.png)
Estd 4.22.2023
Introduction
Pricing is arguably one of the most powerful—yet frequently overlooked—levers for SaaS success. While founders obsess over product features, design, and customer acquisition, pricing decisions often remain an afterthought. Yet, according to research from Price Intelligently, a mere 1% improvement in pricing strategy can yield an 11% increase in profits—significantly outperforming similar improvements in acquisition, retention, or cost reduction efforts.
For early-stage founders approaching your first 100 customers, the pricing decisions you make now will set the trajectory for your company's unit economics, market positioning, and long-term profitability. This guide walks through practical approaches to SaaS pricing that balance short-term revenue needs with long-term strategic positioning.
Why Your Initial Pricing Strategy Matters
Your early pricing decisions signal your product's value to the market. Price too low, and you risk being perceived as a commodity; too high, and adoption stalls. According to a study by OpenView Partners, 40% of SaaS companies never conduct price optimization exercises, leaving substantial revenue on the table.
More importantly, your initial pricing establishes:
- Unit Economics: The foundation of your business model's sustainability
- Customer Expectations: The value perception that persists as you scale
- Market Positioning: Where you sit relative to competitors and alternatives
- Growth Capital: The revenue that fuels your continued development
Value-Based Pricing: The Gold Standard
While cost-plus and competitor-based pricing models provide straightforward starting points, value-based pricing consistently delivers superior results for SaaS businesses.
Value-based pricing requires a deeper understanding of what financial or operational benefit your solution delivers to customers. According to a study by McKinsey, companies employing value-based pricing strategies achieve 2-3x higher growth rates than those using cost-plus approaches.
Practical Implementation:
Quantify Your Value: If your SaaS solution saves customers 10 hours per week and their time is worth $150/hour, your solution creates $1,500 weekly in value.
Apply the Value Capture Principle: As a rule of thumb, aim to capture between 10-30% of the value you create. For the example above, this suggests a monthly price between $600-$1,800.
Segment Value Perception: Different customer segments will derive different value from your product. Early-stage companies might focus on a specific segment to establish a clearer value proposition.
Pricing Models for Your First 100 Customers
1. Tiered Pricing
The most common SaaS approach uses packages that increase in features and price. According to ProfitWell research, companies with 3-4 pricing tiers typically optimize revenue better than those with fewer or more options.
Example structure:
- Basic: Core functionality for smaller teams or limited use cases
- Professional: Full functionality for growing businesses
- Enterprise: Advanced features with customization options
2. Usage-Based Pricing
Usage-based models align costs directly with value received. OpenView's 2022 SaaS Benchmarks Report shows that companies with usage-based components grow faster (29% vs. 21% annually) than those without.
This model works well when your value scales with usage volume (storage, API calls, users, etc.).
3. Per-User Pricing
While straightforward, per-user pricing can inadvertently discourage adoption within customer organizations. Consider whether your value increases linearly with user count.
4. Perpetual Premium
A newer approach combines a free tier with a premium offering. This allows prospective customers to experience value before committing financially.
The "First 100 Customers" Pricing Strategy
For your earliest customers, consider this sequenced approach:
Phase 1: Discovery (Customers 1-10)
Focus on validating product-market fit rather than optimizing revenue.
- Implementation: Offer deeply discounted pricing with clear expectations that prices will increase.
- Goal: Gather data on value delivered and customer willingness to pay.
- Method: After delivering value, conduct interviews asking questions like "What would be a fair price for the value you've received?"
According to Jason Lemkin of SaaStr, these early customers should be priced at least 50% below your target pricing but should never be free—customers who pay nothing generally provide less valuable feedback.
Phase 2: Calibration (Customers 11-50)
As you gain confidence in your product's value, gradually increase prices.
- Implementation: Test different price points with different prospects.
- Goal: Identify price sensitivity and optimize conversion.
- Method: Track conversion rates at different price points to find the optimal balance.
During this phase, monitor your Customer Acquisition Cost (CAC) to Lifetime Value (LTV) ratio closely. A healthy SaaS business typically aims for an LTV:CAC ratio of at least 3:1.
Phase 3: Optimization (Customers 51-100)
By now, you should have substantial pricing data to refine your model.
- Implementation: Finalize your pricing structure based on accumulated data.
- Goal: Establish a sustainable model that supports your growth ambitions.
- Method: Implement formal pricing tiers with clear value differentiation.
Practical Tips for Early-Stage Pricing Success
Annual Contracts: Encourage annual prepayment with a modest discount (typically 10-20%). This improves cash flow and reduces churn risk.
Grandfather Early Adopters: When raising prices, allow existing customers to maintain their original rates for 6-12 months. This builds goodwill while allowing you to charge market rates to new customers.
Build in Value Metrics: Design your pricing around metrics that grow as customers derive more value (users, data volume, features used).
Avoid Discounting Without Concessions: If you must discount, always get something in return—case studies, longer commitments, or expansion opportunities.
Document Value Delivery: Systematically track and showcase the ROI your solution delivers to customers. According to Forrester, this practice increases renewal rates by up to 20%.
Common Pricing Mistakes to Avoid
Pricing Too Low: According to data from Price Intelligently, SaaS founders underprice by 30-85% on average. Remember, it's easier to lower prices than raise them.
Competing on Price: Low prices attract price-sensitive customers who churn more frequently. Focus on value differentiation instead.
Ignoring Customer Acquisition Cost: Your pricing must support sustainable customer acquisition. If your CAC payback period exceeds 12 months, your pricing likely needs adjustment.
Complex Pricing Models: During early stages, simplicity in pricing reduces friction in the sales process. Save complexity for later stages.
Neglecting Competitor Analysis: While you shouldn't base your pricing solely on competitors, understanding the market landscape is essential context.
Conclusion
Pricing strategy for your first 100 SaaS customers requires a deliberate balance between short-term revenue and long-term positioning. By taking a phased approach that prioritizes learning and adaptation, you can establish a pricing foundation that supports sustainable growth.
Remember that pricing is never "set it and forget it." The most successful SaaS companies revisit pricing strategy quarterly and make significant adjustments annually as they gather more data about customer value perception and willingness to pay.
Your first 100 customers represent not just initial revenue, but an invaluable opportunity to calibrate your product's market value. With a thoughtful approach to pricing, you'll build not just a customer base, but a sustainable business model capable of driving long-term growth.