SaaS Pricing Strategy: The 10x Rule

First thing to clearly understand when developing your SaaS pricing strategy; pricing is a function of Marketing.

If you think creating your SaaS pricing strategy is a function of Finance, Accounting, Operations, or even Sales… you’re doing it wrong.

That means anyone who comes up with a price for their app (or for your app) as the result of a spreadsheet function is doing it wrong.

The spreadsheet shouldn’t tell you what your price is… your price should be something you put into the spreadsheet that will determine revenue and allow you to calculate future growth, profitability, etc.

Price should be an input, not a result, on a spreadsheet.

Second thing to clearly understand:

No one knows what the best price for your SaaS offering should be.

This is why most ‘Pricing experts‘ like to deal with companies that sell commodity products – including traditional software – in markets driven (downward) by pricing.

Value Pricing a SaaS offering, on the other hand, is a completely different beast where you’re often dealing with a completely new and/or heavily differentiated value proposition and very often – with entirely new categories of service offerings!

All we can do is get it AS RIGHT AS POSSIBLE out of the gate and understand that pricing is not a “set it and forget it” function, but – just as your overall Marketing Strategy is ever-evolving and changing with market forces, market feedback, etc.

Now there are techniques, tricks, voodoo dances, and smoke-n-mirror performances one can employ while coming up with your initial price that can help you get closer to that ‘getting it as right as possible.’

SaaS Pricing Strategy: Consider the Customer First

But let me be very clear; any techniques/strategies that don’t take the CUSTOMER into consideration as the main input when developing a price is not going to get you close to where you need to be.

There are so many ways to mess up pricing that the chances of you getting it close to right are not in your favor, even if you employ many of the tricks of the trade.

Fortunately, I don’t employ many of the tricks of the trade… I think ‘the trade’ gets most things wrong so why would I employ their tricks?

But I want to help you get your pricing as right as possible so you don’t leave money on the table… or not too much, at first.

Lead with Value for a profitable SaaS Pricing Strategy

Look, it’s easy to sell cheap stuff… higher prices actually require you to know your customer better!

Remember that customers generally care ONLY about the outcome and how it affects them (at least when they are searching for a solution).

This means – at first – don’t emphasize features – emphasize OUTCOMES – RESULTS – SUCCESS.

So the definition of Value Pricing is: Applying a price to a service that is congruent with the value derived from the services’s use rather than the underlying cost to create and deliver the SaaS, market prices, specific margins, etc.

Which makes Value Pricing the most effective method of pricing for SaaS and Web Apps… something like cost+margin just doesn’t make sense.

The key to Value Pricing is knowing the, well, value of your service as perceived by your target market AND/OR market segments (not all are alike).

Value is the “What’s In it For Them?” – WIIFT – of your SaaS.

It is the benefit of the benefit of the features… or the emotional benefit

So a very good way to determine your price point – because it requires you to really understand the customer – is to follow the 10x Rule.

We charge this much because our customers get at least 10x that much value.

If I sell something for $100, I want to provide at least $1,000 in value to them… at least.

Even better is if the “value” isn’t something that is ‘ROI-able,’ but rather something intangible that they cannot directly quantify.

You do this by understanding your customer’s goals, opportunities, problems, etc.

You do this by offering Price Anchors that are not competitive services, but what it would take to replicate this in-house, with low-efficiency, high-cost human beings, what you (or the industry) has paid to create this solution, or the fear of not meeting some level of compliance and the costs associated with that.

And you can remind them – maybe not in so many words – that you must charge a premium price so you have a large enough margin to provide an extraordinary value & experience!

But don’t just remind THEM of that… remember that yourself… charge a premium so you can offer truly PREMIUM service!

Using this method to determine a price will become clear quickly, and you’ll see that delivering a 10x ROI – even if simply perceived by the customer – is rather easy.

In fact, once you start doing this, you’ll see how it can be true that if you charge too little, a 10x ROI isn’t that exciting and how a low price could actually reduce your credibility in the market.

Let’s Grow Your SaaS Company

For immediate consultation and advice on effective growth strategies and tactics for your SaaS company, schedule at least a 15-minute meeting with me via Clarity. If you feel a more involved engagement is required for me to help you, email me with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars.

Lincoln

Display a Phone Number to Increase Conversions?

Does displaying a Phone Number on your website Increase Conversions?

I’ve been talking about Trust Factors and their effects for years and as I’ve done more work in this area others have taken an interest, too.

For instance, LessAccounting got a 2% lift in paid conversions they were able to correlated directly to adding a phone number to their marketing pages.

10 little characters added to their site bumped conversions 2%.

But what about Flowr’s non-result as documented in this KISSMetrics post?

