The key to pricing is to always keep testing.
Pricing has always been a tricky affair. Price too high, you lose customers. Price too low, you lose value. Finding the sweet spot has been one of the oft discussed topics in the realm of SaaS. And every pricing expert will recommend that you need to keep testing and iterating. Just like we did.
Because, getting to the product-market fit is a continuous process. You'll always end up identifying a new persona, a niche market, or a different vertical you're catering to.
And you'll almost always end up finding yourself evaluating your current pricing.
Do you iterate on pricing such that any change to the product reflected in the value and pricing, like Shopify? Or do you revise the pricing understanding the customer segment, like Zendesk? Or do you tailor your pricing according to the core differentiating features, like Statuspage?
Do you grandfather your existing customers? What impact will that have on your new sales and expansion revenue? Do you localize your pricing to suit the current geography?
In any of these cases, your billing system will help close the loop by:
- Offering flexibility in pricing models — freemium (a portmanteau of free + premium), flat fee, usage based pricing, volume pricing, tiered pricing...
- Grandfathering the customers you want so your pricing changes only apply to your new users
- Offering flexible payment options to customers in transition (with segmented plans, advance invoices, and discount options)
- Offering custom pricing — potentially during an upgrade or in a hybrid sales model
- Converting your pricing in the native currency
And in all of this your billing system should back you up — to allow you to make these pricing changes, without an extra line of code, so your customers find no discrepancy in your pricing. Should your customer upgrade to a higher paying plan mid-cycle, your billing system should prorate the amount.
GetAccept, An AI-based eSignature & deal management platform, adopted a hybrid approach when it came to sales — an outbound sales-driven model as well as a self-serve sign-up model. As they scaled, their customer acquisition strategy pursued different use-cases and required a platform that allowed for pricing experiments including support for tiered as well as dynamic pricing for enterprise sales. And for mid-cycle expansions, this needed to be done on a pro-rata basis.
Iterating on pricing and custom pricing, among other experiments contributed to GetAccept's revenue growing 4X at the time — businesses should take a leaf out of GetAccept's growth storybook.
Here's how Doodle Scaled Globally with Localized & Tiered Pricing Model
Switzerland-based scheduling app, Doodle, is a freemium tool — where users sign up for a forever-free plan, and you need to upgrade to a paid plan to benefit from additional capabilities.
"Most of our customers start by using the freemium product. They come to Doodle, create poll (which means they're trying to find a time to meet). These people come again for other meetings. If they have organized enough meetings, we run a campaign to prompt you to consider the premium product, or we suggest that it'd be a good idea to have all these additional features. And you'll use one of the teasers we have in the product and go through the purchasing flow. Not a very sales-heavy process. Only for big companies with a lot of users using the product do sales get involved,"
Doodle saw that the value lay in adding more users to an account i.e. offering paid plans based on the number of users/members in a team. And at prospects who are at scale, it's highly likely that they'll have different team sizes willing to use the product.
Doodle wanted to capitalize on that and offer their product across multiple currencies with individual prices and different tiers. Today, they offer Tiered Pricing — instead of offering a single option of pricing and bucketing them into a "Buy" or "No Buy" situation. As a result Doodle's prospects are able to select the plan that resonates with them the most, and aligns with what they value the most.
Doodle's free plan supports ads. Along with this, Doodle also offers two ad-free, paid plans using Chargebee's tiered pricing - a 'Private' plan at €43 per year for a single user, and a 'Business' plan at a base price of €59 per year depending on the number of premium users signing up for the product. Typically, this works for businesses with professional teams of different sizes.
For further reading:
Here's more on how you can experiment with pricing strategies.
Here's more on the good, the bad, and the in-between of Freemium model.
Here's more on what you can learn from AWS on the freemium model and how you can apply it to your business.
Here's an absolute complete Pricing and Trial Playbook [Must Read]