Software as a service pricing examples

Why would you charge them the same amount? I love the idea of selling through accountants as a channel strategy. This is when a SaaS company sells to a party with a relationship with a pool of customers in return for that party selling their product through those relationships. Typically, this results in the channel taking a cut of the price the end-user pays.

You do not explicitly make the case for it here, which is that it allows accountants to benefit from the upside of selling a high-margin software product in addition to their lower-margin services work.

This is pretty attractive as an upsell for them, and for SMB-focused accountants, which do a supermajority of their billable hours for the year in tax season, it gives them both things to bill for in Q2 through Q4 and also an ongoing reason to be in touch with their clients. Services businesses generally benefit from improvements in their offerings which increase the cadence at which they are in front of their clients.

It leads to happier clients, more opportunities for follow-on work, and more opportunities to collect referrals. Understanding allows you to make relatively small changes to your offering which create outsized value for them. Often the changes are, by the standards of a software company which can quickly write code, almost trivial to deliver; for example, co-branded or white-labeled PDF reports would likely be very compelling for accountancies using your software to give their customers the impression of bespoke, authoritative guidance without costing professional time on high-quality one-off visual design.

Vempathy helps use AI to analyze user interviews and usability tests for their emotional content. You should not offer a 14 day free trial of your enterprise offering; you can build the demo into the sales process. I read pricing pages for a living, which is not the case of most users of pricing pages.

You might have wording that people connect to better than that. How would you communicate that this is the very valuable AI-assisted emotional analysis software used by the most sophisticated UX designers and researchers?

I would demote the risk reducers to their proper status as minor details. You can clarify it later on the page for people who are worried they have to pay per seat. Charging based on AI-analyzed recordings as the primary axis makes sense. See if anyone hits it. Will it cause someone to choose to buy the software? Probably not. Instead, continue the sales message: how specifically does this reduce the amount of human work to pull stunning insights from user recordings?

Put that on the page; supplement with details about features where appropriate. It is generally easier to sell into SMB verticals a particular industry or customer archetype than across all SMBs, because it is easier to laser-focus on their specific needs, understand the factors which impact their business, and speak the language of your users. Many SaaS entrepreneurs describe their products as less mature than the incumbents and therefore they price far under the incumbents.

This is almost always a mistake. Your customers are not buying KitchenWhiz because it is bad but attractively priced. I would encourage you to ask them what a single remodeling job typically costs; I suspect that they quite literally discard more materials as waste than they spend on KitchenWhiz at any of your contemplated price points.

I would probably sell 3 packages of KitchenWhiz, with arbitrary contents in them that I leave to your best judgment. These price points are my default price points for a B2B SaaS sold on the low-touch model; they work across a range of firms and industries.

Note that this proposed pricing is 10X to 50X the maximum pricing contemplated by the existing pricing. This demonstrates the power of doubling down on the B2B market when you have a product which could theoretically be used by a consumer or a business.

That is a hard market expectation to go against. I would generally encourage software sold on the low-touch model to offer refunds to customers who are dissatisfied. I would maximize for learning right now: offer a call to literally everyone who starts using the software. You should use these calls for customer development and for sales, not training—if they have questions, note them for later and produce screencasts or similar that you can show to everyone.

If you do not project manage them in the adoption of your software and process, you can reasonably expect for them to not make effective use of your trial during the time limit, mooting any benefit of it being available. This is a very common failure case for free software trials; they carry a cost which, despite not being charged to a credit card, is much more material than software people give it credit for.

We like them too much and we should be more considered about whether offering them is in the interests of our businesses or our customers. Unfortunately, the vast majority of SaaS c ompanies usually avoid this step for three main reasons:.

By asking the right questions of your customers and adding the right data to your buyer personas, you can find out more about where your company is succeeding and where it is failing than you ever would looking at an analytics dashboard.

But all of this is data that makes your company better and moves you up and to the right. This is the fun and also the scary part.

Running tests and gathering data to validate or invalidate your hypotheses are vital for identifying the best long-term pricing strategy that you can. By testing small changes often, you can quickly get reliable data on each of your individual hypothesis.

This is where you take the results from your experimentation and embed them into your pricing. This is the entire point of your pricing process, though also the part that companies rarely follow up on. Going live with major pricing changes is terrifying for any SaaS company. Will customers recoil at the new prices? Will acquisition drop off a cliff? With quantified buyer personas, though, you can make these changes confidently, safe in the knowledge that the value you provide aligns with what the customers want and what they are willing to pay.

SaaS pricing strategies run the gamut from picking numbers out of thin air at one end of the spectrum all the way to fully optimized, value-driven pricing plans at the other. Think of pricing like a game of darts: you can throw at random, or you can aim for specific points on the board, but without data to tell you where to aim, you might as well be shooting in the dark.

