How to price your SaaS or software product?
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Presentation from the 6th iPosao iPivo talk, held Mar 3rd 2020: https://www.meetup.com/iPosao-iPivo/events/268513664/ *Description:* There is an old dilemma in pricing: if you price your product higher, you will earn more per each sale, but fewer customers will buy it. If you price it lower, you will have more sales, but you will earn less per each sale. So, should you increase or decrease the price? Often, a business will do nothing, leaving the initial pricing as suggested by the gods of business intuition. We will explain more systematic approaches: • A/B testing on the pricing page. • Competition research. • Pricing as a market positioning tool. Using these methods, you can finally create a pricing model that will make you rich. Unfortunately, it seems your customers want you to stay poor, as they will resist any pricing change. We will discuss how to overcome that and give a few examples of SaaS companies that radically changed their pricing. Speaker: Zeljko Svedic, founder of GemBox Software and cofounder of TestDome
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How to price your SaaS or software product?
- 1. How to price your SaaS or software product? Željko Švedić
- 2. Storyline • The magic of pricing • Method 1: Competition research • Method 2: A/B testing • Method 3: • Examples, examples, examples • Conclusion • Q&A 2
- 3. The magic of pricing 3
- 5. Software: even more magic • Economy of physical items: unit_price = unit_cost x (1 + margin) • Economy of software: • Unit cost is almost zero. • Once your software is produced, you can sell use licenses at any price you want. 5
- 8. 8
- 9. Problem: Who do you compare to? (just call classifieds) 9
- 10. 10 More thinking... Credits: Zeljko Svedic
- 11. Method 2: A/B testing the pricing page 11
- 13. 13 C: Control
- 17. Mar-Apr 2019, V3 first pack size ⇧ 69% 17
- 18. Problem: A/B testing is useful for small changes, but not for big ones (HINT: the curve is different for different products) 18
- 19. Method 3: Pricing as a market positioning tool 19
- 20. "Pricing is a part of market positioning" 20 Credits: Miramax
- 24. CUSTOMERS PRICELIST MARKETING MATERIALS TARGET AUDIENCEDiscount buyers “office chair” < $70 Professionals with back pain “therapeutic chair” > $1,000
- 25. “Pricing is a part of market positioning” • Target audience: • Also a part of market positioning. • Different marketing channels have different audiences… • …and different pricing expectations (eg. App Store, SEO, IT conferences). • Marketing materials: • Again, a part of market positioning. • “we have the most features” → high price • “affordable solution” → low price • Price is one more marketing message. 25
- 27. Marketing channels Consumer marketplaces: • Methods: Apple App Store, Google Play Store, Steam, Envato. • Price range: < $50 • Price visibility: Platform recommended prices: $0.99, $4.99 etc. Digital marketing (organic): • Methods: SEO, Content Marketing • Price range: $50 - $1,000 • Price visibility: Public Digital marketing (paid) : • Methods: SEO, Content Marketing, paid ads (PPC, display advertising): all as lead generators • Price range: $1,000 - $20,000 • Price visibility: can be both public and hidden (“contact us”) • Teams: Marketing, Inbound Sales Enterprise sales: • Methods: Outbound Sales, Solution Selling, Conferences • Price range: > $20,000 to many millions • Price visibility: Hidden. Price negotiation is expected. • Teams: Sales team, Support team (product customization, white labeling, integrations etc.) 27
- 28. Marketing channels Consumer marketplaces: • Methods: Apple App Store, Google Play Store, Steam, Amazon, Envato, AliExpress. • Price range: < $50 • Price visibility: Platform recommended prices: $0.99, $4.99 etc. Digital marketing (organic): • Methods: SEO, Content Marketing • Price range: $50 - $1,000 • Price visibility: Public Digital marketing (paid) : • Methods: SEO, Content Marketing, paid ads (PPC, display advertising): all as lead generators • Price range: $1,000 - $20,000 • Price visibility: can be both public and hidden (“contact us”) • Teams: Marketing, Inbound Sales Enterprise sales: • Methods: Outbound Sales, Solution Selling, Conferences • Price range: > $20,000 to many millions • Price visibility: Hidden. Price negotiation is expected. • Teams: Sales team, Support team (product customization, white labeling, integrations etc.) 28 20x 400x
- 29. CUSTOMERS NEW PRICELIST MARKETING MATERIALS TARGET AUDIENCE Only a fool would try this
- 30. 30
- 31. Example 1: Monthly subscription experiment Customers would chose a monthly amount ($100-$1000), depending on their testing needs. 31
- 32. 32 TARGET
- 33. 33 MARKETING
- 34. 34 PRICELIST Minimum was $1200 annually ($100/month)
- 35. 35
- 38. GemBox.Bundle 38
- 39. 39
- 40. Enterprise sales • Prices are multiples of packaged pricing. • Costs are much higher: up to half of the employees are salespeople with sales bonuses. • Prices are hidden and negotiable. • Sales cycles are long. • Common pattern: small, successful product is bought and switched to enterprise pricing. 40
- 41. Example 3: Assembla • JIRA competitor, used in GemBox • 2012: $185/year for 5 people • May 2016: Assembla purchased by Scaleworks (Venture Equity) • 2018: • Legacy plan $1,012/year for 14 people • Asked for one additional user: $5280/year offer • 9x pricing increase from 2012 (28x more for 3x larger team) • 2019: We are with JIRA, $142.50/month for 19 people. 41
- 42. Example 4: Optimizely • Had a free and starter plan. • October 2015: Optimizely raised $58 million in Series C funding (from Index Ventures, with participation from Andreessen Horowitz, Bain Capital Ventures, Battery Ventures, Benchmark Capital, Citi Ventures, Danhua Capital, Salesforce Ventures and Tenaya Capital) • “We’ve been told plans start at a minimum of $36,000 a year, for 200,000 visitors or more.” - from convert.com 42 ~42x price increase!
- 43. Conclusions 43
- 44. 1. Target audience, marketing materials and pricing are all part of product positioning. 44
- 45. 2. Your customers decide where you are positioned in a market, not you. 45
- 46. 3. After market positioning is done, compare your pricing with alternatives your customers compare you to. (eg. EU banana tax) 46
- 47. 4. As a last step, A/B test your pricing page. 47
- 48. Q&A 48