Ah, the human brain – yeah, it keeps our bodies going (can’t say the same for the knees past 40, obviously).
But it can also use emotions and personality traits to mess us up in ways we might not even realize. Like with self-esteem. Relationships. Pricing strategy.
It’s true – pricing strategy has emotions at the heart of it.
On the surface, the SaaS industry has made pricing a crucial part of driving growth and customer acquisition. And SaaS companies have to strike the right balance between perceived value, affordability, and profitability.
However, all of that has to be balanced against our brains and its mess. Stuff that not only gets in the way of making sound pricing decisions but downright sabotages the whole thing.
Allow us to explain.
Signs your brain’s secretly sabotaging your pricing
There are tons of ways your brain will lead you astray when making the big pricing decisions:
Fear of change
Doesn’t matter how impulsive or free-spirited you are, all of us fear change. Don’t believe us? Then stop being impulsive and free-spirited.
Change is scary, and a pain. Our primordial brains are wired to resist it. But eventually, we have to change our prices. That kicks in fear and uncertainty. Will customers run away? What if they think we’re not worth it?
Stubbornness
Clinging to an outdated pricing strategy like we’d cling to the cool side of the pillow on a boiling hot night is bad for business. Products change. Markets evolve. Customer expectations are all over the place. A closed mind helps no one.
Laziness
Oh boy. The idea of lazy people in SaaS is confusing to us- what are you doing here? This is no place for the weak! But we guess it happens. Complacency is the sworn enemy of progress.
Loss aversion
Our brains feel the pain of loss more than gain. We’ll bet you still remember when you were a kid and your scoop of double-chocolate ice cream plopped right on the ground.
You might fixate on the fear of losing customers, revenue, and good feedback if you change, no matter how great your product is.
Hiding
Hiding’s great when it’s your neighbor who’s electric sander you haven’t returned. But hiding with pricing? You might be all about safety in numbers- jump on the latest pricing trend or copy your competitors. This means you’ve lost sight of your own USP.
If you add up all these things together, they mainly can be traced back to one thing – fear. Fear you won’t make the right decisions. Fear you aren’t worth money. Fear they don’t understand you’re worth the money. Fear of getting it wrong.
It’s easy to forget about all the amazing things we’ve accomplished. Building a SaaS company is no joke! It requires grit, vision, hard work, and commitment.
That’s what makes the brain such an insidious little beast – it can just pick one thing and mess it up.
With Bluefort’s end-to-end SaaS software platform, you can streamline your processes and take automation to the next level, to effortlessly personalise your customer experience.
Stop it in its tracks
Maybe you recognize one of the above signs. Maybe you recognize more than one.
There’s no difference between this type of self-sabotage and wearing a high-powered hearing aid to a fireworks display. It’s always going to be a disaster.
The thing is, there are things that can help turn it all around. Here’s how.
Giving yourself the best chance
After you confirm your market research is all up-to-date, it will be a lot easier to check those emotions and traits making sure they align with what you want to do.
There are specific pricing strategies to think about when you figure out which is the best approach for your SaaS offering.
Selecting the right strategy (or combination of strategies) depends on things like your target audience, industry landscape, competition, and unique value proposition.
So, before we get back to our emotions and the like, let’s get down to business for a second. Here are some of the best-known and most popular:
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Cost-plus pricing
This strategy is simply figuring out the cost of making your product/service and then adding a percentage on top for profit. It’s a straight-up approach, but it must align with the ideal customer’s perception of value. So cost-plus needs checking against the market and competition.
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Value-based pricing
Value-based pricing is based on the perceived value of your product/service in the eyes of your customers. This demands a strong understanding of the problems you solve and the benefits you give. This works better when there’s less competition and demands a deep understanding of your target audience.
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Competitive pricing
This is about altering your prices according to your competition’s offerings. This can be a tricky one because it undercuts your USP. Many businesses use competitive pricing as a starting point, and then change after brand awareness kicks in.
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Tiered pricing
Variety is the spice of life. Tiered pricing means multiple plans or packages at different price points, features and benefits. It can be complex to run, but at least you can cater to a range of personas and encourage upgrades.
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Usage-based pricing
AKA pay-as-you-go or metered pricing, this pricing charges customers based on their actual usage. Though it’s tough for the business to make forecasts, this model is very attractive to those whose needs are more flexible.
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Freemium model
This gives basic version of your product/service for free, and offers features and benefits through paid upgrades. This is a great one for customer acquisition, but requires thoughtful planning to convert free users to paying.
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Captive pricing
Similar to Freemium, it involves you offering your customers a cheap core product and then add-ons and accessories that they will eventually need to maximise the core product.
The Pricing Page (Dun dun DUNNNNNN!!)
A couple of years back, we heard a debate (some would say shouting match with several adult beverages involved) at a conference on whether SaaS companies should have an up-front pricing page.
We’re not surprised it’s an emotional issue. The pricing page is ground zero for fear because a potential customer could run for the hills if they know the prices without first hearing the very slick sales script offered by your CSRs and AEs, right?
The thing is that when done right, a good pricing page can convert website visitors to customers.
But there are elements that need to be included:
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Clear and concise plan descriptions
They should be accurate and easy to understand. Avoid jargon and technical language- your customers probably don’t know it.
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Highlighting key features
Lead with the most important features and benefits of each plan so customers can choose which option is best. Icons or visual cues always help.
