Pricing strategies for a SaaS product

Monetizing a SaaS based platform

Context

  1. B2B company — enterprise clients
  2. Data based products eg. the platform processes

Types of pricing strategies

  1. Value based pricing — Match your pricing strategy to your value proposition
  2. Competitor based pricing — Analyze your competitors’ prices
  3. Determine price sensitivity — Determine if your customers are price-sensitive and estimate the optimum price points by experimentation.
  4. Brand reputation based pricing — Determine if you want to leverage your brand to set an above-average price precedence.
  5. 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?

#1 Free

  • 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.

#2 Freemium

#3 Subscription based models

  • Subscription model based on Data volume usage and/or Number of users accessing the platform

#4 Data volume tier based pricing

# 5 Number of users based pricing

#6 Service model based pricing

#7 Contractual / licensing / white-label model

  • 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

Factors to consider while creating a pricing strategy —

  1. Breakeven point
  2. 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.
  3. In a new market, a flat-fee based model initially. Or for certain types of customers
  4. Differentiating your product is a key factor in pricing decisions
  5. Strategy to price higher initially and then when the breakeven point is reached, start experimenting with lower prices based on customer feedback
  6. Don’t display the pricing on your website directly but have a ‘request for quote’ or ‘contact us for detailed pricing’.
  7. Different pricing for different segments of customers (high, low, mid-tier)
  8. Pricing negotiation
  9. Pricing for a high end product vs a low-priced product in an overly saturated market
  10. Buyer and User persona (who are you targeting) based pricing

How do you measure the success for your pricing strategy

  • 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.

Product @Microsoft | https://www.swapnamalekar.com/

Product @Microsoft | https://www.swapnamalekar.com/