Determining an effective SaaS pricing strategy is one of the biggest challenges your company may face. Added to this task is the frequent disagreement on which department is best positioned to determine price. Depending on who you ask, people often believe marketing, sales, accounting or another team knows what the optimal price is or they have the best perspective for figuring it out.
But the best answer to this debate is that no one department should be solely responsible for setting the pricing strategy for your product. Effective pricing requires a lot of information and, as such, input from departments across your company is essential to strike an objective balance between business goals, costs, customers’ perceived value and your competitive landscape. No one department will have the insights into all of these areas so it’s best to bring it all together when setting your price structure and then have one person in charge of the final pricing decision.
The most successful SaaS companies re-examine the effectiveness of their pricing every six to nine months. Although playing the ‘price guessing game’ (setting your price slightly above or below your competition) may work to some degree, more strategy will maximize your revenue and boost your profit margin. This is especially true as a SaaS company because you have to have a price that accounts for the ongoing value you are providing which is very different from traditional one-time software sales. Instead of maximizing your upfront price, you’re looking to maximize your customer lifetime value (CLV).
This means you need to know not only where your customers are purchasing from but also how long they are staying, what they are using on an ongoing basis and what they are actually saying about your product. In other words, you have more touch points with customers that different departments are responsible for. It can be a challenge to stay on top of all of this information but it is also gives you a huge advantage over one-time sales when it comes to pricing because you can have a much more detailed understanding of how your customers value your service.
Different departments bring different perspectives and interests to a pricing decision.
While crafting an informed strategy is important, it is also vital not to get stuck in an endless analysis. You won’t know if your SaaS pricing strategy will work until you actually test it with real customers. So, be sure to get the insights provided by different teams in your company but also don’t be afraid to get out there so you can start testing.