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Easy Comparison with Anchoring
Customers love spotting value. You can suggest a higher price first, which makes anything that follows more reasonable. Or offer a slightly high price with a decent offering, but give much more with the higher-priced packages.
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Pricing transparency
Pricing should be upfront because surprises later on make people bounce, fast.
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Social proof
Testimonials, case studies, or customer logos on your pricing page can reassure people you’re worth it.
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Calls-to-action (CTAs)
Make it easy for people to take the next step by including action-oriented, easily spotted CTAs on your pricing page.
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Flexibility and customization with bundles
Give the people what they want- options, flexibility and personalization. Let them customize plans into bundles that are perfect for them- and then as time goes on, they can adjust as needed.
Checking out the pricing on your competitors’ websites will give you information on what they’re doing and charging. And customer feedback pages and forums on the prices will give you great insight.
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How to get over those sabotaging traps in your pricing
Finding the perfect pricing strategy is an ongoing process that requires continuous iteration and optimization. As market conditions and customer preferences evolve over time, it’s essential to adapt your approach accordingly. Here are some tips for optimizing your pricing strategy:
Regularly conduct A/B testing
Fear usually comes from the unknown. We’re not sure what’s going on, so our brains catastrophize everything.
The great thing about testing is that although the wait for results can give a little anxiety, at the end you have concrete results.
Being in the SaaS industry, you are already great at experimenting. That’s how you ended up with your products. You can also extend this talent for experimenting to your pricing- it takes the pressure off you because you can’t get it wrong.
You’re free to experiment with different pricing structures, tiers, and features to figure out what resonates with your target customers. Take the data insights and let that inform your pricing strategy.
It’s competitive because your potential customers have already chosen what they like.
Solicit customer feedback
Some customers are a dream – their feedback shows they love everything you do. And their suggestions are immediately helpful and build on your strengths.
Sometimes they don’t give the best feedback. In fact, they might be really unhappy with a product or process, and they don’t mind shouting it from the rooftops. But at least then you can take this feedback and improve, so that you don’t hear it again.
But wait – let’s be honest here. Sometimes it’s so frustrating talking to your customers that banging your head against a wall made of straight razors would be better.
They’re flaky. They change their minds. They get distracted by your competitors. Their needs evolve. They might not even know what they want. And you’re supposed to get feedback from that?
The thing is that even those annoying situations shed light on their needs and problems. That’s why the hiding has to go.
It’s about listening and asking questions that deepen the engagement with them. For example, maybe the reason they can’t make up their mind about a product is that the package doesn’t offer benefits that they need – or maybe they can’t see how the benefits would work.
But you won’t know that until you talk to them.
When you actively seek input from your existing customers (combined with your research on your competitors’ customers), you’ll better understand their needs, preferences, and willingness to pay.
They are telling you what to do to make them happy. You can fine-tune your pricing strategy and ensure it aligns with their expectations. It builds trust and cuts down your anxiety and fear.
Monitor performance metrics
Whether you do it manually or have an automated software solution, this is an important one. Knowledge will make you feel empowered- especially if you’re a numbers person.
Numbers feel secure. And they cut down stubbornness because true numbers can’t lie. It’s hard to argue against them.
When you keep a close eye on key performance indicators (KPIs) such as conversion rates, average revenue per user (ARPU), and churn rates, you’ll know where you stand. No more guesswork.
These metrics show you how effective your current pricing strategy is. And more importantly, it will help you find what you can change.
Stay informed about market and industry trends
Though this takes some time (and you’ll have to overcome laziness if that’s your Achilles heel), it pays dividends in the end.
If you can’t be bothered to do it, bring someone in to do it or subscribe to SaaS industry newsletters and websites.
However, you decide to do it, keep your eye on industry trends, competitor pricing, and customer preferences. That will help keep your pricing strategy relevant and up-to-date.
Staying informed about where the broader market is moving can help you get over the fear of change because there will be a point where you will HAVE to change unless you want to go the way of Blockbuster and Kodak.
And bonus benefit – the more you enmesh yourself in the industry, the easier it will be to also spot future trends to consider in your innovation and product strategies.
Iterate and optimize
It’s a mistake to see a growth mindset as woo-woo. Growth is great with profit, why wouldn’t it be great for mindset?
Part of it can be down to fear of change or fear of failure, of course. But those are part of any process. And they are at the heart of SaaS. Innovation and change are built right in.
That mindset of continuous improvement can absolutely impact your pricing because you’re constantly refining and optimizing your pricing strategy based on data, feedback, and market conditions.
Remember that pricing is an ongoing process, not a one-time decision, and be prepared to adapt as needed. It’s an ongoing improvement, just like you. Just like your business.
Conclusion
In the competitive landscape of SaaS, pricing can be a make-or-break factor for your business.
On top of that, sometimes our brains can sabotage our efforts – even with things as business-y as pricing.
However, by becoming aware of some of the emotions and personal traits that buzz around our head during the decision-making process, we can figure out if there’s something behind our pricing.
And once we know about our pricing options and how they can help us simmer down the noise inside, the road to pricing success opens.
Don’t let mind tricks get the best of your business. You can craft a pricing strategy that reflects your product’s value and drives sustainable growth. You’re a SaaS company and deserve to profit off your hard work and effort.
The future is yours if you want it!
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