Like all businesses, SaaS startups need cash to survive and be sustainable.
A good SaaS product pricing strategy plays an important role in this, and can be one of your biggest growth levers—yet it is often improvised, or treated as an afterthought.
Note: this section is based on a pricing workshop held by Patrick Campbell from PriceIntelligently during our XAwards event.
The full video is embedded at the bottom of the page.
The average amount of time spent on pricing amongst companies is a mere 8 hours total over the life of the business. This is a phenomenal realization because you have to ask yourself: can your business be successful if you only spent 8 hours on product, marketing, or sales? The answer is most likely no. So you shouldn’t only spend 8 hours on pricing either.
Patrick Campbell
Co-Founder and CEO at Price Intelligently
A decade or so ago, starting a company was harder—but with fewer competitors, it made sense to go all-out on
When you put too much focus on acquiring new customers, you neglect two other strategic pillars: making more money per each (monetization) and keeping your target customers around for a long time (retention). But to grow your SaaS business, improving monetization and retention has two to four times the impact of just sticking with acquisition:
SaaS companies that are primarily acquisition-focused invest their time, energy, and resources into bringing people on board, but later miss out on the opportunity to find out important data points such as what value proposition drove people to their core product, and what kept them there.
The same logic applies to your startup: if you don’t have a clear sense of which customers you are getting, how can you know what to build, or how to price it?
Gathering customer data helps you understand the general makeup of your customers and quantify the value people derive from your product, so you can drive your pricing strategy accordingly.
Surveys are a very effective and relatively fast way to obtain information, but you need to be smart and intentional about the questions you ask. Standard survey templates include demographic data points such as age, gender, location, etc., but behavioral insights are more useful for pricing purposes.
If you need some additional inspiration, you can get started by taking a look at the survey questions we love asking our Hotjar users. After you send out a survey and collect all the answers, you can always follow-up with a few customers using the in-person interview formats we covered in the chapters on positioning and product-market fit.
If no-one has paid for your product yet, pricing it is hard: when we launched Hotjar, we simply picked a number that looked like a no-brainer and put little extra thought into it—which is why now, two years later and with over 180,000 websites using us (and all the customer data that comes with it), we are in the middle of refining and updating our pricing structure.
You can also get customers involved more explicitly by asking ranged survey questions to discover their ‘price sensitivity’. This model is known as the Price Sensitivity Meter (PSM) and is based on four questions that let you derive the different thresholds of your customers’ willingness to pay for your new product/service.
Once you have a sample of data in place that is highly representative of your whole customer population, plotting the answers onto a graph will help you visualize an optimal price band. This is a more advanced process, which Patrick Campbell explains in the video below (starts at 39:50):