The 7 Deadly Sins of SaaS Marketing – Greed
Sin number six is greed. Just kidding, greed in SaaS is good. If you underprice your product, you won’t be able to reinvest in your user experience or your growth marketing. You might win more users short-term, but long-term your competition will leave you in the dust. When you are pricing your services, you need to think about the potential growth of your business. Are you making enough revenue to remain at your current size, maintaining the same features with little product development? Or is your pricing model allowing you to grow your revenue to spend more money developing your product, and acquire new, potential customers? Go for the latter.
As with your buyer personas, which we will use to optimize your pricing model in just a bit, you don’t want to guess and check with price. We understand that if you are just starting this can be challenging. You don’t yet have the data you need to determine a value-based price without customer feedback, and you want to focus on getting your business off the ground. But aiming for value-based pricing is the key to your business growing and reaching its full potential. Most SaaS companies spend around 8 hours to price their business for the lifetime of their company. Don’t do that.
Like most SaaS companies, you probably don’t know what your value is and how to best communicate that value. How do you find the value of your services for a value-based pricing model? Remember this about SaaS marketing: the number one rule in business still applies, even if you aren’t meeting your customers face to face: “The customer is always right.”
Pricing Your Product
Value is how useful your customers find your services, and what they think is a fair price for these services. Price your business at a price that customers will want to play, not your competitor’s prices or for business costs. Your ideal buyers understand the value of your product to their work or business–and those are the buyers you want to convert into loyalists.
Your customers need to see the immense value of your product, so much so that they think it’s such an amazing deal they are almost obligated to pay. Make the money a no-brainer.
So, as you reach out to customers to develop buyer personas, also ask your customers about the value they see in your product, and what they would be willing to pay for it. Customers love clarity, and including them in the process of pricing will make them feel like their input is valued, and that they are being charged even more fairly. They will feel like they are part of the process of determining where their money goes, and the value they will receive back from their investment.
Make Surveys Work for You
Make more surveys, and ask these kinds of questions:
- What would you want most out of all of your product options and features?
- What price is too high?
- What price would say this product is questionable?
- What price is a bit expensive?
- What price is a bargain?
You can also ask:
- How are your users solving their problems right now?
- How much time does it take?
- What investments have you made to find a solution?
With these questions you can quantify the time saved, money saved and money earned that your potential buyer would gain from your product.
You can also set up pricing interviews with your customers and listen to what they perceive to be true about your product and its value.
In the data, you obtain from surveys, interviews and feedback, search for patterns in the features, benefits, and price points your different buyer personas favor in your product. These patterns will help you tier and package your feature services.
Tiering and Bundling
In the past, SaaS companies have sold their services like fast food combo meals–in bundles at one size for all users. Some companies are becoming aware of the trend that buyers want to buy specific features, and not others–so they can customize and create their own plans. But the most efficient strategy is tiering your service options with set prices. Offering customized plans can often become too complex. The more flexible you are, the more confused and less willing to convert your customers will be.
Distinguish your tiers with specific features that will be valuable to your specific buyer personas. Consider the size of their company, how many users they will have, and what features would be most beneficial to them. For example, a sole proprietor will most likely have different needs than an enterprise.
Tiered pricing for your business is the most effective strategy because it speaks to your buyer personas’ unique needs. The better you align tiered offers with your personas, the greater your conversion and revenue. With structured tiers, you also build in a path for scaling, increasing pricing with more revenue, and upselling your features. When your customers need more than what is offered with their current package, they can move to a higher package with more features, which will allow them to grow as you grow.
SaaS companies that cater to the needs of the varying tiers of users are more profitable because rather than the one-size-fits-all, they are reaching a greater range of buyers who will use their service.
Like the magic buyer persona number, keep your tiers between 3-5. Too many tiers may complicate things for your customers and prevent them from converting.
Quality Over Quantity
This is where your loyal customers enter the picture once again. Most SaaS customers think growth correlates to the acquisition of more and more customers. But actually, it’s about quality, not quantity. Monetization, and increasing revenue with loyal customers, while extending their lifetime value, are the keys to growth. Monetization can be up to 4x more efficient than new-buyer acquisition in developing growth potential for your business.
Your customer lifetime value–that is, how long your customer will pay for your service–must be higher than your customer acquisition costs. If it isn’t, you won’t grow. When your LTV is higher than your CAC, you will continue to lower acquisition costs and be able to focus more specifically on your best, ideal buyers, as well as increase your LTV through greater prices and buyer retention.
Your prices should not be set in stone. You should consistently update them just as you update and specify your buyer personas. Don’t be afraid of changing your prices. You may think you will scare your users away with a shift in cost, but without constantly reflecting on your pricing, at least once, if not twice annually, you will not be able to grow and scale your business. You will remain stagnant, or fall into decline.
Include all of your departments in price updates to make the most informed changes. Consistently evaluate your prices as you learn more about your customers and what they need to increase specificity and grow closer to optimum pricing numbers for your ideal buyers.