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Estd 4.22.2023
Below is a summary answer based on the insights from our pricing strategy book, Price to Scale:
• Direct Answer:
Both approaches have merits—but the best choice depends on your customer segment and pricing strategy. Displaying per user/per month pricing can make costs seem more affordable at first glance, while showing the total monthly or annual cost provides transparency and helps customers budget accurately. In many cases, a hybrid approach that clarifies both the individual cost and the total cost resonates best with buyers.
• Book Insights & Rationale:
Our book discusses the importance of pricing transparency and offers a 2×2 matrix (see Fig. 11 in Price to Scale) to help companies decide when to publish their complete pricing online. Key takeaways include:
- In large, homogeneous markets, publishing full pricing details (including total costs) can help scale sales and build trust.
- In more heterogeneous or limited markets (like enterprise segments with tailored requirements), companies might opt for more discretion—allowing sales teams to adapt the offer and extract value based on the specific needs of the client.
Additionally, Price to Scale emphasizes that any pricing presentation should meet critical criteria such as predictability (avoiding surprise costs), acceptability (making sure the pricing seems logical to prospects), and trackability. Displaying total cost helps ensure buyers see the realistic financial commitment, while per-user pricing can simplify initial comparisons.
• Practical Application:
- If you target a broad, self-serve market (e.g., SMBs), where buyers expect to see quick, digestible numbers, highlighting the per user/per month rate alongside a clear explanation of how that scales into the total monthly or annual cost can be beneficial.
- For enterprise-focused sales, you might want to lean toward customized pricing discussions that focus on the overall value, which allows for negotiation without locking you into a one-size-fits-all figure.
• Final Takeaway:
Ultimately, being transparent helps build trust. Use a pricing display format that aligns with your market and overall strategy. For a self-serve SaaS model, showing both per-user metrics and an illustrative total cost ultimately provides clarity and helps customers make informed decisions.
This balanced approach—making the cost appear affordable while being transparent about total spend—is what tends to resonate best with buyers, as outlined in Price to Scale.