Well, it’s simple… if you have a Free Trial that isn’t designed to convert prospects to customers, simply adding a phone number will probably not help increase conversions directly.

Just to be sure, I signed-up for Flowr, went through the whole process, and it is missing some key elements that are present in high-converting Free Trials.

So, if you have a product that is bad, not wanted, or otherwise positioned or promoted wrong, adding a phone number will probably not help increase conversions directly.

But… if everything else is good, a phone number – certainly in B2B, and especially where the SaaS or Web App vendor will be a major part of the customer’s business, will require integration, etc. – can really help.

In fact, this question of whether to add a phone number to your marketing website came up – interestingly – with a telco API company.

Being primarily an API company and selling to software developers means that most/all of their customers will heavily integrate with them and that means having a prominent phone number will certainly help.

That said, where I’ve seen a phone numbers help the most isn’t by increasing conversions directly, but by the conversations that occur when people call you.

I know for many companies, especially small ones or early-stage startups, the last thing you want to do is talk to a bunch of potential customers,… I’m sorry, but there’s your first problem.

Anyway, some of the people who call will be ready to buy or almost ready and talking to you – a real person – might just close the deal. Score.

But… most of the people that call might not even be interested (yet) in becoming a customer, but what they’ll tell you is what’s not clear on your site.

They’ll ask questions that you didn’t even think about, they’ll tell you they thought your product did x, y or z, and it will blow you away.

Those will be super-valuable conversations from which you’ll learn what to fix on your market site that WILL lift your conversion rate over time.

At least right now, and especially in B2B, some of your potential-customers will be more willing to pick up the phone and call you than to email (because you might spam them) or do the on-site chat thing.

So give them the opportunity to do that by putting a phone number on your site.

Here’s a quick hack, especially if you aren’t in the U.S. but want a U.S. number: just get a Google Voice number and have it go straight to voice mail at first (be sure to manage expectations and follow-up promptly).

Later you can switch to something more substantial, or use an answering service (you can just forward Google calls to that service when you aren’t in the office).

The reality is, most people won’t call, but it will give peace of mind to many.

But some will call and they’ll teach you things you never knew!

And as for where to put it on your site… while there are no standards, a phone number prominently displayed in the upper right corner of your site (in a header graphic or menu bar) seems to work well.

And do it on every page, too… you might have some information on a page that you don’t think is as “important” as the main page, pricing page, etc. but when your prospect is on that “non-important” page and something is confusing, having a phone number right there for them to see and take action is a good thing.

But definitely display the phone number above the fold and make it very easy to see… To me, this is one of the things that might have contributed to Flowr’s non-result; it was above the fold but very small and hard to read!

If you’ve been in-market at least 6 months and are curious how we could Accelerate your Profitable Growth – perhaps by optimizing your Pricing Strategy – contact me and we’ll setup a time to discuss your options for improving and accelerating customer acquisition.

Lincoln
(972) 200-9317

SaaS Affiliate Marketing: How-To Supercharge Your Growth

I’ve been asked if you can “quick start” a new venture or reinvigorate an existing offering with SaaS affiliate marketing?

Here’s the answer I generally give… “it depends.”

Okay, let me dig in a little deeper.

SaaS affiliate marketing can really super-charge your growth, BUT if you don’t have everything in alignment (or your ducks in a row), you won’t super-charge anything!

Think of it like this… if you have a super-charger and no engine to put it on, the super-charger doesn’t really help, right?

For SaaS affiliate marketing to work, you have to:

  • Be clear about your target audience
  • Have your value prop super-powerful and targeted to that audience.
  • Ensure the rest of your marketing is on target for that audience
  • Make sure your Free Trial is optimized, especially to keep affiliates interested if you pay only on conversions!

Not to mention your Pricing Strategy, landing pages, sign-up process, etc.

Plus you have to have a way to manage and communicate with your affiliates, keep them excited and above all… ensure they get paid for  what they bring and get paid on time… every time.

The SaaS Affiliate Marketing Catch-22

The pushback I often get from that is “if I do all that, I might not need affiliates”… which is correct.

You don’t *need* a super-charger on your engine – the engine will get you down the road – but the super-charger makes you go FASTER… which is awesome.

I suppose that analogy could play out fast, but the bottom line is, you can waste a lot of time/money/resources chasing affiliate marketing too early when your time might be better spent optimizing your base first.

Put another way… if you don’t know what you’re selling or to whom, it will be hard for others to sell it for you!

Curious how we could Accelerate your Profitable Growth – including by creating or optimizing an Affiliate Program for you? Contact me and we’ll setup a time to discuss your options for improving and accelerating customer acquisition.

Lincoln
(972) 200-9317

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