SaaS pricing is a strategic move, not guesswork.
Right now, the most common way of setting up SaaS price is copying the next guy, hoping it sticks.
Spoiler alert: it doesn’t.
Instead, it leads you blending into the background or out-pricing yourself.
In my experience, taking a customer-centric approach is the right way to go. A method that focuses on value and simplicity.
Today, I’m going to show SaaS founders how to set up the right price to maximize profit and growth in 4 simple steps.
So, let’s jump right in.
Step 1: Choose Minimal Pricing Tiers
The less you confuse your target customers, the better.
You must keep this principle in mind while doing your SaaS pricing.
Start with the basics. Too many options confuse everyone.
Keep it to as few as possible to streamline the decision-making process.
In my opinion, the best way to do this is to have only 2 pricing models in the beginning.
You should have one free price tier and one paid traffic tier.
Based on the kind of product you have, the paid tier can be a monthly or annual plan.
Step 2: Use Smart Pricing Metric
I’m a fan of charging more as people use your tool more.
Your pricing should grow with your user’s engagement. You need to find a key metric that reflects the value they gain as they use your app more.
For example, if it is related to occupying storage, you can charge more as customers need more storage. If it is related to involving more people in the process, you can charge more for more seats.
Step 3: Identify the Right Pricing Point
Some SaaS founders are skeptical about how customers are going to react to the SaaS tool.
Because of this, they charge too low and only attract tire-kickers.
On the other hand, when you charge too high, you deter potential early adopters.
You must avoid the extremes when it comes to pricing your SaaS.
Aim for a middle ground that signals value without being prohibitive.
Step 4: Offer Free Plan & Trial with Proper Considerations
Your free plans should serve as a stepping stone to paid upgrades, not a final destination.
Use free plans wisely.
Encourage trial sign-ups by lowering barriers, like not requiring credit card details upfront.
You need to give them a taste of the good stuff that leaves them wanting for more.
Both the free plan and free trial must leave enough space to form a habit of using your tool for the customer.
This way, your paid plan won’t strike them as a shock at any point.
One Last Thing: Your trial period should depend on how much time it takes the customer to realize the value of your tool. For some SaaS, this may be achieved in 7 days. For some others it might take 90 days(i.e. Slack).
Wrapping Up
Keep your pricing strategy clear, concise, and user-friendly.
As subscription is the only way for you to make money, your price should set the stage for further growth without overwhelming your audience or yourself.
Also, you need to bear in mind that this pricing is only to attract your first 100 users.
You can always modify your pricing model later once you understand your users better and how they derive value from using your product.
That’s it for today.
See you next week.
P.S: If you’re struggling to grow your SaaS to 100 customers, there are 3 ways I can help you:
➡️ 1:1 SaaS Growth Power Hour
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➡️ Content + Engagement System for organic SaaS growth
Just drop me a message.