Notes on SaaS pricing

Pricing your SaaS is much more than three or four cards, priced ending in 9s. With one highlighted with a “recommended” text.

Here are the main takeaways from the Profitwell Guide on SaaS pricing.

Growth need not necessarily happen from more customers. 

Existing customers can pay more too. People always give importance to Acquisition -> Retention -> Monetisation 

But monetization has the most impact on Growth.

Two things to always keep in mind

LTV – Lifetime value per customer

CAC – Customer acquisition costs

LTV to CAC ratio should ideally be greater than 3 for the sustained growth of your product. Over time, LTV should go up. CAC should go down.

In every organization, somebody should own pricing, actively review and improve it. 

A pricing strategy has three aspects:

Positioning:

Segment your target market by buyer persona – from the individual user to enterprise. 

– Identify different price range and pain points for each persona

– Example: Pro, Startup, and Enterprise plans

Packaging

Package your product features for each customer segment. Give enough features for the user to start with and let them grow with you

Price

Find the numbers for each tier depending on how many values do they add. 

Three pricing methods:

Cost-plus pricing – Find your total cost. Add a markup on top.

Competitor based pricing – Based on what your competitor charges. It is ok to start with this. But not ideal for the long term – since you are running on someone else’s strategy. 

Value-based pricing

Based on Persona pricing fit and willingness to pay. 

Be able to define 

– Who wants what features

– Who would be willing to pay what

– Who doesn’t want a feature

Traditionally we define user personas based on characteristics (Tech-savvy, Creative, Advanced, etc). It is useless unless you can attach a number(What they are willing to pay) to each persona. 

A well-designed pricing plan can lead to better upselling and reduce churn.

Each persona becomes a card on a pricing page

The feature set beneath each card is the result of mapping the most valued features to each user persona

The numbers below are your understanding of the persona’s willingness to pay. 

Understanding these things goes a long way in aligning your company. Not just coming up with a better pricing page. 

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