Lots of software-as-a-service (SaaS) companies will ponder for weeks, sweating over pricing details: should we charge $25, $27, or $32 per month, which features should be included in the premium package, but not the basic package, or should the lower tier extend to 100 users or 250 users.
From what I’ve seen though, getting these details exactly right isn’t what matters most for SaaS companies. There are other, much more important decisions about pricing that make a bigger difference in whether a company succeeds or fails.
Connect the price to the benefit
Ensure that the price of the solution is directly related to the benefit it delivers. Or to put it another way, how much does it cost the prospective customer to not buy and use the product?
If the product can eliminate the risk of some catastrophe to the customer’s business, then it’s worth a lot and they’re likely to be willing to pay a lot for it.
On the other hand, if your product solves an insignificant problem, one that the customer barely recognizes or can afford to ignore, they’re not likely to pay much for it. In fact, it’s going to be hard to sell that kind of product at all. (See the short video, “Only urgent problems require solutions.”)
Get the units right
Get the right “cost per….” SaaS vendors have shown lots of ingenuity in selecting the units they use in pricing their product. “Cost per user” is used commonly for CRM applications, “cost per employee” for HR applications,” and “cost per amount of storage” is used for storage applications. Email marketing products assign price by the size of the mailing list, and invoice management solutions price by the number of invoices processed.
The goal here is to connect the price directly to the value that the customer derives. The more value they get, the more they’re willing to pay.
Don’t get too complicated
Keep the pricing simple. Remember you’re selling to people that are busy, and evaluating your SaaS solution is only one item on a long list of tasks they’re responsible for. The more complicated you make the pricing, the more difficult you’re making it for people to buy your product. It could slow down the process or, in the worst case, cause a prospect to walk away from it altogether.
The pricing policy should earn trust
Don’t get sneaky. It’s okay to include one-time fees for implementation or on-site training, for example, but make it clear up front. Be transparent. Customers are usually willing to pay for something valuable, but they don’t want to be surprised by something hiding in the fine-print or snuck into the first invoice.
The way you price your product speaks to the way you run your business and how you treat your customers. Remember that when you’re selling a SaaS solution, you’re actually selling a promise, not a product. Transparent pricing is an essential part of earning trust and winning and keeping customers.