Questions

We are launching a B2B SAAS based Online platform which offers different products to clients for different application areas. All these products are stand alone and not connected to the main offering. Currently We have 3 plans which is based on Number of users. Higher plans have additional features like whitelabel etc. We have 4 different add on products which can help the same clients in case they need it. So instead of opting it to all, can we have it as an add on with separate price for each. So instead of clubbing all products and offering under one plan or one pricing, we can allow clients to pick and paying for all add ons they feel is required. So client X who wants only One product pays only for that and Client Y who needs all products pays for all 4 but at a special discount. 1. Does this kind for pricing work in SAAS? 2. Is it better for SAAS conversion to have all products offered to the client).

This is a classic pricing- and positioning problem, and in the SaaS-environment you can do lots of stuff with it that is harder in traditional businesses.

First off, consider the lessons from pricinglessons.com - they are a good starting point before you build your pricing structure, and they also include considerations on product quality. http://stefanmichel.typepad.com/.a/6a011570229a53970b019104666b84970c-pi

I think you should take the following into account in your work going forward.

- Different Pricing Plans for Different products makes excellent sense. Price differentiation as a great way to go, and you want your customers to choose. But don't make it overly complex (as we see f.eks. in insurance).

- It makes sense to group your offerings, but make sure, that the products are bundled in a coherent and value adding way, that fits your clients needs. Think about how your customers will use your solution. Perhaps start by offering the bundled product over the phone to a few pilot users, and try to understand their price sensitivity and will-to-pay. Once you launch it on the website, it will be harder to change.

- It could make sense to build a simple structure as you describe, where one package costs x, while 4 packages cost 4x minus a discount. But the discount has to count for something: Expected increased usage or increased loyalty? Advantage in distribution? Larger margin for you?

- In my view - especially in SaaS, pricing has to be fair and transparent, as customers have to quickly understand the structure. While it is important, that you find the optimum price, this also has to work in real life, and you have to be able to stand up for and explain your pricing structure, although product offerings get challenged less than service offerings

- Don't die from maintaining a complex IT-infrastructure to support your pricing structure - instead spend your time making your offering and positioning better, and improve fencing between the products (see pricinglessons.com for fencing definition, or search Stefan Michel Fencing HBR for an introduction).

- Make sure you capture all data, that will document the customer journey from consideration to quote to conversion. Otherwise, you cannot adjust your pricing and nuance in the future as you produce new offerings and the market changes.

If you want to discuss this further, I will be happy to set up a call as pricing, positioning and business model optimization are of great interest to me!

Best regards
Kenneth Wolstrup


Answered 5 years ago

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