Each of the pricing strategies below has its place for different business types, but in SaaS, the only viable option is value-based pricing. So why is cost-plus pricing popular? Once again, it all comes back to simplicity. Cost-plus pricing is nowhere near the best solution for maximizing SaaS revenue since the costs for delivering a single account of a SaaS product can be very low. Your pricing should be based on the value that your customers will get out of using your product, not how much you paid your developers.

Instead of using your business costs as a benchmark for your pricing, competitor-based pricing involves setting prices based on what your competitors are already charging. My advice? To put it bluntly, value-based pricing is the only pricing strategy you should choose for your SaaS company. Instead of looking inwardly at your own company or laterally towards your competitors, with value-based pricing, you look outward. You look for pricing information from the people who are going to make a decision depending on your price: your customers.

Value-based pricing truly gives customers what they need in order to trust your product and brand:. In this article, we will focus on the 7 most used and successful!

SaaS Pricing Models to help software vendors to define the best pricing for their product. Many software vendors still believe that their Pricing Strategy begins and ends with the pricing page they developed on the basis of what they think is the value of their service. Defining a price is about finding the balance between the ability to solve a problem and the compensation for that help. The pricing model will determine the market position of a product, the ideal target and the level of service customers will require.

In this article , Lincoln Murphy suggests that software vendors should ask themselves at least two kinds of questions when defining their pricing model:. Typical questions include: who is the ideal customer? Which value are ideal customers getting from the service?

What will the ROI be? What metric s will the price will be based on? What is the buying process? What level of service does the customer expect? What do competitors do?

Not answering these questions means choosing random prices: what are the chances that they will work? As mentioned above, the flexibility of the SaaS business model means that there is an extreme flexibility in the pricing model. Anyway, there are 7 main pricing models for SaaS businesses. The Usage based pricing model relates the cost of the product to the usage: the more you use the service, the more you pay. This model typically works with data services, cloud storage services and recurring billing services.

It reduces barriers to use and correlates price and usage. However, it makes harder to predict revenues. Stripe is a good example of this model:. User Based Pricing is one of the most popular pricing models for SaaS businesses. Their "Free" package allows small companies to talk to their first contacts for free: when demand for the service increases beyond that point most likely correlating with company and revenue growth , it becomes necessary to upgrade to their paid packages.

Your pricing model is at the heart of your SaaS business: it's the foundation that allows you to build out repeatable sales processes and generate recurring revenue. But, within the framework of your pricing model, there are all-manner of different goals you'll need to hit on the way to your over-arching objective of "growth". That's where SaaS pricing strategies come into play.

Each of these strategies is suited to a different objective: whether that's rapidly expanding into a new market, or attracting particularly high-value customers. Penetration pricing is the strategy of reducing prices to rapidly gain adoption in a target market, and secure the "first mover" advantage: claiming market share before your competitors can beat you to the punch. In order to do so, companies often lower their prices to unsustainably low levels in the short- to medium-term, but aim to compensate in the longer-term, when they'll be able to upsell and cross-sell their large customer base onto a more profitable package.

This "land and expand" strategy has been used to great effect by companies like Slack and New Relic, using penetration pricing to grab the lion's share of the market before their competitors. Captive pricing also known as captive product pricing is the practice of offering a "core" product for a lower-than-expected price, but charging extra for additional products that are required to get the most from the core product.

One classic example is the printer: most modern printers are sold for extremely low prices, but as soon as your ink runs out, you're forced into shelling-out for expensive, own-brand ink cartridges the captive product , which are usually far more expensive than the printer itself.

For equivalent examples in software, imagine offering graphic design software at a nominal price, but requiring users to download stock imagery from the company's own stock photo service. Or for a real-world example, the case of Adobe, offering older versions of their software for free, but gradually eliminating backwards-compatibility, forcing users to upgrade to an expensive paid version if they want to collaborate.

Skimming pricing also known as promotional pricing is the strategy of setting a high initial price for a new product, before slowly lowering the price over time. Skimming pricing is sometimes referred to as "riding down the demand curve": as the product's price is lowered over time, it appeals to different sub-sections of the marketplace, and customers with different price sensitivities.

The best examples of skimming pricing can be found in tech: Apple products are famous for heavy discounting just a few months after launch, and in video gaming, prices steadily decline from release.

In SaaS, this strategy works because of the Technology Adoption Lifecycle : early adopters gain utility from the bragging rights of first access to new technology, and they'll often pay more for access to new products. As the product matures and prices are reduced, it begins to appeal to the later market. Prestige pricing also referred to as premium pricing is the strategy of maintaining high prices, in order to convey a sense of quality, exclusivity or luxury.

