Getting your pricing right is an important part of succeeding in the SaaS space. There’s an ever-growing supply of competition, and consumers are becoming more particular about how they choose to spend on services and solutions.
If you don’t have the flexibility to adjust your pricing in ways that make sense for your business and your customers, you're missing out on profits.
Take a moment to consider the signs. Are you:
- frequently fiddling with your product and pricing catalog to accommodate customer demands
- manually adjusting invoices, which is eating up time and resulting in errors
- foregoing pricing updates simply because it’s too much of a headache to make changes, or
- losing customers to competitors with more attractive pricing models?
If any of these—or all of these—sound like your business, your pricing is probably hurting rather than helping.
Here are five key actions that flexibility and agility make possible when it comes to your SaaS pricing strategy, each of which has a potentially huge impact in your business’s profits.
1. Optimize your SaaS pricing strategy as needed.
A recent study found a modest 1% improvement on pricing resulted in an 11% increase in operating profit. That’s hard to ignore.
This finding is far from surprising to Allan Wille, Co-Founder of Klipfolio. Originally, the custom dashboard platform’s creators set up its subscription pricing based on the number of users on an account. Four years later, they decided to A/B test their existing pricing model against one based on the number of dashboards created on each account.
- The existing pricing model was holding their customers—and their SaaS business—back. By pricing on the number of dashboards created rather than the number of users, the average starting subscription value rose significantly.
- That’s not all. Klipfolio’s customers started adding more users who started building more dashboards, causing the SaaS business’s revenue to rise.
- Now, all new Klipfolio accounts are activated under the new model and existing customers have the option to switch.
To replicate this kind of pricing success, SaaS businesses need to be able to A/B test various pricing models and price points, make bulk pricing updates in real time, and customize pricing on an individual customer level.
By comparing the effectiveness of different models, and with the ability to easily make changes on both a large and small scale, SaaS businesses can frequently iterate on pricing and ensure ongoing alignment with value.
Pricing flexibility makes this possible.
2. Repackage and price your SaaS offerings in ways that makes sense.
In 2019, MailChimp decided to transition from an email marketing platform into an all-in-one marketing automation platform. The move made sense from a business perspective. MailChimp had experienced a lot of success supporting customers’ email marketing needs, but the platform’s real value was in its audience reach—a reported 4 billion at the time.
The business needed to completely revamp its pricing strategy to prepare for this shift.
MailChimp repackaged its offerings to center around audience reach, offering customers a wider array of tools for reaching and engaging their potential leads. With improved offerings, of course, came pricier tiers and increased revenue.
You don’t have to reinvent your entire subscription model to benefit from repackaging. With a flexible subscription catalog, you can package and price offerings to better represent your value without going full-on MailChimp.
Of course, if the day comes that you do need a complete overhaul, catalog flexibility helps with that, too!
A flexible catalog enables pricing flexibility with subscription plans. If your business offers physical goods or other one-time charges in addition to subscriptions, for example, your catalog needs to be able to accommodate that.
If you find yourself continually creating and canceling new catalog items to represent non-subscription charges, it’s time for more flexible solution.
Ensure your pricing is always aligned with the value your products offer.
3. Increase acquisition and retention by meeting changing customer demands.
Being flexible with pricing enables your SaaS business to satisfy customer and market demands as they evolve.
For example, your marketing and sales teams should be able to get creative with offerings both broadly and at the customer level, and your business should be able to follow through on them. This is the core of how your business brings in leads and wins deals.
In 2020, many SaaS businesses used discounting as a strategy to weather the economic downturn. Doing so enabled them to gain market share with a ‘land grab’ effort while customers on a budget searched for deals.
Through these efforts, many businesses:
- met acquisition goals
- beat competition, and
- reduced churn.
Low cost brought customers in, and useful products and features retained them when the discounts came to an end.
SaaS businesses with flexible pricing can also satisfy the changing needs and buying habits of customers as well as pivot to capture new market segments. With giants like Twilio, AWS, and Stripe leading the SaaS shift to usage-based pricing, businesses need the ability to offer pricing that matches customer demand for a variety of usage models.
Usage-based and hybrid pricing models allow the kind of low-cost or free access SaaS businesses need to “land-and-expand” their user base. This can feed into a product-led growth strategy, where acquisition is driven by end users telling their bosses about the most helpful SaaS products for their job.
Flexible pricing is a must for SaaS businesses to leverage this increasingly popular and successful approach.
4. Build recurring revenue growth into your pricing strategy.
Many SaaS businesses include price uplifts in their contracts, but then struggle to implement them on a consistent schedule. This leads to all kinds of trouble. If an uplift is missed, revenue begins to leak. If your team catches this kind of error and tries to correct it later on, you risk upsetting customers.
Modern billing solutions give your SaaS business the flexibility to bake this type of customer expansion directly into subscriptions and then automate the process on whatever schedule you set—for example, maybe once after the first 6 months, or every 12 months indefinitely.
You can even apply uplifts in bulk:
- across all subscriptions on a specific recurring product, or
- set unique schedules for individual customers based on the details of their contract.
By automating uplifts, you’re automating one facet of farming your customers and you ensure predictable recurring revenue growth happens without lifting a finger.
5. Retain more customers at renewal time.
Finally, when it comes time to renew, flexibility in pricing means you can meet customers where they’re at to ensure they stick around. For example, you can adjust contracts to more closely adhere to specific customer needs or offer a discount at every renewal.
By showing customers you’re willing and able to be flexible, you increase loyalty and improve retention—both of which lead to an increase in customer lifetime value (LTV) for your SaaS.
Pricing agility makes it possible to build strong customer relationships and maintain a business culture centered around value.
Increase your SaaS business’s revenue with pricing flexibility
Making updates to pricing results in positive results for about 98% of SaaS companies. But if you aren’t able to make updates and adjustments with ease, you miss out on the potential benefits.
Adding agile recurring billing software to your technology stack gives your SaaS business the flexibility it needs to match value and pricing. This makes it possible to optimize your SaaS pricing strategy, adjust your contracts to meet customer needs and market demands, and increase revenue through acquisition, retention, and expansion.
A digital transformation to a modern SaaS billing solution like Fusebill makes it easy to do all this and more. With customer-level customization and bulk action capabilities, you can set your business up for recurring revenue growth and boost your profits, no matter what changes the future brings.