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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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Based on the insights from our saas pricing book, Price to Scale, it can be beneficial to create a separate “lite” version to attract price-sensitive customers—but only if it’s executed as part of a broader, thoughtful pricing strategy. Here are some key points from our book to consider:
• Direct Impact on Churn: As discussed in the book, when churn becomes a concern, offering a “lite” package can serve as a defensive maneuver. This lower-price option can help retain customers who might otherwise leave, thereby reducing churn without eroding the value of your premium offerings.
• Tiered Pricing Structure: Our book presents a tiered model (as illustrated in the packaging strategies section) where you can clearly differentiate between “Lite” and higher-tier packages like “Good,” “Better,” and “Best.” This structure allows you to capture different segments of the market without blurring the lines between product tiers.
• Avoiding Price Erosion: While a lowerpriced “lite” version can capture price-sensitive users, there is also a risk that it might lead to downward pricing pressure or cannibalization of your premium products. Our book suggests strategies like:
- Implementing explicit, no-downgrade policies (where existing customers aren’t exposed to a lower list price than what they already pay).
- Offering package-specific list prices for new sign-ups rather than across-the-board discounts.
- Carefully segmenting your customer base and proactively managing the messaging around value and feature differences between tiers.
• Strategic Segmentation: The decision to create a “lite” version should also be based on your understanding of customer segments. By accurately identifying which customers truly benefit from lighter functionalities and are willing to pay a bit more for premium features, you can design your tiers to meet a spectrum of needs without devaluing your premium offerings.
In summary, our pricing strategy book suggests that a well-designed “lite” version can help capture a broader market segment and address churn issues. Just be sure to implement it thoughtfully—with clear differentiation and safeguards against cannibalization—to maintain the overall value perception of your brand.