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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 pricing strategy book, Price to Scale, the answer is: Not necessarily. The decision to price lower for a PLG (Product-Led Growth) model isn’t simply about undercutting sales-led competitors—it’s about aligning your pricing with the self-service value proposition and market dynamics.
Here are some key takeaways from the book:
• Value and Segmentation:
Our book emphasizes that lower-end packages can be designed to attract customers who use only the core lightweight features. This approach incentivizes market share by offering a compelling value proposition for those who prefer a self-service model over the comprehensive support typical of sales-led environments.
• Avoiding ASP Erosion:
While lower pricing can appeal to self-service customers, there is the risk of diluting average sales prices (ASP). As discussed in Price to Scale, leadership may be concerned that reducing list prices for one segment might create internal tensions or lead to revenue pressure. Strategies like differentiated list prices (for new versus existing customers) or establishing no-downgrade policies can help manage this issue.
• Context-Specific Tactics:
The book outlines that pricing approaches should be situation-specific. Tactics might include providing higher discounts to existing customers, creating distinct packages for new customers, or adopting explicit policies to maintain pricing consistency. This ensures that any lower pricing for self-service is strategic and does not inadvertently reduce the perceived value of the product.
In summary, while a PLG company might consider a lower price point to highlight the self-service value, it’s crucial to balance this with the need to sustain overall ASP and revenue growth. The focus should be on crafting a pricing strategy that reflects the unique benefits of a self-service model, without simply positioning lower prices as the only differentiator from sales-led competitors.