If you’re a B2B SaaS company, your pricing strategy is as important as your overall business strategy.
In spite of this, many B2B SaaS folks overlook pricing strategies by:
- Over-focusing on new products instead of addressing core pricing of existing ones.
- Misinterpreting pricing strategies as a way to drive profitability only.
- Thinking pricing is something you review once in a while and seldom change.
A pricing strategy is your chance to communicate to your customers that you understand their needs, and how your product creates value for them.
When done right, a great pricing strategy can help bring in new customers, make current customers more sticky – and ultimately, can give you a competitive advantage. Especially at a time when budgets are at the forefront of most customer’s minds.
So how can you get started with a pricing strategy? In this blog we explore three foundational steps to start you on your pricing journey so you can keep your SaaS offering as competitive as possible.
Step 1: What’s the goal?
Before you can launch into a new pricing strategy, you need to step back and interrogate what your overall business strategy is – and how your pricing strategy will support it.
Are you looking to increase profits, cashflow, growth, market share? Are you looking to increase customer retention? Are you a market entrant taking on established market leaders? And are the answers to these questions the same for each region you operate in?
The deeper and more detailed the insight you can gather in this phase, the more it will help refine how best to approach your pricing strategy.
This makes it crucial to seek the input of stakeholders across all your teams. This is true even if one department will ultimately have the final say on the pricing strategy.
"It’s one thing to have a price list, but have you decided what you’ll get out of your customer when they sign a contract? You need to have a good view and understanding of your overall strategy so you don’t just land contracts, but expand them." – Leif Bohlin, Monterro
Step 2: Who is it for?
Once you know how your pricing strategy will help your business hit its strategic goals, you need to interrogate how it will do the same for your customers.
Businesses that skip over this stage, assuming they know their target audience well enough, deny themselves a crucial feedback loop that can be used to drive performance.
How will your customers actually use the product? How and where does it provide the most value for them? Your answers here will help define the best pricing model. For example, value-based or cost-based pricing. You can dive deeper into the benefits of a value-based pricing model in our eBook.
Pro-tip: Avoid a one-size-fits-all approach
Selling to the right people with the right value proposition is the whole ballgame. In some cases, this means different pricing for different regions and segments – do your research and ensure you know the pricing expectations of each.
"We interviewed a sample of our customers to understand our pricing strategy. This included non-customers and lost customers and gave us a really valuable understanding of what people were willing to pay for the different modules, functions and areas so we could set the price curve in a good way." – Urban Bucht
Step 3: What about our competitors?
Your SaaS product will only be compelling if it’s priced competitively – so gather as much market intelligence as you can.
How are your competitors pricing their products? How do you stack up? What changes can you make to outmanoeuvre them?
The learnings of this stage will not only help with pricing, it will help you refine your overall value proposition.
It’s also crucial to understand that this is a living process. Market trends, economic changes, and new market entrants can all have an impact on your pricing strategy. Stay agile and reevaluate your pricing regularly.
"With the current economic climate, right now is a good time to initiate your pricing strategy. Increasing prices are on everyone’s agenda so it’s worth reviewing your strategy to stay competitive." – Leif Bohlin
- What’s the goal?
- Pricing strategies are only useful if they help you hit your overall strategic goals.
- Who is it for?
- Understand how your customers will use your product, how it creates value for them, and how that changes by segment and geography.
- What about our competitors?
- Do you research, understand the market, and revisit pricing regularly to ensure you remaining competitive.
We're Monterro, an investment firm (of the get-your-hands-dirty with strategy and operational support variety) that helps Nordic software companies hit their biggest partnership goals.