SaaS Pricing :
Pricing is paramount in SaaS marketing and it is this factor that can make or break your business objective. Here is an article to help you understand the SaaS pricing strategies better.
Deciphering SaaS sales models:
Once you have understood the concept of pricing, it is time to move forward to the next level, wherein you decide the right kind of SaaS sales model for your venture. Sales plays a very crucial part in making your startup successful. It is this phase where you acquire your customers, both in quantity and quality. Success is a journey and not a destination as quoted by Arthur Ashe, and it is apt in this case where getting the sales pitch right is more important than the outcome. Because, if you’re treading on the right path, then even if it takes a little longer, you’re bound to reach your destination.
So, let’s try and decipher the different SaaS Sales models and try incorporating the concept in our venture. There are three different models that are designed to suit your company based on its characteristics and objectives.
The types of SaaS sales models are broadly classified as Customer Self-service, Transactional and Enterprise.
The first question that erupts in your mind is “Which model do I choose and how will it impact my business model?” In order to answer this question, let us define the three models with examples.
1. Customer sef service Model:
This model follows a low price, high volume approach. It is quite obvious that if your product/service is positioned at a lower cost and if your customer acquisition involves huge numbers, then this is the model for you. Usually, the pricing of your product may vary between $1 to $1000. Generally, small sized companies or startups take this approach as they lack the ability to initially spend a fortune on sales. In the previous chapter, the terminology of ASP (Average Selling Price) explains this method along with its pros and cons. In this method, a company often prefers keeping free trials or freemium options so that customers convert easily. This model, as the name suggest, believes that customers will service themselves and no support will be provided by the company. You, as the company, need to make things as simple as possible for your customers to understand and follow in order to use your product/service without any hassles. Dropbox is a leading example that uses this method and the world knows that they’re nailing it in the industry. Basically, you need to have appropriate answers for these questions – Do your customers find your product/service’s price justified for its purpose? How expensive is your product/service by the market and your competitors? Is your product/service easy to use and self-explanatory? Does it need a human touch to explain the functions of your offering? Are your lead generation channels ready for high volume and low cost approach? If you have positive answers to the above questions, then there is no doubt that this is the right choice for you!
This model is more customized and flexible and can be altered to suit the needs of each company. You may just seal the deal for a specially designed plan over the phone or email. This sort of method is more suitable for medium sized business or companies a little bigger than that. In this category, your product/service is priced a little higher than that in the previous model. Typically, your product/service will be priced at around $3000. So, you need to justify this increased pricing with enough support like results, testimonials and other case studies that have worked well for your business. Customers in this situation will expect to see trustworthy results before investing a decent sum of money in your offering. If you have good quality material to back-up the high price, then go for it and take this approach. Here, you require to set in order customer support of human assistance to solve customer queries on a real time basis, invoicing, well-revised and well-drafted contracts that instill confidence in your clients about the quality of service before they sign-up. As in the above case, there are a few questions whose answers may help you zero in on your preferred model. Are your customers willing to pay such a high-price for your offering? Does your product/service need customer support facility? If yes, then do you have it in place to satisfy the needs of your customers at all times? Will your customers be convinced and ready to make an investment on an annual basis? Well, these are a few queries that you need to look answers for to make the right decision.
You guessed it right. This is the low volume, high price model where your product is positioned at a high price and the customer base that you’re targeting is lower in volume. This model is for companies that offer sophisticated and high-quality services that justify the huge price tag associated with them. Most of the SaaS based startups opt for the other two models and very rarely go in for this one. However, there are few brands that have complete confidence in their offering and possess a highly complex and valuable tool in hand that they know will fetch the deserved amount. CrazyEgg and Powtoons are good examples of brands that use this model for their sales. Their product is expensive but they do have customers who are willing to pay that price as their offering is indispensable. You will know if you fall in this category, if you have answers to the following questions. Do you think there are enough customers in the market who will be willing to pay more than $100,000 for your product/service? Do you have the facilities to provide extremely good and seamless customer support to your customers? Is your company ready to take on experienced enterprises who have high expectations and demands? Is your product complex and irreplaceable to attract huge amount of money?
From what we have seen already, we know that, while determining the type of SaaS sales model for your business, ASP plays a vital role and deciding your ASP correctly is the key to a successful startup.
A change in your SaaS sales model:
Now, the next stage in this process would be to undergo a change in your SaaS sales model or in other words, expansion. So, what impact would it have on your business and how can you cope with the changes that it brings along?
1.Pricing has to be modified
In order to expand, you have to price your product/service a little higher to fit in the bracket and appear competitive in the industry. Ensure that your pricing is justified with the right quality and trust that your brand stands for.
2.Product/Service has to be competitive
Moving to the next model would imply fabricating a more intense and complex product/service to justify the price that you’ve mentioned for it. Provide compelling features and add-ons to your earlier product that are prominent enough to be charged higher.
3.Marketing strategies to be upscaled
Now that your ASP is changing, your marketing/sales activities also need to undergo changes accordingly. Plan your strategies in order to attract a lower volume if customers but with higher quality. Make sure that you only grab the attention of a niche audience that will add value to your brand and not irrelevant people to just add up to the volume.
4.Working nature has to be adaptive
Scaling up would mean changes in work culture. You are growing and so is your company. So your style of handling employees and co-workers has to adapt and be more encouraging to drive productivity and satisfaction among the people who make your company big.
5.Learning graph has to be maintained
With more things to focus on, learning or gaining more knowledge will take a backseat. However, you must dedicate some amount of time to upgrade your knowledge base and stay update with current trends and technologies.
There are plenty of startups being launched daily, but only a few make it big in the market. Could you be one among the giants? Make smart choices and you’ll know. It is imperative for you to completely understand every aspect of your business and then apply relevant concepts to climb the ladder of success. Select the most impeccable SaaS sales model and channelize your strategies in the right direction to see yourself at the top.