What Pricing Strategy Changes Can Positively Affect SaaS Product Sales?
SaaS Perspective
What Pricing Strategy Changes Can Positively Affect SaaS Product Sales?
In the competitive world of SaaS, pricing can make or break your sales. We've gathered insights from product managers and CEOs on the pivotal pricing strategy changes they've made, resulting in sales boosts. From offering full-featured free trials to adding social proof to pricing, discover the top eleven transformative strategies that have led these experts to success.
- Offer Full-Featured Free Trials
- Introduce À La Carte Features
- Adopt Freemium Model
- Provide Money-Back Guarantee
- Implement Usage-Based Pricing
- Utilize Tiered-Pricing Model
- Segment Based on Customer Lifetime Value
- Simplify to Fixed Pricing Structure
- Bundle Support and Hosting
- Introduce No Money Up Front Model
- Add Social Proof to Pricing
Offer Full-Featured Free Trials
I always prefer to give a full-featured free trial for a limited number of days without requiring credit card details. This strategy works well if you have a more aesthetic, intuitive product.
The customer can start building their use case during the trial period, making it costly to switch. They can also perceive your product as being intuitive and easy to adopt.
It is important to give a full-featured trial so the customer can build their use case from end to end. It also helps in upselling. Not requiring credit card details reduces the friction in the process.
Advantages of this process include:
- Higher lead generation because of the low friction in the process
- More time to engage with the customer and understand their use case (as compared to a demo)
- An understanding of the projects developed by the customer, which can be used to further improve your product.
Introduce À La Carte Features
We were able to boost product sales by lowering the price of our basic subscription and allowing users to add features they want à la carte. This means people can get exactly what they want without paying extra for things they're never going to use. While our average order value has gone down, sales and profits have gone up. I believe this is because people are able to make a plan that works for them instead of leaving because of limited options.
Adopt Freemium Model
One pricing strategy change to be considered by SaaS products encompasses the freemium pricing model. Here, you offer a free subscription or access to products with limited functionality and give your customers the option to upgrade to premium plans to unlock all features. This works best because people are often susceptible to trying new solutions, and most free trials don't give people enough time to explore the solutions. This is where a freemium model truly shines, as it offers enough value to be useful but lacks advanced features.
You can also tailor free plans to offer sneak peeks into premium features, stimulating users' desire to leverage the solution to its fullest. This is a proven strategy that has helped SaaS products around the globe achieve their set goals, making the decision to consider this pricing strategy a viable approach.
Provide Money-Back Guarantee
We implemented a pricing strategy where we offered a money-back guarantee and personalized onboarding to remove risk for users. We recognized that many people were afraid of losing money and struggling with our product. By removing this fear, we made our product more accessible and secure for our users. Coming to this decision was easy because we were gathering feedback from our customers to understand what affected them. We also followed best practices in pricing by including social proof, comparison tables, and so on. Altogether, we brought our sales up with these methods.
Implement Usage-Based Pricing
One pricing strategy change for a SaaS product that could positively affect sales is usage-based pricing. A standard pricing model charges a fixed monthly or annual price in exchange for offering access to the standard features. It doesn't matter whether you leverage the solution to its fullest or don't benefit from most of the capabilities it comes with; you pay the same amount.
Usage-based pricing is different. Here, customers are charged based on their actual consumption and usage of certain features or functionalities. For example, storage space used by customers, the number of users accessing the solution, the number of API calls made, processed transactions, and so on. Based on customers' usage of the solution, the price may vary. This decision is often backed by data, as not many customers use all the functionalities. So, giving them the option to pay less or pay as per their actual consumption is fruitful for the companies.
Utilize Tiered-Pricing Model
One pricing strategy change that could positively affect sales is implementing a tiered-pricing model. A tiered-pricing model offers different pricing tiers based on the features and functionality included in each tier. This allows customers to choose a pricing plan that best fits their needs and budget. To arrive at this decision, you could conduct market research to understand your customers' needs and preferences. It's also crucial to analyze your competitors' pricing strategies. You could also gather feedback from existing customers to understand what features are most important to them and what they would be willing to pay for. By implementing a tiered-pricing model, you can increase sales by offering customers more options and flexibility, as well as better aligning your pricing with the value your product provides.
Segment Based on Customer Lifetime Value
One strategy we've experimented with for a while is the introduction of a customer lifetime value segment. Essentially, this means we segment our audience based on how long we expect them to use our product and how much they are expected to earn us over time. We then offer custom pricing to these users. For example, if someone plans to purchase our product for 20 employees, they can get a better price point on each annual license. This strategy makes sense to me because the average value of this customer is far greater than that of someone who pays month-to-month for one account.
Simplify to Fixed Pricing Structure
The pricing strategy change involved transitioning from a complex, dynamic, usage-based pricing model to a more simple and fixed pricing structure. This shift was driven by a comprehensive analysis of market trends, customer feedback, and competitor offerings.
We conducted an in-depth analysis of the cybersecurity market, focusing on evolving customer preferences and industry benchmarks. This analysis revealed a growing demand for simple and scalable pricing models, especially among enterprises seeking to have an overall view of their cybersecurity investments. The dynamic pricing created uncertainty around the expenses made for cybersecurity.
We actively solicited feedback from existing customers and prospective buyers through surveys, interviews, and user testing sessions. The feedback highlighted a desire for pricing plans that allow better cost control and scalability as their security needs evolve.
The decision to implement this pricing strategy change was supported by rigorous financial modeling and scenario analysis, ensuring that the new model would not only drive sales growth but also maintain profitability and customer satisfaction levels.
The results of this pricing strategy change were highly encouraging. We observed a significant uptick in sales inquiries and conversions, as the new pricing resonated well with both existing customers looking to scale their deployments and new prospects evaluating our solution against competitors. Moreover, the increased transparency and predictability in pricing fostered stronger trust and long-term relationships with our customers.
By staying attuned to market dynamics and customer needs, we were able to drive sustainable sales growth and maintain our position as a leading provider of cybersecurity SaaS solutions.
Bundle Support and Hosting
We decided to flat-rate our support and hosting into one package. This allowed us to transition from an hourly-rate model, which has inconsistent revenue, to a more consistent SaaS model with consistent monthly revenue. We later expanded this to our marketing teams and other teams as well.
Introduce No Money Up Front Model
One pricing strategy change that significantly boosted sales for our SaaS product was introducing a "no money up front" model alongside longer payment plan options with smaller monthly payments. This approach made our product more accessible to a broader audience by lowering the initial financial barrier to entry. As a result, more people were willing to try our service, increasing the number of potential customers entering our funnel. Additionally, offering smaller, more manageable monthly payments encouraged customers to stay with us longer, enhancing customer retention and stabilizing our recurring revenue streams.
The decision to adopt this strategy came from understanding the financial constraints and preferences of our target market. We recognized that committing to a large upfront payment could be daunting for many potential customers. By making it easier for people to start using our service without a significant initial investment, we not only expanded our customer base but also built a more predictable and reliable revenue model.
This not only helped in forecasting but also positively impacted our sales reps and account managers. With a steadier month-to-month commission stream, they became more motivated to maintain high customer satisfaction levels and keep customers engaged over time. This strategy has been crucial in strengthening our financial health and maintaining a motivated team focused on long-term customer success.
Add Social Proof to Pricing
One important part of our pricing strategy is to add social proof to our pricing pages. Adding product reviews, expert feedback, and push notifications with the latest sales plays a drastic role in building confidence and trust. Seeing proof that other customers also trust our product builds a sense of confidence and security that our product will fulfill their needs. Simple steps like these go a long way in driving trust, which impacts sales and conversion rates.
