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Pricing page hygiene: How to price your SaaS product right?

According to the Forbes article, one of the top reasons why so many startups fail is pricing issues.

Why does this happen and how to avoid this?

In this article, I want to cover one of the hottest topics in the SaaS industry — How to price your product?

My name is Arthur and I'm one of the Offermy founders. Last 7 years I have spent working in big companies (Ask.fm, AMZScout, Printify), have provided hundreds of hours of consulting services for various companies, and have worked on my own startups. What do I do? I do Product Design, in other words, I build digital experiences for people like you.

For most of my career, I was interested in digital product monetization and how to perfect that experience. After hundreds of iterations on perfecting the pricing page design, I have come up with the perfect algorithm that will help you to price your product right.

Let us start with the basics:

Imagine that you have built the product that people want to use. Why do people want to use your product? Because you are solving a problem they have. How many people will use your product will depend on how big and frequent the problem is. When you are solving a problem people have, they will vote for your service with their money.
When your product is ready to be launched you will need to set the right price for it. If the price is too low you will lose potential profit. If the price is too high you will also lose potential profit. So the question is how to find the balance?

The short answer is — you need to test a lot to find it.
How to do that?

Step 1: Do the math

The starting point of your journey is how much money you spend to run the product. Calculate all your current and potential operational costs to know what is the minimum profit you should get to stay alive. Most probably, when starting you will have pretty low operational costs, but think carefully about the closest future.

Step 2: Initial pricing

To come up with your first pricing hypothesis you need to talk to your potential customers. Conduct as many user interviews as possible to discover their needs, how your product is solving their problem, how big is the problem for them, and how frequent it is? Showcase your product and try to figure out how much they are ready to pay for your product by asking the right questions. You will discover how much they think they are willing to pay, but you will not know how much they are really ready to pay!
- To understand which questions to ask read this book as a starter. Also, I really recommend you watch this tutorial.

Step 3: Spy on competitors

This one is pretty simple. Just check what prices your competitors have to have an understanding of what people already are paying for similar solutions.

Step 4: Create your first pricing page

Build your first pricing page with your hypothesis in mind. Let's imagine, that after tons of user interviews you have identified that the initial price could be USD 11.99.

Step 5: Test potential direction

Put 1-2 or even 3 more pricing options around your initial price. Offer different features for different prices or faster customer support, etc.
Step 6: Analyze your data

The numbers will tell you do people buy the cheapest plan only, or some people are willing to pay more for a slightly different set of features. As a result, you will know what people are ready to pay for your solution and which plan is the most profitable.

Step 7: Narrow your prices

Once you have the data you will know where to move and what to optimize. Set up several versions of your pricing page with slightly different changes in your pricing and launch it to different segments of your audiences. Optimizely will be perfect for that and don't forget to target only new customers. Start to test each plan separately, one by one.

Your current pricing — USD 4.99 / USD 11.99 / USD 24.99

  1. Option 1: USD 5.29 / USD 11.99 / USD 24.99
  2. Option 2: USD 5.49 / USD 11.99 / USD 24.99
  3. Option 3: USD 4.79 / USD 11.99 / USD 24.99
Do that for each of your plans, gather data, and analyze the numbers. In the end, you will see what price is giving you more revenue.

Step 8: Various audiences

Your product is used by various audiences, the same as most of the products, you use in your daily life. There could be small companies, students, teachers, bloggers, etc within your customers. They all wish to use your product. But they all are ready to pay a different price. The question is do you want to lose part of your audience because the price is a little too high for them? I believe not.

Same as booking.com, airline companies, or even fashion brands you could offer your potential customers different pricing tiers. How to do that?

You will need identifiers that will help you to do the profiling of your customers. Ask questions to your customers when they sign up.

- What do they do?

- What is their income?

- What is their goal?

- etc.

P.S. In case you know how to reach your different audiences via special sales channels create a dedicated landing page for each audience. Each will offer personalized prices.

Step 9: Define prices for each audience.

Test, test your prices again as in step 7. Go for numbers and see what is the perfect price for each of your audience segments.
Now you have perfectly optimized pricing personalized for each segment of your audience.

I'm sharing this because I want to help you to save time and money. But I want to do more. That is why I'm building Offermy. It will help you find the perfect price, target different audiences, or simply convert the pricing page in a much shorter time without code.
Our team is planning to launch the public beta in June and you could join the waitlist below.
The next articles will be on Price personalization and Price localization.

I will be happy to answer any questions, receive any feedback simply talk with you! You can reach me at [email protected]

Cheers!
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