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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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Improving your pricing strategy can significantly impact your revenue growth. Here are effective approaches for optimizing your pricing:
Strategic Pricing Approaches
Pricing Model Shifts
- Subscription to usage-based pricing: Align revenue with actual value delivery
- Usage to user/subscription models: Provide predictability while capturing value
- Segment expansion pricing: Target specific market segments with tailored approaches
- Market positioning adjustments: Implement pricing strategies for moving upmarket or downmarket
Price Point Optimization
- Tier price adjustments: Optimize the price per unit across your offering tiers
- Geographic and segment optimization: Set different price points for different channels, geographies, or customer segments
- Contract term design: Structure terms to encourage account growth
- Discounting analysis: Implement strategic discount frameworks rather than ad-hoc approaches
Strategic Product Innovation
- Packaging for margin increase: Restructure offerings to improve profitability
- Anti-commoditization packaging: Differentiate your offerings from competitors
- Upsell and cross-sell path pricing: Create clear value steps for customers to move up
- New product/feature monetization: Develop pricing for new capabilities, including GenAI features
Research Methods to Guide Pricing Decisions
Quantitative Analysis
- Conduct price point measurement through Van Westendorp surveys
- Identify optimal packages through conjoint analysis
- Prioritize features using Max Diff analysis
Empirical Research
- Analyze tier/package performance across metrics like average deal size and upsell rates
- Evaluate pricing power across sales teams, geographies, and segments
- Study usage patterns to align with pricing metrics
Qualitative Validation
- Validate pricing through client and prospect interviews
- Gather direct feedback on willingness to pay
Real Success Stories
A $30M ARR eCommerce SaaS company achieved 15-30% increases in deal sizes after revamping their packaging and pricing strategy. Key actions included:
- Aligning pricing with their enterprise-focused sales motion
- Rationalizing from 12 to 5 core packages across 3 product lines
- Achieving 100% sales team adoption
Another $10M ARR IT infrastructure management software company transitioned from lump sum subscriptions to a structured model by:
- Aligning pricing with their go-to-market strategy
- Rationalizing four packages to two with remapped feature-sets
- Creating a combination pricing metric based on users and customer revenue
By implementing these strategic pricing approaches, you can significantly increase your revenue while delivering clear value to your customers.