SaaS pricing isn’t easy. In a constantly changing environment, getting your pricing right can feel like you’re trying to hit a moving target.
Today I’m identifying five of the most common SaaS pricing mistakes to avoid.
1) A Hidden Pricing Page (or No Pricing Page)
If your customers can’t find your pricing information – or worse, if you’re not displaying pricing information on your website - you greatly reduce the likelihood of them buying from you.
They have no way of knowing whether your product is going to cost them $5 a month or $500. It’s much easier for them to go to one of your competitors, where the pricing information is clearly laid out for them, than to fill in a contact form on your website, wait for a response, and then make their purchasing decision.
Make sure your pricing page is easy to find – don’t create extra work for your potential customers.
2) Only One Price Option
The amount people are willing (or able) to pay for your service varies from person to person.
If you only have one price option, all of your customers are paying for all the features in your service. This can be a barrier to potential customers who may only need some of the features but can’t afford the price of the whole package.
In contrast, a tiered pricing structure would allow you to have different levels of packages based on the number of included features. This would make your service more accessible to a greater number of potential customers.
3) Too Many Price Options
At the other end of the spectrum, having too many pricing options is another common mistake.
Having too many different plans with a multitude of add-on features will over-complicate the buying process for your potential customers. Too many options will overwhelm them, as the benefits of one package over another will be less clear-cut, making it more difficult for them to choose the best option to meet their needs.
While the optimal number of pricing options depends on your particular service and target market, you will commonly see companies limiting themselves to three different plans.
4) Determining the Wrong Value Metric
A value metric is effectively what and how you’re charging for a product.
One of the most common value metrics we see in SaaS is the ‘per user’ pricing model. It’s the easy option because it’s simple to understand, and easy to measure – but it’s not always the most appropriate for your customers.
In worst-case scenarios, per user pricing can actually be a barrier to customers adopting your software. A company with 100 members of staff, who only wants the most basic functionality your service offers, won’t want to pay for the pricey enterprise package just because they’ll need 100 user accounts to adopt your software across their organisation.
“8 out of 10 companies using per user pricing should be using a different value metric, simply because their products probably don't provide more value with additional users, so charging for them doesn’t make perfect sense.”
It’s vital that you identify the right value metric: one that is easy to understand, and aligned to the customer’s perception of the value your software provides.
5) Basing Your Price On Your Competitors
If you’re just starting out, looking at how your competitors are pricing their services may offer insight on where to start. But your price should be based on the value that your customers think your service is worth, not what other people pay for other services.
Your product isn’t the same as your competitor’s product, so your price should take that into consideration. Copying your competitors’ prices could lead you to under- or over-pricing your service by failing to taking into account unique aspects of your service.