Pricing it right


2

I don't have retail experience and what I need to price is SAAS, however I am aware of the psychological factors when it comes to pricing. $19.95 is a heck better than $20, even though the price is basically the same.

Currently I have 3 subscription levels:

  • $9.95 / mo -- BASIC
  • $19.95 / mo -- PREMIUM and
  • $149.95 / yr ($12.99 / mo) -- PRO

I do have subscribers on all levels... I don't intend to drop PREMIUM, because this is a great value, however, the Annual price looks a little out of order. I know some offer 10 - 20% if users pay annually. In my case it's more of 25%. I am starting to lean towards $179.95 / yr ($14.99 / mo). Or is it too steep?

Pricing Saas

asked Oct 12 '11 at 07:00
Blank
Usabilitest
1,698 points

2 Answers


2

You realize cost savings for having people pay on an annual basis. These cost savings include not having to maintain monthly billing. You also have customer service/retention gains when you are not having to "resell" the product every month. You also have the cash flow advantage of having the money in your bank to support your business up front. These cost savings are passed on to the customer through a discount. Make sure you are not passing on more than you are actually saving.

I like it when the annual offer communicate it as a special -- like 12 months for the price of 10, or first two months free. Makes it seem to me like I am getting more.

I can even fake myself out on my own services.

answered Oct 12 '11 at 12:34
Blank
Joseph Barisonzi
12,141 points
  • I like the idea of expressing the annual price as a free month or so, instead of cheaper price per month, which is just a few dollars. Great idea!, thanks. I cannot make it sound like they are getting 2 first months free, because they are actually billed right away. Thanks for bringing up customer quantization costs. Yes, this is an important point to keep in mind. – Usabilitest 9 years ago

1

I find the presentation confusing, to be honest.

Now, please excuse the shouting, but your question and your website both capitalize the product names, so I'll follow suit.

You have 'BASIC' - $9.95 per month. Let's consider that the baseline offer.

'PREMIUM' offers three additional features, and extends one feature (data retention 6 months not 3), priced at $19.95. Let's take as read that this is good value - you'll already know from your analytics. So this is very much the standard 'level up' product.

But then, there's 'PRO.' PRO is feature identical with PREMIUM, but extends one feature (data retention 12 months not 6), and is charged annually in advance. So the question is, what is PRO? Well, you need to decide.

It could be another product level - and as it's another column in your table, it has its own tick boxes, and it has its own name, I think that's the expectation. But it's presented as being priced below PREMIUM, which is confusing.

From your question, what you seem to mean PRO to be is not a distinct product level, but simply a payment option: you want to reward a 12 month up-front payment with a discount.

If that is what you want, then say it. Offer it as an option within PREMIUM, and present it not as a freestanding dollar amount but as a discount or bonus - $25 off, or 10% reduction, or 12 months for the price of 11, or...

And then you need to decide whether you should make a similar offer on BASIC. I'd argue that if the term discount you run with is moderate, you should offer it on either BASIC or PREMIUM.

You need to make the presentation coherent before you can optimize the price.

answered Oct 12 '11 at 20:47
Blank
Jeremy Parsons
5,197 points
  • Yes, makes sense. I need to separate a term more clearly. Honestly, BASIC is there as a budget alternative. I do not want the cost to get in a way of at least trying out the tool. PREMIUM is the full package and might be suitable for occasional users. PRO package is for the regular users, thus a discount in exchange for commitment. Lemme get back to the drawing boardl. – Usabilitest 9 years ago
  • OK, I made some revisions. How about now? Am I getting any closer to clearing confusion in terms of presentation? – Usabilitest 9 years ago
  • So for me, I'd still say PRO isn't a product, it's a purchase option for PREMIUM. The explanatory text - 12 months for the price of 9 - is nice and clear – Jeremy Parsons 9 years ago
  • That's exactly what PRO is. It's a version of PREMIUM but for frequent users. I think I would like to simplify it further, but for now I think I'll just keep it that way. I split PRO to make a distinction of monthly vs. annual payment option. Thanks for the insights. – Usabilitest 9 years ago

Your Answer

  • Bold
  • Italic
  • • Bullets
  • 1. Numbers
  • Quote
Not the answer you're looking for? Ask your own question or browse other questions in these topics:

Pricing Saas