Price plans for a newly launched SAAS platform
A few organizations in Vancouver have been consulting with us before launching their platforms, so we thought it was a good time that we wrote a blog about devising price plans for a SAAS platform.
Delivering applications as SAAS or software as a service gain popularity during the 2008 recession as a rebounding business model for providing software to a high number of users. This way, customers could signup for recurring monthly or annual plans and use an application over the internet rather than paying a large sum of money upfront for software licenses.
So how would you devise the subscription price plans for your first customers?
There are plenty of excellent examples out there from prominent SAAS companies, but you need to realize that they are in more mature growth stages, and you need to be mindful when borrowing their ideas on how to devise your subscription plans.
The following seven tips help you accomplish that.
Design your price plans for the first ten customers
Rather than trying to accommodate everyone, identify your first 5 to 10 customers and design your price plans for them only. This strategy helps you bring context and focus to your business.
Your selection is usually from your existing customers and organizations that you have approached and informed about the product you were developing. If you haven’t done that yet, start making calls and ask to meet their decision-makers.
Perform market research and look for companies that are offering similar services to yours. They don’t need to provide identical services to what you are implementing. For example, a project management app has more in common with a CRM than a food delivery app. Be mindful that these are companies positioned at a later growth stage than you are. Their software is likely more reliable than yours, and they have a higher volume of subscribers. You, on the other hand, need to focus on your first set of customers who prize your company and willing to be your early adopters for a while as you improve your product by keenly observing how your customers use your product.
For your pricing model strategy, what works best for SAAS is often value-based multi-tiered pricing. It’s acceptable if you aren’t making a profit right away. Focus on polishing your product and delivering the best user experience to your small customer base.
Keep it within 3 + 1 price plans
Too many pricing options lead to a situation called the Paradox of Choice. It hinders the decision-making process of your prospective customers. Most SAAS companies offer no more than four options on their pricing page. The last one is often a contact button for enterprise customers who are willing to pay a lot more for a custom hosted solution tailored to their organization. You don’t need to publicly list a price for this option, because it can vary depending on the scope of an enterprise customer’s demands.
You can design the first three options based on resource usage or the number of users per subscription. For example, you may offer three subscription price plans for freelancers, small consulting firms, and organizations.
Devising your subscription plans based on the number of users is reminiscent of software licenses that came with every copy of the software in the 20th century. To be more fruitful, perhaps focus on the number of assets your users can create and charge based on that. The more people signup, the more assets they’ll be producing, and therefore, you can charge more.
Please keep it simple, at least for now
The most straightforward approach would be a recurring monthly subscription until the customer decides to cancel or switch their plan. You may not want to offer annual plans yet, because your software is newly released, and despite all the tests that you have performed in your team, it can still be prone to incidents. Also, implementing complex schemes to bill your customers for usage and the number of users will get in the way of improving your product. Providing billing-related customer service will also become more resource consuming.
None of those circumstances work in your favour when you have just launched your service and working on improving it while gaining traction. You can implement more complex billing schemes in later growth stages when your software is more reliable, and you have more customers and funding.
Mention only the relevant and comparable attributes
You might be tempted to create feature comparison charts with checkboxes; after all, this is the product you have invested in developing, and you wish to tell the world about all it can do. This approach, however, leads to information overload and poor usability.
On your pricing page, mention only the most relevant and comparable attributes because it reduces the time required for your users to make a purchasing decision and therefore improve usability, both contributing to your successful customer acquisition.
Offer a compelling value in each tier
Give a little extra in each price tier to upsell your customers to a higher price plan. While being mindful of your profit margin and sales volume, keep the best interest of your customers in mind.
For example, offer 15% extra storage, an additional number of accounts or assets that they can create for the same price. Feel free to highlight the best value tier to get the attention of your new subscriber.
Some SAAS vendors adjust their second subscription plan in a way to make their third option appear to be the best value. In this approach, customers are mainly choosing between the first or third options. For example, Apple seems to offer three options for its main products, such as the iPhone, iPad, and laptops. In each product category, the second option is a means of upselling their customers towards the high-end product.
Offer a free trial period
No sales and marketing tool is better than letting your prospective customers experience your product and use it least for a couple of weeks. You can always limit their access and functionality until they subscribe to a paid plan.
To impress your users, focus on refining your product’s user experience in every release cycle. Invest in creating informative material that explains the aptitude of your product and take advantage of every opportunity to gather feedback.
Adjust your price plans at least once a year
Revise your subscription plans at least once a year. It is quite acceptable if you make adjustments to your prices to maximize both profits and the value you are delivering to your customers. The sooner you find that optimum spot, the better because making changes to your plans will be more work once you have more people using your platform.
You will realize that in different growth stages, you need to make adjustments to your offerings and price them differently. Payment processing services such as Stripe allow you to create new subscription plans for your new customers while grandfathering your existing customers on their ongoing subscriptions.
Have a successful launch, and let us know if you needed help.