How To Kick SaaS
  • Introduction
  • Forward
  • Who & How
  • The business of SaaS
    • The Business of SaaS
    • Basic Lessons of Saas
    • The Process
    • Parts of a SaaS
  • Validating You SaaS
    • Validating Your SaaS
    • What happens when you don't validate
    • The SaaS Validation Process
      • Why are you doing this?
      • Should you do this?
      • Competition Analysis
      • Buyer Analysis
      • Sales & Distribution
      • Time & Money
      • The Secret Sauce
      • Buyer Categorization By Sales Method
      • The Advisory Approach
    • Validation Success
  • SaaS Build Process
    • SaaS Build Lessons
    • Planning & Costing
      • The Costing Process
      • The Estimate
      • The Scope of Work
      • Information Architecture Development
      • Working Numbers
      • The Project Plan
    • Build Team Roles
      • What To Expect From Your SaaS Development Team
      • Build Teams
      • The Project Manager
      • Information Architect
      • UX Designer
      • Developers
      • Quality Assurance
    • Standard Tools
      • Project Management Tools in SaaS Development
      • Development Environment & Dependencies
      • Remote Development Environments
      • Code Repositories in SaaS Development
      • Monitoring Your SaaS
    • Steps to Developing a SaaS
      • What to expect in SaaS development
      • Systems Setup
      • Creative
      • Project Planning
      • SaaS User Experience (UX)
      • Concept Design
        • SaaS UX Design Case Study
      • Content Development
      • FrontEnd Development
      • BackEnd Development
      • Quality Assurance (QA)
      • Alpha Testing
      • Beta Testing
      • Launching Your SaaS
      • Continuous Integration
    • Things to know and expect
      • You MUST learn at least the basics of Project Management
      • Things you do and do not know
      • How to tell if your development team is working
      • Good, Cheap, Fast. Choose Two.
      • Positivity is Key in Management
      • Storytime: The Story of a Ton of Lost Users and Money!
      • Development is iterative
      • Development Time Increases As Complexity Increases
      • Storytime: Don't Send Me Shit
      • Story Time: The Best of the Best
      • Sunk Costs
    • Your SaaS MVP Pre-Development Build Checklist
  • Appraisement: Pricing Your SaaS
    • Appraisement: SaaS Pricing
    • SaaS Pricing Metrics
    • SaaS Pricing Metrics Glossary
    • Science of Pricing
    • What You Need To Know About Your Customers
    • How To Price Your SaaS
    • Customer Types Case Study
    • Storytime With Brennan
    • Pricing Page: The Most Valuable Page On Your Website
      • Pricing Page Examples
  • Acquisition: Gaining SaaS Users
    • Acquisition: Getting SaaS Users
    • SaaS Traction Lessons
    • Acquiring your first users
    • Getting ready for growth
    • Organic Search Marketing
      • Content Marketing Is An Investment
      • Step 1: Keyword Research
      • Step 2: Content Planning
      • Step 3: Writing, Formatting, & Beyond
    • Marketing Automation in SaaS
      • Marketing Automation Basics
      • Storytime: Learning about marketing automation the hard way
      • Lead Scoring, Tagging, & Triggers
      • Marketing Automation Systems
    • Lifetime Deals
    • Outbound Campaigns
    • Affiliates & Partnerships for SaaS Businesses
    • Narrowing Your Message With Adaptive Design
    • Social Media Marketing
      • Social Media Retargeting
      • Testing your social media ads
      • Social Media Ad Tricks
    • Pay Per Click (PPC)
    • SaaS Software Checklist
    • Email Marketing
    • The Marketing Website
  • Activiation
    • Activation
    • Getting Personal
    • Stalking Your Users
    • Onboarding
    • Training Webinars
    • Onboarding Emails
    • New User Tour
    • Setup Checklist
  • Attrition: Supporting Your Community and Growing Your Business
    • Supporting Your SaaS Customers
    • SaaS Community Building
    • Chatbots
    • Events
    • Swag
    • Education
    • The Knowledge Base
  • NOTES
    • NOTES
    • The best growth hacks no one wants you to know
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On this page
  • SaaS pricing isn’t rocket science, but it is science
  • Pricing Aspects in SaaS
  • Price Sensitivity Meter Questions
  • Methods of SaaS Pricing
  1. Appraisement: Pricing Your SaaS

Science of Pricing

PreviousSaaS Pricing Metrics GlossaryNextWhat You Need To Know About Your Customers

Last updated 6 years ago

SaaS pricing isn’t rocket science, but it is science

In SaaS, pricing is part your marketing, your sales, your system, your upgrades, your conversations, your growth, and your happiness within the business. In some ways, it is the business.

Your pricing model should be based on a , and the people that are going to give you the answers to those decisions are your customers. If you’re not talking to them, you’re not doing your job.

Pricing Aspects in SaaS

There are a number of techniques noted in the book that outline what questions to ask your customers to determine their:

  • Willingness to pay

  • Interest in different features

  • Interest in different kinds of pricing models

As well as what price points create the most sales vs. the most revenue. The SaaS Pricing Strategy book does rely exclusively on the the economist , which is a great place to start. But there are also , which I think are valid.

Price Sensitivity Meter Questions

There are four questions from Van Westendorp’s Price Sensitivity meter:

  • At what price would you consider the product to be so expensive it is not worth buying? (too expensive)

  • At what price would you consider the product starting to get expensive, so that it is not out of the question, but you would have to give some thought to buying it? (Expensive/high)

  • At what price would you consider the product to be priced so low that you would feel the quality couldn’t be very good (too cheap)

  • At what price would you consider the product to be a bargain - a great buy for the money? (cheap/good value)

Rather than delving into how to ask these questions the right way, how to find the right price for your company, and why that price may or may not be right, it would be better if you just read the books I mentioned on SaaS pricing already. They do a great job of exploring this concept.

Methods of SaaS Pricing

What this means is that you are providing value to your customers, so your price should reflect the value you provide. There are other ways to price, noted in both of those books, such as cost-plus pricing (take your cost and add a margin to it) and competitor-based pricing (figure out what your competitors are charging and charge something close). The point is, if you are providing something that is exactly the same as what someone else is providing, they are probably going to just go with the other company.

So figure out how you are different and set your price based on how much money you’re making or saving that client, not on how much it costs you or what your competition is doing.

Especially if you’re sell at the enterprise level, I highly recommend one of my favorite short reads on value-based selling , by Mike McDerment the founder and CEO of . He also happens to be a really nice guy who randomly took me out to lunch one day and schooled me hard on the differences between small business and enterprise accounting systems. But that’s another story.

What delves into is the difference between for agencies. If I was going to wrap the book up into a few words it would be “If you are selling something in a market where the price can be based on the value you provide for your customers or clients, base your pricing on this.” This is also what is recommended in the book noted at the start of this chapter, by Price Intelligently.

scientific model of evidence based decisions
SaaS Pricing Strategy
Van Westendorp’s Price Sensitivity Meter
counter-arguments to this method
Breaking the Time Barrier
Freshbooks
Breaking the Time Barrier
value-based pricing vs. time-based pricing
SaaS Pricing Strategy