Lessons Learned: Price and Value
This lessons learned series is part of our live SaaS resource list we're building while launching a new product.
When it comes to pricing we've got it wrong, experimented, figured something out, changed it again and eventually stuck to something.
What one lesson about pricing was the most important and why?
When we couldn't figure it out we guessed at the total value it might provide someone and then charged a percentage of that.
Underlying it all the product provides a certain amount of value. We're in tech and we're not dealing with tiny margins. The impact of our tech can be enormous and well worth the price. We figured we'd charge at least 1/10th of that value. So if we think we're saving someone $300 per month or making them $300 per month then we should charge them $30. The saving could be a lot more but this is a minimum starting point to anchor on.
What dumb mistakes did we make in pricing at the start of our SaaS journey?
We tried unlimited agent pricing. Dumbest thing ever. It means a company with 1,000 agents would have been paying us $50 per month and yet that company would not have signed up for Upscope because if we were the managers at that company we would not trust Upscope to survive or provide a good service because the pricing was so low.
What's the one thing we did that made a big difference?
We experimented with different pricing models fast enough to make mistakes to learn from. At least we didn't suicidally stick to one dumb thing for too long. Eventually we came to the value pricing model which made sense.
We also showed flexibility in pricing for some larger deals which matters a lot in closing those deals.
What would we advise someone starting from scratch?
If you don't have any way to position it against a competitor's pricing and features then make it 1/10th of your estimated value provided. Don't spend too much time on questioning it after than until you've learned a lot more about how you're positioned in the market.
The amount of time and energy we wasted on 'some' pricing discussions without progress was just dumb. Better to go for it and find out.
If we had a magic wand how would we use it to improve our pricing proposals for enterprise?
We'd wave the wand and instantly know their budgets, key concerns over pricing and how much value they expect from the product.
The purpose is not to charge them a maximum amount but to understand what's stopping them from buying.
For example, they might not know the full value they'll get so paying up front for a year is putting them off and they're concerned they have to buy 300 seats but only 100 might end up using the product full time.
What would we do if we had this information? We'd offer them a 30 day proof of concept followed by 6 monthly pricing and a grace period of a week for new team members using the product as it takes a week for them to figure out if they really need it for their particular job.
We want to be sure that our initial proposal alleviates their key concerns over value and pricing.
How will we use our experience for our new product?
We have no idea how to price it yet because we're not even fully sure how the product will be adopted and how it'll expand. If it's spreading fast then the freemium model is essential.
Minimally we will study how similar products were priced and grew. We know we can price it low at first and then raise it depending on the value it provides.
Our focus will not be on pricing though. That does not lead, that follows. We'll focus on quality of the product and distribution. If the pricing slows the distribution then we'll sacrifice the pricing. However, we also need money to further develop the product so we need a source of capital. It could be that we raise funds rather than continue to bootstrap or we charge for premium features. Overall we'll analyse and move as we learn more.
How 25 companies priced their product
There's a wide range of companies and pricing models mentioned in this list including lessons learned along the way to achieving that pricing.
See how 25 companies priced their SaaS
Patrick Campbell of Profitwell breakdown of pricing your SaaS
Patrick Campbell is one of the go to guys for SaaS advice and he runs a SaaS business that does SaaS analytics so probably has a great deal of information to base his advice on.
See his breakdown of how to price your SaaS here
Pardeep overlooks growth at Upscope and loves writing about SaaS companies, customer success and customer experience.