Doubling SaaS Revenue By Changing The Pricing Model

We've found that increased usage is not what differentiates our users (no one hits the imposed limits on their plans). So we're switching to plans that users should be able to read and immediately identify themselves with (Solo, Consultant, Agency)

Would love to chat with you about your thoughts and results if you're interested.

Can I give you a suggestion that's halfway there? There's no reason that your /pricing page has to be the only channel anywhere for getting signups. You might have a particular recommendation specific to a particular audience and give that particular audience just a single option. For example, when I write drip marketing campaigns, I often pitch the #3 out of 4 plan semi-exclusively, and send folks to pages which plug it and only it. (If you want to hear more about drip marketing get on my email list. August will be a fun month for you. If you don't want to hear about email marketing optimization my email list is a very bad place to be for the next couple of weeks.)

This would tend to suggest not pricing backups by weight at all because, crucially, businesses do not value data by weight. 8 GB of bingo cards: doesn't matter if they get rm -rf'ed, I can regenerate them trivially. 200kb gzipped of Appointment Reminder database backups: that literally represents more than half my net worth. The production database for a large enterprise customer? That might trivially be worth $20k+ per month, totally no-brainer, regardless of size.

My most specific recommendation: if the pricing page includes "picodollars", it really shouldn't. (Much love for Tarsnap but darn it I'm right.)

There's a semi-related issue where talking in a particular way can make you seem like The Other to someone, and you don't want to do that, but I doubt the person with purchasing authority is so scared of math that this qualifies. (I might avoid putting a D&D joke on that page, where I would totally do that when talking directly to a geeky audience, if that fits the company culture.)

These very desirable business customers will run screaming from the impending trainwreck of a company which is proposing a) tie your business at the hip to ours and b) we could fold at any stiff breeze.

Which techniques?

Market segmentation and pricing by features? Sure, absolutely. Some people value a certain service more than other people depending on their circumstances, just as some businesses do.

Doubling/trebling your prices overnight and hoping you'll get a similar number of customers all paying several times as much? ROFLOLWAT. These customers are spending their own money, and not only will many of them take their business elsewhere if you try to charge insulting prices, they'll tell all their friends that your service is a rip-off, too.

Obviously it's not really as simple as that. For example, a lot of businesses pitch their prices far lower than market value would support at first. In those cases, increasing the prices to something higher but still reasonable is fine and often quite lucrative.

But you're absolutely right that advice that holds for B2B environments doesn't necessarily work the same way in a B2C context. The starting point and assumptions simply aren't the same.

Optimising for price isn't necessarily being ruthless and unfriendly to customers.

In my experience more people like pricing models like these. It's easier to understand. They know what they'll be spending each month. It saves them effort and work.

I worked with one organisation who just killed out of hand any service that had variable pricing since it played merry hell with their accounting processes. They would much rather pay $99 a month every month than deal with the hassle of figuring out what this random number was on the invoice (because you had to check that that number was the right number somehow - which cost them money in admin, tracking, etc.).

Yes - models like this make some customers unhappy. Some of those customers will be good customers. That doesn't mean that other who go for the new model are unhappy - or being screwed.

Changing pricing models like this are in many cases more a way to resegment / target your market. The revenue increase is just evidence that you're doing it well :-)

Also - money for the company should mean more resources for building a better product for the customer, so a long term win for the customer.

If you can sustain that pattern indefinitely, perhaps not.

If you're getting a quick boost at the expense of your long-term reputation, for example because customers signed up for your service and then you left them high and dry, then I think you should.

Case in point: Around 2-3 years ago, certain recurring billing services made rather sudden changes to their pricing, which very publicly upset a lot of their users. I bookmarked those stories at the time, knowing that sooner or later I would be looking for payment services to use with my own companies.

Recently, that day arrived, and we immediately ruled out anyone who appeared to have acted in a way that screwed over their existing customers. I have a list of names of some of the key founders who were identified at the time, and no company of mine will ever buy any service from any company of theirs. Given that they have demonstrated that they are likely to be incompetent, unreliable, or both, there is simply nothing they could ever say or do that would make us trust them with any important part of our operations now.

that's just because you aren't big enough. Amazon has been caught testing prices previously, and there were a lot of upset people. Noticing the test isn't what caused the outrage.. wait until you have thousands of people who find out they paid more than another person for the same item (ie in their minds: were ripped off). Then you'll see how consumers feel about your test.

What do you do when your old pricing scheme is no longer profitable?

I think HN has been collectively in denial on this kind of point lately. Yes, services offering real value should charge commensurate with that value. Yes, it's lovely if you're Patrick or Thomas and in B2B world where you can whack up your prices and hope whoever is paying the bill isn't spending their own money.

Newsflash: If you're dealing with a bootstrapped business, it might well be that the person paying the bill is spending their own money.

Newsflash #2: There are dozens of companies pitching useful-but-not-that-useful tools and services to these bootstrapped businesses. If you spend $100/month on this one, and $300 over there, and $150 on the next one, and ten more after that, and then you multiply it by 12... Well, before long you're spending on the same kind of level that it takes to hire some office help or to run a long-term marketing campaign with a significant level of funding or for that matter to hire in a guy who knows what he's doing for a few days to build your own customised versions of a lot of these services.

In short, if you think the ability to monitor a couple of production servers is worth $1,000+/year to a bootstrapped company, you're crazy. Yes, it's a convenience, but you're talking about a service that could be built using a couple of widely available building blocks with a tiny fraction of the running costs, and frankly to a business at that stage in its development it is highly unlikely that a server falling over until the morning is going to cause any real long-term damage anyway.

When you're dealing with relatively time-rich and cash-poor early stage businesses (OK, time-poor as well because they're trying to build the business, but that's not really the point here) you can't just dismiss the cumulative effect of all these SaaS gadgets. They add up, and if you want to know why so many small businesses fail, I expect not controlling costs is probably somewhere around #2 or #3 on the list.

Does that mean bootstrapped companies are bad customers for these kinds of services? Sure, maybe it does. If there isn't enough in it for both sides to make it a deal worth doing, it's not time to do the deal yet.

I'd say offer the new price to all and get happier clients. If you can't afford that then why are you lowering prices in the first place?