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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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Pricing your SaaS product before you've validated product-market fit is one of the most challenging decisions founders face. Too high, and you risk alienating early adopters; too low, and you undervalue your solution while setting unsustainable expectations. According to OpenView Partners' 2023 SaaS Benchmarks report, 72% of early-stage founders report making significant pricing mistakes that slowed their growth. So how do you approach pre-revenue pricing when you're still navigating the uncertain waters before product-market fit?
The Paradox of Pre-Revenue Pricing
The inherent challenge in startup pricing is that you're setting prices for a product that hasn't been fully validated by the market. While established companies can rely on historical data, customer feedback, and competitor benchmarking, pre-revenue startups operate in a realm of hypotheses and educated guesses.
"Most founders overthink pricing early on," says Patrick Campbell, founder of ProfitWell (acquired by Paddle). "The truth is your initial pricing doesn't need to be perfect—it needs to be directionally correct and designed for learning."
Key Approaches to Pre-Revenue SaaS Pricing
1. Value-Based Pricing: Start with Customer Problems
Even without revenue history, you can still estimate the value your solution delivers by quantifying the problem you solve. For example, if your software saves enterprises 10 hours of administrative work weekly, you can calculate the dollar value based on average hourly wages.
To implement this approach:
- Conduct in-depth interviews with potential customers about pain points
- Ask quantitative questions: "How much time/money does this problem cost you?"
- Estimate what percentage of that problem your solution solves
- Price relative to a percentage of the calculated value (typically 10-30%)
2. Penetration Pricing: The "Get Users Now, Raise Prices Later" Strategy
Many pre-product-market fit startups opt for penetration pricing—strategically setting lower prices to accelerate adoption and gather critical feedback. According to a CB Insights analysis, SaaS startups that employed penetration pricing strategies acquired early customers 35% faster than those starting at higher price points.
This approach works if:
- User feedback is more valuable than immediate revenue
- Your product has network effects
- The cost of serving each customer is minimal
- Your roadmap includes premium features that justify price increases later
3. Tiered Pricing to Test Multiple Hypotheses
When uncertainty is high, testing multiple pricing tiers allows you to gather data on different customer segments simultaneously. Early-stage startups like Notion and Slack successfully employed this strategy.
A typical three-tier approach includes:
- A free or very low-cost tier for personal users
- A mid-tier for small teams or businesses
- A premium tier for larger organizations
This structure lets you observe which features different customer segments value most, informing both your product roadmap and future pricing strategy.
Pre-Revenue Pricing Mistakes to Avoid
Underpricing Based on Fear
A 2022 First Round Capital survey revealed that 81% of founders believe they initially underpriced their products. While it feels safer to start low, dramatic price increases later can alienate early customers and signal instability.
Overcomplicating Your Pricing Structure
Before product-market fit, complex pricing models with numerous variables create unnecessary friction. Keep it simple enough that customers can easily understand what they're paying for.
Neglecting to Build in Price Experimentation
Your initial pricing should include mechanisms for testing price sensitivity. Consider building in different price points for different acquisition channels or geographic regions to gather comparative data.
How to Implement Pre-Market Fit Pricing Strategies
1. Set Clear Learning Objectives
Before implementing any pricing strategy, define what you want to learn:
- Which features drive willingness to pay?
- Which customer segments show highest conversion rates?
- How price-sensitive is your market?
2. Create a Value Metric That Can Scale
The most successful SaaS businesses price based on a value metric that grows with customer usage or value received. Examples include:
- Per user (like Slack)
- Per project (like Asana)
- Per storage used (like Dropbox)
- Per transaction processed (like Stripe)
Choosing the right value metric early gives you flexibility to adjust as you learn more about customer behavior.
3. Build a Pricing Communication Strategy
How you communicate price has almost as much impact as the price itself. Your startup pricing page should emphasize value rather than features, clearly articulate what problems you solve, and frame pricing in terms of ROI rather than cost.
Testing and Iterating Your Pre-Revenue Pricing
Before full market launch, consider these testing approaches:
Fake Door Testing: Create a pricing page and track click-through rates to different options without actually processing payments.
Smoke Tests: Run limited-time campaigns with different price points to gauge conversion rates.
Cohort Analysis: Offer different pricing to different customer groups and compare retention and expansion metrics.
Jason Cohen, founder of WP Engine, recommends conducting structured pricing interviews: "Ask potential customers how much they'd pay, then increase the amount until they hesitate. That hesitation point is valuable data."
When to Know It's Time to Adjust Your Pricing
Pre-revenue pricing decisions aren't permanent. Watch for these signals indicating it's time to revisit your pricing:
- Extremely high conversion rates (you're likely underpriced)
- Significant customer value realization that exceeds your price point
- Customer feedback suggesting price isn't a consideration in purchasing decisions
- Competitive landscape changes
Conclusion: Pricing as a Learning Tool Before Product-Market Fit
In the pre-revenue stage, pricing should be viewed primarily as a learning tool rather than a revenue optimization strategy. The goal is collecting data that helps you understand customer perceptions, refine your value proposition, and ultimately achieve product-market fit.
Remember that the best pricing strategies evolve alongside your product. By approaching startup pricing with flexibility and a commitment to learning rather than perfection, you position your SaaS business to make increasingly informed decisions as you grow.
The journey to finding the ideal pricing model is iterative—much like the journey to product-market fit itself. Start with educated hypotheses, build in mechanisms for learning, and be prepared to adapt as market feedback rolls in.