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Estd 4.22.2023
Below is a concise answer based on the insights from our SaaS pricing book, Price to Scale:
• Direct Answer
Pricing can act as a powerful signal of both quality and market positioning. Setting a higher price can communicate a premium, enterprise-level product that is rich in features and support. Conversely, a lower price is often used to attract a larger volume of SMBs by emphasizing affordability and ease of adoption.
• Supporting Insights from the Book
- In Price to Scale (see page 93), we describe how companies targeting enterprise customers often opt for a margin-maximizing approach. This deliberate pricing decision not only generates higher cash flow needed for business growth or further product development but also reinforces an image of superior quality and specialized focus.
- Our book also discusses how different market segments are managed through pricing strategies, such as the Good-Better-Best model (refer to page 29), which allows companies to differentiate packages. Higher-priced packages often include premium features aimed at enterprise clients, while lower-priced options cater to the more price-sensitive SMB market.
• Practical Application
- When setting a high price to signal an enterprise focus, ensure that the product offering—including features, support, and service level—matches the premium perception. This alignment is key to converting the enterprise segment without creating expectation gaps.
- Conversely, when pricing for SMBs, prioritize velocity—ensuring a lower barrier to entry to capture a broad market share without the need for deep customization.
• Summary/Takeaway
In Price to Scale, we emphasize that pricing is not just a number but an integral part of your market positioning strategy. Whether you choose a high price to underline enterprise quality or a lower price to drive broad market adoption, your pricing strategy should be consistent with your product’s value proposition and overall market approach.