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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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Below is a structured way to think about the difference in pricing for mid-market versus small business customers based on the principles outlined in our pricing strategy book, Price to Scale.
• Direct Answer
While our book doesn’t offer a one-size-fits-all “optimal” price point, it does provide a framework for determining the right price based on market dynamics. For mid-market companies, the pricing strategy tends to focus on balancing deal sizes with an approval for added services or more robust support, while for small businesses, the approach typically emphasizes accessible price points that drive volume and ease of adoption.
• Insights from Price to Scale
- Segmentation and Packaging:
- Our book discusses a two-pronged approach. One common method is the Good-Better-Best pricing model, where different customer segments receive packages matched to their value‐perceptions. For mid-market firms—which have grown beyond the startup phase but may need more tailored functionality—you might lean toward a “better” or “best” tier that includes more comprehensive features and support.
- In contrast, for small businesses, the “good” tier is often crafted to offer core functionality with fewer bells and whistles, keeping the price accessible to drive mass adoption.
- Alignment with Customer Willingness to Pay:
- Mid-market companies, as mentioned in our book, are willing to pay more if the pricing aligns with their operational scale and if the package helps them overcome more complex challenges. In these cases, higher pricing tiers (often supported by tailored support and additional features) can be justified by the underlying cost structure, such as a relatively higher cost for implementation (for example, a scenario in our book described an average implementation cost of around $3000).
- For small businesses, competitive pressures and a need for fast adoption mean prices are typically set at the lower end of what the market will bear—often requiring more volume-driven pricing strategies. Here, lower-cost tiers (as seen in modular pricing strategies discussed in Price to Scale) are key to boosting user acquisition and supporting long-term revenue growth.
- Competitive and Cost-Side Considerations:
- The book emphasizes that it’s not just about what customers are willing to pay, but also about the cost of acquisition and service delivery. For example, when selling into competitive markets (often the case with small businesses), pressures can compress deal sizes into a price range (as illustrated by an example in our book comparing deal sizes from $1,000 to $10,000 annually).
- For mid-market companies, you might be justified in a higher price point if the cost of customer implementation and the competitive landscape support a margin-maximizing approach.
• Practical Application
When setting prices:
- Begin by segmenting your customer base (as detailed in Chapter 15 of Price to Scale).
- Consider whether a graded packaging approach (good-better-best) or a modular pricing strategy better fits your desired customer value capture.
- Use competitive benchmarks and a careful assessment of the customer’s willingness to pay in each segment to iteratively refine your recommended price points.
• Takeaway
There isn’t a fixed “optimal” price for mid-market versus small business SaaS offerings—rather, the optimal pricing strategy is one that is tailored to each segment’s needs, perceived value, and cost dynamics. For mid-market firms, this typically means higher-priced tiers with more features and support, while for small businesses, accessible, lower-priced tiers that encourage volume growth are key.
In summary, Price to Scale emphasizes that the right price is determined by balancing market segmentation, customer value perceptions, and competitive cost factors rather than relying on a predetermined number.