Product pricing is considered to be the most important part of every business. Whether you are selling t-shirts or a SaaS service, the pricing of your product is something that determines the success or failure of your company.
But, still, some of the business owners treat pricing as an afterthought.
You can consider a business that takes a year to develop a new product and then, decides the price of that product one morning. In that case, the particular business can experience a huge amount of loss. So, product pricing should be taken very seriously by every business.
If you want to avoid the negative consequences that occurred due to the wrong setting of price, then you should spend a good amount of time thinking about your pricing.
To ease out your work, you can follow the below-mentioned simple steps which help to come up with prices that work for you. All of these steps also help you to decide the price of a SaaS product in a new B2B market.
Pricing Strategies Of A SaaS Product
SaaS companies consider making use of different methods to price their products. One of the common methods used by the companies involves Value-Based Pricing.
This pricing strategy enables you to price your product at a fraction of the overall quantifiable value which you can focus on delivering to your clients.
Here, are given the step-by-step process which you can consider following for creating pricing plans with the help of this Value-Based Pricing method.
Step 1: Segmenting Your Customers
The first and the most important step is to segment your customers. All that you need is to segment them into small logical segments. The main objective of this is to properly understand the requirements of every segment.
Also, you should gain a proper understanding of the value they derive from your products. Then, you will be able to come up with effective pricing plans which suit each of the segments.
In general, the SaaS companies possess 3 to 5 segments and so, they focus on building their pricing plans for them.
It is also possible to segment your customers based on some parameters such as industry, size of company/team, function/role, etc.
For example, if you consider the size of a company as a parameter for segmenting your customers, then you need to create pricing plans for the listed segments:
- Enterprises: 500+ employees
- SME: 100 – 500 employees
- Startups: 2 – 100 employees
- Freelancers: 1 employee
Step 2: Having A Clear Idea About The Value You Deliver To Every Segment
The value your product delivers to every segment will be completely different.
If you are having Enterprises and Freelancers in your list of segments, then the value which a Freelancer would derive from your product will be different from the value which an Enterprise would specifically draw from your product.
To properly understand this thing, you should focus on investing in customer development. You should ask your customers relevant questions related to:
- What are the steps they take to solve the problem currently?
- How much time do they take to solve the issue?
- What are the infrastructure investments they have made for building the solution?
So, you will be able to quantify the value (money earned, money saved or time saved) with the help of this particular exercise. As a result, each segment can derive from your product.
These differences should be effectively reflected in your pricing. The pricing plans for every segment will be different in terms of the actual price and set product feature which is provided for every segment.
Step 3: Pricing The Product For Every Segment
If you consider the 10X rule, the ideal price of the product should be set at X. This means that ROI for the customer is 10X. So, you should focus on pricing your plans depending on how much they can save from your product.
Like, if the freelancers can save $100/month from your particular product, then the Freelancer plan could be priced at $10/month. On the other hand, your Enterprise plan should be priced at $1K/month, in case the enterprises can make about $10K/month from your product.
But, one thing that you should note is that the 10X rule is only a guideline and so, you should decide whether you are overcharging or undercharging for your specific product.
It does not make any sense to fix the price of the product at $500/month, in case the value delivered by the particular product is $1K/month. On the other hand, if the delivered value is $1 million/month, then you would end up undercharging if you fix the product price at $500/month.
So, this 10X rule does not necessarily have to be 10X. You could fix this value to be 12X, 10X, 8X, etc. depending on your needs. For example, the product pricing should specifically range between $80 – $120, in case, the value delivered is considered to be $1K/month.
Final Words
Therefore, these are some of the most important pricing strategies of a SaaS product that you should focus on following. All of the above-discussed steps will help to come up with the best pricing which will ultimately lead to the success of your business.
Another important thing is to consider your long-term objectives and goals while pricing your product.
A lot of businesses commonly make the mistake of not taking into account all the overhead costs in their pricing strategy. It ultimately results in the slow death of the company.
If you want your business to succeed in the extremely competitive market, then it is very important to properly price your product. This is possible by understanding the best profit margin.
Other than that, you can use different strategies such as seasonal pricing for effectively experimenting on several prices.
Also, you can focus on determining the pricing strategies which are most commonly used in your industry. All of these particular strategies will help you to decide the best prices. Contact us now at ZealousWeb for more details on website development and design services.
