Following your product, the pricing plan is the basis of your company. It’s the cornerstone of your business model. However, companies often spend just a couple of hours per year on their pricing plans, if at all. But just like your product, you need to evaluate and refine your pricing in order to remain competitive. In this article, we offer you 5 tips for your SaaS pricing plan.
Give your pricing the attention it deserves. Review (and update) your pricing 1 – 2 times a year. But just scheduling it is not enough. Make it a continuous attention point, with someone in charge. Collect input from your colleagues, key customers, or competitors and all other sources you can think of.
Continuing on the first tip; make sure your pricing is based on facts. Your gut feeling might push you in the right direction. But always make sure this is supported by the facts. So, make sure your processes give you insights. Think about product (group) performances, life cycle management, customer behavior, etc. This information is key in defining your product packages and their pricing.
Most SaaS companies still work with an uplift or cost price+ model. This is the cost price uplifted with a percentage. But how about approaching your pricing from a ROI point of view? Does your product save a lot of time? Or increase your customers’ revenue? Determining your prices based on this principle turns it into a SaaS pricing plan based on your customer’s needs.
With this approach you will still cover your costs. And if not, you have to question your business model to begin with.
Get rid of exceptions in your pricing, as much as possible. They are not scalable and a lot of companies get stuck on them. So hold on to the KISS approach: Keep It Simple Stupid. Basically, this should follow intuitively from the tips above.
An exception is often a quick fix with consequences for the long term. And if you’re not careful, in no time you’ll have more exceptions than customers. Something you definitely do not want. By evolving your pricing based on customer needs, you will get closer to the ideal SaaS pricing plan for your customers. And you no longer need exceptions.
Also, if your pricing is well thought out, you know when customers set unjust demands. So, make sure the key employees in sales and marketing know the story behind the pricing. They will be able to sell your product without pricing exceptions. Based on a strong story that leaves no room for questions.
We do know that in practice this tip is not easily feasible. So if you do end up with exceptions, at least make sure you have a good and flexible billing engine. This way you can still automate the exceptions. And you are not depended on (error-sensitive!) manual invoice adjustments.
As you can see a good pricing plan is a living thing. This will have its effect on your processes and the demands for your IT structure. Just make sure you have the flexibility to change pricing plans easily. Too often the business gets held back by hard coded settings or Band-Aid solutions.
Billing tools like CloudBilling give you the flexibility to manage your pricing plan. CloudBilling automates the preparation and sending of your invoices. Moreover, we give you valuable insights in product performance and customer behavior. This way you have all the tools you need to make strategic decisions for your business. And create the perfect pricing plan.