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Frameworks, core principles and top case studies for SaaS pricing, learnt and refined over 28+ years of SaaS-monetization experience.
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In the rapidly evolving PropTech landscape, finding the optimal pricing strategy for real estate software can make the difference between sustainable growth and stagnation. For property management platforms and real estate SaaS solutions, pricing isn't just about revenue—it's a strategic lever that communicates value, influences adoption, and determines market position. This article explores how testing different pricing approaches can help real estate software companies optimize their subscription pricing models for maximum market impact.
The Critical Nature of Pricing in Real Estate Software
Real estate software solutions serve a diverse market—from individual agents and property managers to enterprise-level real estate corporations. Each segment has different needs, budgets, and perceptions of value. According to a recent McKinsey study, a 1% improvement in pricing can translate to an 11% increase in profits for SaaS companies, making pricing optimization one of the highest-ROI activities for PropTech businesses.
The challenge lies in identifying which pricing strategy will resonate with your specific market segments while adequately capturing the value you provide.
Common Pricing Models in PropTech
Before discussing testing methodologies, let's examine the prevalent pricing strategies in real estate software:
1. Tiered Subscription Models
Many property management platforms offer tiered pricing based on features, number of properties managed, or user seats. This model allows customers to start with basic functionality and upgrade as their needs grow.
2. Usage-Based Pricing
Some PropTech companies charge based on transaction volume, number of listings, or other usage metrics. This approach aligns costs with the value received, particularly for platforms serving real estate professionals with fluctuating business volumes.
3. Freemium Models
Popular among newer real estate software entrants, freemium offers basic features for free while charging for premium capabilities. This can accelerate user acquisition but requires careful balance to ensure conversion to paid tiers.
4. Per-Property Pricing
Specifically for property management solutions, charging per unit managed creates a scalable model that grows with the customer's portfolio.
Designing Your Pricing Strategy Test
Testing pricing isn't simply about raising or lowering prices. It requires a methodical approach to isolate variables and measure actual market response.
Step 1: Define Clear Testing Objectives
Begin by establishing specific goals for your pricing test:
- Are you trying to increase average revenue per user (ARPU)?
- Do you want to improve conversion rates from trials?
- Are you seeking to reduce churn in a specific customer segment?
- Are you trying to move upmarket to larger real estate enterprises?
Each objective might require a different testing approach and metrics.
Step 2: Segment Your Market
Different customer segments respond differently to pricing changes. A pricing approach that works for individual real estate agents might fail with property management companies.
According to research from Price Intelligently, most SaaS companies (including those in real estate) should have at least 3-4 different pricing tiers to address distinct market segments.
When segmenting, consider:
- Size of real estate portfolio managed
- Type of properties (residential, commercial, mixed-use)
- Geographic region
- Company size and structure
- Feature requirements
Step 3: Choose Your Test Variables
What specific elements of your pricing strategy will you test? Options include:
- Price points - Testing different monthly subscription costs
- Pricing structure - Comparing per-user vs. per-property models
- Packaging - Adjusting which features appear in which tiers
- Billing frequency - Testing monthly vs. annual billing with discounts
- Free trial length - Determining optimal trial periods for conversion
Step 4: Implement A/B Testing Methodology
A methodical approach to testing is essential. Consider these implementation strategies:
Cohort Testing
Present different pricing options to separate groups of new customers over the same time period. This approach minimizes the impact of seasonal variations.
Geographical Testing
Launch different pricing in separate geographic markets to compare performance while maintaining your existing pricing for current customers.
Staged Rollout
Gradually introduce new pricing to a small percentage of your market before full deployment.
Measuring Pricing Test Results
The success of your pricing strategy test depends on tracking the right metrics:
Key Performance Indicators for Pricing Tests
- Conversion rates: How does pricing affect the percentage of prospects becoming customers?
- Average contract value: Has your new pricing increased your typical deal size?
- Customer acquisition cost (CAC): Has pricing affected your cost to acquire new customers?
- Customer lifetime value (LTV): Are customers on the new pricing staying longer or upgrading more frequently?
- Churn rate: Has the new pricing affected customer retention?
- Feature utilization: Are customers actually using what they're paying for?
Real-World Examples of Successful Pricing Tests
Case Study: AppFolio Property Manager
AppFolio, a leading property management software provider, historically charged a base fee plus a per-unit fee. When testing pricing strategies, they discovered that adding premium tiers with advanced features for larger property managers increased their enterprise adoption by 35%.
Their key finding: larger real estate management companies were less price-sensitive than small landlords but required specific enterprise features to justify higher subscription costs.
Case Study: MRI Software
MRI Software transitioned from a traditional license model to a SaaS subscription pricing model. During their testing phase, they found that offering flexible module-based pricing—where clients could select specific functionality—resulted in 28% higher adoption rates compared to all-inclusive packages.
This confirmed that real estate companies preferred tailoring software solutions to their specific portfolio needs rather than paying for unused features.
Common Pitfalls in Pricing Strategy Testing
When testing pricing for real estate software, avoid these common mistakes:
Testing too many variables simultaneously: Change one element at a time to clearly identify what's driving results.
Insufficient test duration: Real estate companies often have longer sales cycles. Ensure your test runs long enough to capture the full customer journey.
Ignoring competitor responses: Monitor how your competitors react to your pricing changes and be prepared to adjust accordingly.
Overlooking customer communication: Even positive pricing changes can cause friction if poorly communicated.
Neglecting customer feedback: Qualitative input is just as valuable as quantitative