So you’re trying to create a pricing model, whether for a new offering or to make more money from your current offerings. You’re probably wondering where to begin and how pricing works.
The information below will serve as a practical guide on how pricing works and how to price your products and services. While these considerations are primarily geared towards B2B SaaS solutions many apply to different industries, marketing strategies, and sales cycles.
This piece will focus on four main considerations
- Identify your early adopters and purchasing model
- Creating a value framework
- Displaying pricing
- Pricing Psychology
Identify your early adopters and a purchasing model
When starting to think about how pricing works for your business, it’s critical to identify your early adopters. In SaaS, early adopters are often labelled as the Ideal Customer Profile (ICP).
The first step is to create a hypothesis and definition for who these early buyers might be. At a high-level these folks can be defined as the “perfect customer” – they’re experiencing the pain your product/service solves and they’re willing to pay for it.
Early adopters are naturally risk-takers and are willing to grow with your product. They often want involvement in the product roadmap and offer feedback as you build out your offerings.
- First, they should enable you to easily qualify or disqualify a prospect.
- Second, you should easily be able to communicate your ICPs so they can find others like them.
- Third, they should be easily defined so you can identify them quickly.
A practical ICP might be: VPs of Sales at venture-backed companies who use HubSpot as a CRM. With this defined you can use a tool like LinkedIn Sales Navigator to filter for VPs of Sales, Crunchbase to cross reference how much venture funding a company has received and then attend HubSpot’s Inbound conference to talk to these folks.
Joel York, Chief Marketing Officer at Accellion, defines three key sales models in SaaS: self-service, transactional, and enterprise. To best explain these, I’ll use examples of companies that use each model:
- A tool like Yesware would be self-service. It is low cost, purchased online and the onboarding rarely involves a sales representative or onboarding specialist.
- A tool like MailChimp qualifies as transactional. It is a larger purchase, touches multiple stakeholders, could involve some integrations and you might interact with a company representative as you purchase and onboard.
- Salesforce would qualify as an enterprise purchase. It involves multiple stakeholders, is at a higher price point, and is typically sold through the Sales Development Representative (SDR) and Account Executive (AE) model.
Defining ICP and a purchasing model are crucial steps to figuring out how pricing works for your business. They’ll enable you to ask the two questions below and form the basis of your pricing model
- What other solutions is my ICP currently using and how much do they cost?
- Which purchasing model does my solution fit into?