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Estd 4.22.2023
Based on the insights from our pricing strategy book, Price to Scale, here's an approach you might consider:
Direct Answer
For many SaaS companies, the decision hinges on the feature’s appeal and its strategic role. If the new feature or mini-product has broad appeal, it might be better to bundle it into your existing plans to boost overall value and maintain pricing simplicity. On the other hand, if it caters to a niche need or serves as a strong differentiator, a separate add-on could be justified—but do so with caution to avoid overly complicated pricing.Supporting Information from the Book
- In our book, Price to Scale, we outline two common approaches:
- The “Good-Better-Best” model, where features are bundled into tiered packages for different market segments. This strategy tends to capture a large segment without complicating the pricing structure.
- The “Modular” approach, where distinct features are offered as separate add-ons. This strategy, while potentially maximizing revenue for niche functionalities, requires a careful definition of the feature’s value to avoid cannibalization of core packages.
- The book advises that features with broad appeal—ones that add clear value across your customer base—should ideally be bundled to simplify the decision-making process for customers and strengthen your overall value proposition.
- When contemplating an add-on approach, the book emphasizes being mindful of potential cannibalization, especially if the pricing structure becomes too confusing or if existing customers start comparing offerings leading to churn in higher-margin plans.
- Practical Application
- Evaluate the new feature’s reach: If it enhances the overall product value for most customers, integrate it into your existing plans for a seamless experience.
- For highly specialized features, ensure that any add-on option is distinctly positioned, with clear benefits that do not overlap too much with your core offerings.
- Think about your sales narrative: A bundled approach can simplify training and positioning, while add-ons require clear communication on why they bring additional worth.
- Summary
In summary, if you're concerned about pricing complexity, bundle features that have broad, general appeal into your main plans. Reserve separate add-ons for specialty features that provide distinct value and clearly differentiate from core offerings—always ensuring you mitigate any risks of cannibalization. This balanced approach is at the heart of the strategies discussed in Price to Scale.