- SaaS product (Software as a Service)
- B2B company — enterprise clients
- Data based products eg. the platform processes
Types of pricing strategies
- Cost based pricing — Understand your cost structure and profitability goals
- Value based pricing — Match your pricing strategy to your value proposition
- Competitor based pricing — Analyze your competitors’ prices
- Determine price sensitivity — Determine if your customers are price-sensitive and estimate the optimum price points by experimentation.
- Brand reputation based pricing — Determine if you want to leverage your brand to set an above-average price precedence.
- Premium Pricing because of new trends (eg. AI, blockchain) — New trends can be a critical differentiator in product pricing strategy
How would you structure your pricing?
- Receive invaluable feedback from early adopters / beta testers, collect user data through appropriate consents, encourage feature usage to receive labelled data for machine learning analysis.
- This strategy of giving your product for free might also be useful when you’re going for the network effect or when you rely on an ads-based revenue model.
- New product — When the product is a brand new product, you might want to build a user-base and traction first, before you can start charging users.
- You can provide free product usage up to a certain limit and then you can charge a subscription fee for premium or additional services.
#3 Subscription based models
- Monthly/Yearly subscription based model
- Subscription model based on Data volume usage and/or Number of users accessing the platform
#4 Data volume tier based pricing
- The first tier can be a set data volume at a given price-point, and the subsequent tiers can be then priced on an incremental basis.
# 5 Number of users based pricing
- A pricing strategy based on the number of users from a given enterprise client will be using/accessing their account.
#6 Service model based pricing
- Based on the service you provide them eg. you might do all the analysis for them on your platform and provide them the final reports.
#7 Contractual / licensing / white-label model
- Based on a contract-based pricing for <x> number of years
- You might create a white-labelled instance of your product for this enterprise client
#8 Combination of Service (support, analysis, resources, training) and Subscription /contract based model
- You can also have a combination of a service based and a subscription based model
Factors to consider while creating a pricing strategy —
- Profit margins
- Breakeven point
- Pricing depending the stage of growth the product/company is at i.e. you might want to have a freemium model or provide the platform for free usage if you’re an early stage company where you’re still trying to find the product market fit and want to find user traction. Whereas, you might want to refine your pricing strategy as your product grows and matures.
- In a new market, a flat-fee based model initially. Or for certain types of customers
- Differentiating your product is a key factor in pricing decisions
- Strategy to price higher initially and then when the breakeven point is reached, start experimenting with lower prices based on customer feedback
- Don’t display the pricing on your website directly but have a ‘request for quote’ or ‘contact us for detailed pricing’.
- Different pricing for different segments of customers (high, low, mid-tier)
- Pricing negotiation
- Pricing for a high end product vs a low-priced product in an overly saturated market
- Buyer and User persona (who are you targeting) based pricing
How do you measure the success for your pricing strategy
- Talk and receive feedback from a set of early adopters (conversations, surveys etc.) eg. Atlassian conducted a survey where they asked users on how do they perceive the value they’re getting out of the product w.r.t the price they’re paying for it.
- Customer retention over time (operating margins — profits or revenues)
- Are we serving more customers than before ? (Growth)
- Were we making more money than we were before the pricing changes?(Profits)
- Experiment with pricing — A/B test your pricing strategy with different segments or groups of customers and see which is working more in what industry, domain, with what type of customers.