Deciding on a pricing strategy for a SaaS is often not as easy as it looks. The pricing strategy is defined by, and in fact, integrated into your product. It is dependent on parameters like usage and features, making it a complex process. If you are a SaaS founder, you know exactly what we’re talking about. Getting the pricing strategy for your SaaS right involves a deep understanding of your product and how it fits into the customer/ market ecosystem. Let's see what pricing strategy is the best one for your SaaS

1. How To Pick The
Best Pricing
Strategy For Your
SaaS Business

2. Most products have a simple pricing
strategy. You add the price of the raw
materials, how much you spend to produce
the good, a margin to cover your profits, and
you get the final price for your product.

3. However, for SaaS businesses, it’s impossible to apply the
same principle because you don’t have such measurable
metrics. Nor do you have a recurring product cost every time
someone signs up.

4. Instead, the pricing strategy for a SaaS platform is
integrated into your product. You need to consider
factors like usage and features.

5. So how do you get the pricing right
for your SaaS product?

6. By getting a deep
understanding of your
product and how it fits
into the customer/market
ecosystem.
Answer the following
questions:

7. 1. What is your market segment?
Who are the people you’re selling to?
Your customer persona will define your approach
towards pricing.

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2. How do you want to position yourself?
Are you going for quality or quantity?
Do you want to be a premium provider or a
low-end leader?

9. 3. What is the perceived value you’re
providing?
Customers look at the value you provide, the price you’re
asking for it, and whether they’re willing to pay that price.

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4. What are the metrics that determine your
pricing?
Will your customers pay per user? Per functionality? Per feature?

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4. What are the metrics that determine your
pricing?
What extra value do your paying customers get? If you’re also
offering a free version, you must find that sweet spot where
customers understand the value and are willing to pay more.

12. 5. What is your estimated Customer Lifetime
Value and LTV?
How long does a customer stay with you? The rule of
thumb is that your average LTV per customer should be
higher than the price you’re paying to acquire that
customer.

13. Once you answer these questions, you’ll have
a clearer picture of how you should price
your SaaS product.

14. Here are 4 popular SaaS pricing strategies you can
choose from:

15. 1. Freemium
Freemium means allowing users access to a limited or lite version of your product
for FREE, FOREVER. Your users will only pay if they want to increase their usage
beyond a certain limit or use specific features.

16. Who is Freemium for?
Products that have multiple strong features. The more interconnected these
features are, the better.
Products that create dependence. Users are more likely to pay for a product
they can’t do without. (Think Dropbox for example and how you have to pay
for more storage)

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2. Free Trial
Free Trial means you offer full access to your product for free for x amount
of days. Once the trial period ends, you start charging your customers.

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When to use Free Trial
If your product provides a strong solution for a focused/singular
problem. The more focused your solution is, the earlier your customers
will see the value in a trial and will be willing to pay.

19. 3. Freemium & Free Trial Hybrid
Companies like Spotify use this strategy. They offer a Freemium version (with ads)
to all users. Then, if a user wants to switch to premium, they can have a Free Trial of
the premium version.

20. When to use a hybrid strategy
When you want to bring lots of users to your product and then try to convert
them down the line.

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4. Free demo, but pay to use
This is the pricing strategy used by Custify. On the website, you can
request a demo of the product, but the final product is only available to
paying customers.

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When to use this strategy
When you stand 100% behind your product and are sure of the value it
provides. Be careful, though. This strategy can backfire if you can’t
promise the value you deliver.

23. There’s no right and wrong
when it comes to SaaS pricing strategies.
You just have to find out what works best for you.

24. Avoid customer churn by identifying
opportunities and risks early. Find out whether
your pricing strategy is driving your
customers away today.
Schedule your Custify demo now!