Pricing strategy · Saas

What are the best resources on value based pricing strategy?

Ellen Raynor

February 22nd, 2016

I am looking for current, well researched articles/posts/case studies on implementing value based pricing for SaaS offerings.  

Assuming the cost savings/value can be determined, what rules of thumb are there for sharing in the value that is created?  e.g. vendor gets X% of savings?

Have you seen any good examples of a fixed monthly price plus a variable price that is at risk and tied to the results that are achieved?

Jessica Alter Entrepreneur & Advisor

February 23rd, 2016

Btw, great blog post from Patrick Campbell of Price Intelligently 
http://founderdating.com/what-you-dont-know-about-pricing-can-hurt-you/ who is also an advisor on FD.

Lucie Newcomb Global Marketing & Business Development Leader | Founder| Strategist | Board Member | Advisor | Trainer | Diplopreneur

February 22nd, 2016

HI, Ellen- FYI, our value pricing work (consulting and executive training) is based on the high level work of Adrian Slywotzky (and others); particularly, The Profit Zone. We ground his business design principles and insights within strategic marketing frameworks and applications. Happy to chat further. Great luck!

Bryan CISSP at Microsoft

February 22nd, 2016

Look to EVE (economic value estimation) models to help get you to your price. Inform the model with competitive pricing, as well as conjoint analysis and partworths utility.

Jackson Powell UI/UX Designer & Front End Developer

February 22nd, 2016

Clarity - hire an expert for 30 minutes. It'll cost you around $150. Money well spent.

Jessica Alter Entrepreneur & Advisor

February 23rd, 2016

seems like an advisor that knows SaaS pricing is actually more apt here - pricing is not a one time decision by any stretch.

You can search for advisors by expert areas and markets here 

Lucie Newcomb Global Marketing & Business Development Leader | Founder| Strategist | Board Member | Advisor | Trainer | Diplopreneur

February 23rd, 2016

True, Jessica, but having been steeped in both pricing and SaaS, As an advisor, I can tell you there are definitely core truths. Pricing is as much about Art/psychology as it is about numbers. The concept of "you get what you pay for" runs deep, even across cultures. 

A long time ago, I lost 2 completely different deals in France in the same week (I rarely lose any by the proposal stage) for the same reason: "You must not understand my business because your price is too LOW". Whether selling seats, subscriptions, flat rates, etc. core principles apply though, indeed, more may be needed to complete the scenario.

Glenn Donovan Vice President of Sales (fractional)

February 27th, 2016

Jessica is giving some great insights and while pricing isn't my specialty, i've been involved in it a lot. Just a few quick points:

- Cost based pricing is ridiculous. 
- Value pricing sounds great but in B2B getting to the right value number is harder than you think. 

Stanford's B School used to tell software entrepreneurs to do the following:

1. Dream up the highest price you can and use it.
2. If the client doesn't throw you out of their office, double it in the next proposal until you start losing deals because of it.

Seems a bit off, right? But think about it, it allows you to find the highest value based price. Sure you can obtain some sense of perceived value  by doing interviews and research and really engaging with buyers on the buying journey but their responses are prospective and theoretical. You can only really find a price someone is willing to pay by making an offer at that price and getting a real reaction in a real buying situation. 

There is also a huge psychological aspect to price. People value what they pay for. This is why I dislike freemium models intensely as they essentially delay the value conversation, and in a sense lower the threshhold of value you have to deliver to get the signup, but then SaaS companies kid themselves that they have "200 freemium customers". Uh, no you don't. You have 200 people are signed up for something at not cost and with little effort. That isn't a sale, and is of course why "upselling" is so hard for freemium vendors.

There are limits of course, and the point of experimental pricing is to find those limits and optimize them. My last point? I don't think a lot of analysis yields better results on pricing. I think coming up with a good hypothesis (based on value) and engaging with that pricing and then increasing until you lose is the best way to go. 

Fyi, I help a lot of folks like you with these go-to-market types of issues. Let me know if I can help.