Implementing variable pricing axes can help increase revenue potential over time for SaaS businesses.
Aligning pricing models with customer perceptions of value is crucial for enhancing customer engagement and promoting broader product usage.
Deep dives
Importance of Negative Churn in SaaS Pricing
Achieving negative churn can be transformative for a SaaS business, leading to increased revenue from the installed base even after losing some customers. SaaS entrepreneurs are advised to focus on upselling and cross-selling to existing customers to ensure continuous revenue growth. Implementing variable pricing axes or introducing new products can help in increasing revenue potential over time, adapting pricing models as the company matures.
Alignment of Pricing Models with Customer Value
Aligning pricing models with customer perceptions of value is crucial for SaaS companies. Pricing strategies based on metrics like data usage, events, or server numbers can enhance customer engagement and promote broader product usage. Offering consistent and predictable pricing helps incentivize customers to utilize more of the product, supporting long-term business growth and customer alignment.
Psychology of Pricing and Customer Success
Framing pricing strategies to include perceived discounts can positively impact customer engagement and negotiation outcomes. Setting initially high prices with offers for discounts allows customers to perceive added value without feeling overcharged. Maintaining pricing consistency and customer success strategies can lead to sustainable revenue growth and positive customer relationships, emphasizing the importance of psychological factors in pricing.
Significance of Building a Strong Customer Base and Monetization
Building a loyal and engaged user base is essential for long-term success, focusing on continuous product feedback and adoption. Prioritizing feature development based on user needs and feedback can drive product evolution and customer retention. Balancing revenue metrics with product improvement and customer adoption stages is key, aiming for user loyalty before emphasizing monetization to ensure sustainable business growth.
David Skok: General Partner @ Matrix Partners: Why does David believe that all good products have at least one variable pricing axis? How can founders determine which variable they should choose for their product? What are the pros and cons?
Chetan Puttagunta: General Partner @ Benchmark: Why does Chetan believe we have seen a strong decline in the per seat pricing model? What are the major drawbacks of it? What are we seeing replace it? What has Chetan seen work well amongst his portfolio?
Mark Suster: General Partner @ Upfront Ventures: What were Mark’s two biggest lessons on pricing from seeing the hyper-growth of Salesforce first hand? WHat does Mark advise founders when it comes to price anchoring and discounting? How does Mark view the sale of professional services with this in mind?
Amanda Kleha: Chief Customer Officer @ Figma: What were Amanda’s biggest learnings from running the Zendesk pricing playbook? What does Amanda mean when she says that successful pricing is broke up into 3 separate product features?
Brad Birnbaum: Founder & CEO @ Kustomer:Why does Brad push back on the common suggestion of a “no man’s land in SaaS pricing”? Why is innovation in pricing actually detrimental to sales in most cases?
Guy Podjarney, Founder & CEO @ Snyk: How does Guy think about having a large enough base to test pricing strategies? How does Guy think about the balance between freemium and paid? Does one have to come first?