You’re probably offering a service that differs from others somehow and has more value than your competitors’ service. On the other hand, no one ever made a major breakthrough by copying someone else's (not necessarily correct) decisions. You won’t attract many customers with the price twice as high as the coffee shop next door. Consider you decided to open a coffee-to-go shop. Businesses that compete in a highly aggressive space may depend on this strategy completely since a slight price difference defines the users’ choice. On the one hand, it’s a good idea to bear in mind what your competitors charge. “So, my competitor’s price is $3, and I will charge the same because they probably did their homework and know that $3 is what the market used to sustain, right?” It takes half an hour to browse the competitors' websites and a bit of math in your head (or a spreadsheet for advanced users) to have the price ready. The main advantage of the strategy is, again, simplicity. You look left to find the lowest price, then you look right at the highest price and take a safe place somewhere in between. You don't want your price to look ridiculous when compared to similar offers. When you enter a new market, you don't usually know how to price SaaS. Start looking beyond your product to stop missing out on money. If you sell software as a service, the value your products deliver is probably much greater than the cost to produce them. Cost-plus pricing may be convenient for a company, but it has nothing to do with customers’ expectations. Just like they don’t think about the price of components when buying a bottle of cola, they don’t care about how much you spend on development. That is not per week or per month - six hours, overall, to set, test and sharpen everything.Īnd by the way, why do many startups put so much emphasis on internal cost when determining price? Customers are not interested in your costs. But in fact, for an average SaaS startup, it takes only six(!) hours to decide on pricing. It looks like working on how to price your saas product is the most important thing you can do for success. Acquisition and retention affect the bottom line not nearly as much. According to the study published by Price Intelligently, a 1% improvement in pricing results in a 12.7% profit increase. This is despite the fact that monetization has the most significant impact on the bottom line, leaving retention and acquisition far behind. The price page they often set once at the beginning and then forget forever. They put tons of effort into their home page. Startups put acquisition and retention higher than the work on the monetization of their services. We at Eleken have helped dozens of SaaS companies with UI/UX design and noticed one paradoxical pattern. And the difference between the two is quite profound when it comes to effective monetization and choosing the right SaaS pricing model. What they don’t know is how to figure out how much customers want to pay. They actually know how to determine prices for SaaS software.
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