In doing so, companies can maintain a relatively small customer base of high-value customers; customers that would likely abandon the brand if prices were to decrease. There are a few ways to leverage prestige pricing in SaaS. If you're a well-known brand, or your product is used by high profile companies, you may be able to differentiate yourself by reputation, allowing you to charge a higher price in the process.

The first thing you have to understand is the selling price is a function of your ability to sell and nothing else. Free trials are a staple of SaaS pricing strategies, and with good reason: by offering the product for free, for a limited time, you provide a quick foot-in-the-door.

Customers can start using your product without any financial expense, and as long as they're able to benefit from the product during the trial, there's a strong incentive to upgrade when the trial ends. Free trials are typically time-limited the most common length is 30 days , but it's also possible to restrict it by usage with the trial expiring after 5 invoices, 1 video file, etc. Crucially, half of all free trial signups occur after the trial has ended , so it's important to have a well-defined follow-up sequence.

Cost plus pricing also referred to as cost based pricing serves as a starting point for many SaaS companies. Cost plus pricing doesn't take into account competitor pricing, the perceived value of the product, the price sensitivity of their customers, or any of the other inputs that should influence pricing. But pricing discussions have to start somewhere, often with limited information - and in these instances, cost plus pricing can be a useful framework for kick-starting your thought process.

Cost plus pricing is very company-centric: it's an exercise in choosing the profit the company wants, with little regard for the customer that supplies that profit.

Value based pricing works in stark contrast, using the perceived value of the product as the benchmark for price setting, instead of costs, competitors or target margins. At its heart, value based pricing encourages SaaS companies to view their pricing strategy as a product of the value they provide. Instead of fixating on cost-cutting to improve profit, companies focus on improving the service and value they provide, using extensive research to understand how customers actually value a product.

Value based pricing isn't a quick-win - it's a long-term change to how prices are fundamentally viewed - but if you're looking for a good starting point to transition to value based pricing, check out the 10x Rule. In simple terms, it's the idea that the value your product provides should be ten times its price, providing a simple heuristic for framing your pricing decisions.

Even after you've decided on your SaaS startup's pricing model, and settled on your strategy, there's still room to dramatically improve your price. That's where psychological pricing strategies come in.

Think of these like the icing on the cake: smaller experiments that can be used to fine-tune and optimise your pricing. There's a degree of stigma associated with pricing psychology, perhaps rightly so: I've seen companies use the power of psychology to exploit and mislead customers. Thankfully, the strategies deployed here aren't designed to coerce unwitting customers into buying more than they want: we're simply working alongside the brain's innate processes to reduce friction, and make the sales process as effective and efficient as possible.

Price is a relative concept, and when we assess the price of something, we use a reference point to work out its value. If we were buying a car, we'd compare its price to the price of other cars on the lot, or on eBay; an item of jewellery, and we'd turn to similar pieces in the jewellery shop next door. Price anchoring is a way to leverage this heuristic to increase your customer's willingness to spend.

It's suggested that this psychological pricing strategy works because of the "Left Digit Effect". Our brains process numbers extremely quickly, making snap judgments about prices and values without any conscious awareness.

Odd-even pricing works on a similar principle to charm pricing: prices are reduced by a few dollars to bring them just under the nearest "rounded" price point. Zapier take this approach to extremes, with their seemingly random pricing strategy:. Like odd pricing, even pricing applies the same principle with even numbers, as demonstrated by virtual assistant SaaS Zirtual :. Typically, the bundle price would offer each component product for less than its individual price assuming it's even possible to buy the products individually , but because the bundle encourages the sale of products that might not otherwise be bought, can still represent an increase in overall profit.

Product bundle pricing is great for simplifying complex sales process, especially when a multitude of apps and add-ons are available. It's also great for drawing focus away from the individual product prices, and encouraging outcome-oriented thinking: customers are encouraged to think about the value of a "productivity suite" or "design studio", instead of individual SaaS products. For an example of product bundle pricing, look no further than Microsoft's Office suite.

Office products are now available exclusive through a monthly subscription service, and there's no way to pick-and-choose which products you want to pay for, and which you don't. I use Word, Excel and Powerpoint on a daily basis, and would gladly pay for each application - but I wouldn't touch Access, Outlook or Publisher with a barge pole. But because the products are bundled together, I pay a flat monthly fee, and I have all a whole host of Office products installed on my desktop.

High-low pricing is most commonly used in the retail industry, but it does have some application in SaaS. In essence, high-low pricing is the act of alternating between a "high" price and a "low" price: a product is marketed at a premium price, before eventually being reduced to a lower, discounted price. High-low pricing uses price anchoring to encourage sales: the product's value is associated with the original "premium" price, so when a discount is applied, customers view the reduced price as a particularly great deal.