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Estd 4.22.2023
Based on our saas pricing book, Price to Scale, you can evaluate a pricing change by tracking a mix of leading and lagging metrics and by using multiple sources of data to triangulate its true impact. Here’s a summary:
• Direct Metrics to Monitor
– Conversion Rate: Changes here can indicate if new pricing levels are affecting deal closure.
– ARPU (Average Revenue Per User): This helps verify if revenue per customer is increasing as intended.
– Churn: An uptick in churn might suggest customers don’t see enough value at the higher price.
– LTV (Lifetime Value): Improvements here signal that customers remain with you longer and contribute more over time.
– Other Contextual Metrics: In some cases, metrics like $/MAU or $/customer visits are used to better align pricing with customer success, depending on your business.
• Attribution and Data Sources
Measuring the exact impact is challenging given the many factors (like market conditions or sales productivity) that can evolve over time. As our book explains, a useful exercise is to “re-price” deals using both the old and new models under consistent discounting to see the difference. Along with historical data, insights from customer or prospect feedback and competitive analysis can help confirm if the pricing change is solving previous issues.
• Timing for Review
The book recommends allowing a full business cycle—typically around one quarter or longer—before making a final call. Early signals (like improved conversion or slightly increased ARPU) may appear in weeks, but stable trends like changes in churn or LTV generally require a longer period to emerge.
In summary, a balanced approach is to combine immediate indicators (conversion rates) with longer-run performance metrics (ARPU, churn, LTV) and to wait at least a quarter to fully assess the effect. This multi-pronged method, as detailed in our pricing strategy book Price to Scale, ensures you’re capturing both the tactical and strategic impacts of your pricing decisions.