Am I charging the right price for our SaaS product, or have we potentially underpriced it compared to the value we provide?

Based on our saas pricing book, Price to Scale, the answer is to verify whether your current pricing is truly reflecting the value delivered versus simply aiming to build a larger customer base. Here’s how you can evaluate this:

• Review your costs and margins: Our book advises doing a “sanity check” by comparing the cost (both implementation and customer acquisition costs) against deal sizes. For example, if the cost to deliver your product (or service) is close to or even higher than the price, you may indeed be underpricing relative to the value provided.

• Assess customer willingness to pay: Price to Scale emphasizes analyzing the range that customers are willing to pay. If you’re pricing at the lower end of that spectrum merely to drive adoption, it might mean you’re missing opportunities to boost margins and long-term revenue. As discussed on page 93, pricing should ideally balance volume with revenue per customer.

• Consider the competitive environment: If competitive pressures force you into lower pricing tiers (as explored in our examples), then it’s worth analyzing if these tiered pricing models are inadvertently devaluing your premium features. Sometimes, as competitors introduce lower-cost alternatives, you risk commoditizing key innovations that should command a premium.

• Strategic trade-offs: The book also highlights the need to align your pricing strategy with your broader growth objectives. An enterprise strategy might focus on maximizing margin if the market is limited, whereas mass-market strategies might lean towards volume. The decision should be based on both your market positioning and the value your product delivers.

Taking these factors into account, if a review indicates you’re consistently setting prices at the low end of customers’ willingness to pay—while facing high delivery or acquisition costs—it could suggest that you are underpricing your product.

In summary, use a framework of cost analysis, customer value perception, and market comparison—as outlined in Price to Scale—to evaluate your current pricing strategy. This will help determine if there's a significant opportunity to capture more value from your product.