaS services, especially in the B2B market, as they have many disadvantages for this market segment. This happens for several reasons:
In B2B, you need to assess the budget of organizations that buy your product. Applying only a margin above the cost of production or maintenance of the service leaves the price very low and brings distrust on the part of your target audience..
Trying to use a lower price competitively depends on how much your business can make a loss or stay in profit for a while.
Companies that provide SaaS services like Uber or Spotify have thousands of investors who pay this loss for many years, trusting that one day it will be the most profitable and leading platform in its market segment.
Not everyone has this support. The most suitable, especially for those who are still starting their company, is set your price based on how much value your service is for customers.
What are the advantages of having and keeping your changelog always up to date?
Pricing based on customer value
The idea of creating value for your product is valid, and it has to be done! However, the value is also defined by how much the buyer thinks it is worth.
This is the most appropriate pricing type for the SaaS model.
Pricing Strategy
Create needs and value
In order for them to buy from you, there has to be demand, and demand comes from two factors: need and added value. Think about it, why would any company pay for your service or product unnecessarily? And if the need exists, the buyer needs to know he has it.
If you don't have it, you create it. If it exists and the buyer doesn't know, you introduce it. Educate the consumer:
What are the benefits your service brings to the consumer's lifestyle?
What problem does it solve that generates positive emotions?
How is it more affordable and practical than competitors?
How much time and money will your solution save?
These 4 basic questions already give you a solid way to start this pricing step.
Best B2B SaaS Marketing Strategy
Compare competitors' prices
Is your company new to an existing market? Take the opportunity to see and analyze what values are offered by your competitors.
Even the newest of markets have at least one already priced competitor. Can it be an unpleasant price for customers and the order ends up being reduced? Or is the price so low that it drives consumers away?
Understand what the average market value is and think about whether you are supplying the right demand or stifling buyers.
Charm Pricing
Well-known strategy, users tend to pay on a $49 and $99 item rather than $50 and $100.
There is a perception of being more advantage. The human brain, even understanding that the difference basically “does not exist”, recognizes the smaller value as a more attractive value.
Situation and maintenance
Some bigtechs have the possibility to exist years on a loss basis to reach the desired profit in the future. If your situation allows for some kind of loss or costs to keep very low, think about how much you need to support the company for the next few months.
How many X customers paying X amount do you need to maintain your service?
Is it possible to invest, even a small amount of capital generating a loss for a while, so that at the end of the first year of the business it starts to profit?
Pay attention to metrics
With the price established in progress, follow how it is performing over the months. Changing the price, making temporary promotions can be an excellent idea to increase your cache.
Sales volume, user retention and total revenue tell you if you need a price change or other areas of your business.
Estimate how many buyers you can get based on your competitors' trajectories.
Discount Pricing
Easy step to put into practice. Discount pricing is one of the best ways to get new customers and get the user to try your product or service.
The user experience changes the situation, the customer who previously wouldn't pay full price is now considering buying. Because now he sees value in the product and knows his money won't be wasted.
Conclusion
Pricing a SaaS product or service requires attention and deep analysis on all points, as each one of them influences the whole complex final decision.
Therefore, just as it is important to continue what you offer, it is more important to constantly review the amount you charge, be it monthly, quarterly, once, if you have multiple plans or if you charge for the number of users that can use