Sales

Shut up and take my money: How to price things so your customers buy instantly

Selling is easy when you know how pricing works

How pricing works for display: public, private, or mixed.

This is the (multi) million-dollar question.

Our research found that over 65% of SaaS companies have multi-tiered pricing models with one enterprise / contact-us tier. Meaning there was some pricing visible on the website while also the ability for a custom price based on your needs. Similar to this example from Cloudflare:

CloudFlare Pricing (Source: CloudFlare)
CloudFlare Pricing (Source: CloudFlare)

Prospects like choice and not all prospects fit into one category.  I’d recommend following the industry trend. Have some of your pricing displayed publicly while also leaving yourself the flexibility to create custom packages for certain deals.

How pricing works: Pricing Psychology

Humans have biases and are prone to heuristics, meaning you want to present logical pricing to them with obvious ‘levers’ to jump to the next price. Here are a few psychological factors you should consider when building your pricing model: Single Option Aversion and Domain Authority.

Single Option Aversion

Behavioural scientist Daniel Mochon posits that buyers are much more likely to make a purchase if presented with more than one option. He conducted an experiment where sellers showed buyers two brands of DVD players. 32% indicated they would buy the first brand and 34% chose the other. But when the participants saw a single DVD player, only 9% or 10% (depending on which brand they saw) said they would purchase the product. This represents a 66% increase in sales by simply adding a second option for the buyer.  

“Value is created through increasing revenue, decreasing costs or increasing productivity

The brain approaches almost all purchase decisions like this.

I would argue this effect only increases in B2B SaaS environments.

Many SaaS companies have multi-tiered pricing pages, giving the buyer several options to choose from. This is well and good, but the real issue is at the end of the sales cycle when the prospect gets one price and package. It can be frustrating to feel empowered with choice throughout the process only to get to the end and find there is only one option.

I’d recommend replicating the self-serve buying experience for your prospects but keeping the price hidden. This way to frame your conversation is “These are a few different packages that suit our various customers, is there a particular tier or set of features/functionalities that resonates with your needs?”

From there you can create and price out 2-3 customized tiers for their needs. These come with the benefit of greater knowledge and the scientific principles of single-option aversion.

Authority Bias

This psychological concept basically means that you can sway people in their decision making with perceived authority. When they sense authority, they envision trust, stability, and success. While this authority bias isn’t directly related to how pricing works, it’s still relevant because it can be a catalyst in pushing sales.

Dropbox employs authority bias on its Dropbox Business pricing page by using engaging copy as well as relevant social proof to draw in prospects. The statement “More than 300,000 teams use Dropbox Business” combined with logos of Dropbox’s most prominent customers makes for a strong perceived authority. There’s also a testimonial reiterating the brand’s authority from a well-established brand in Kayak.

Dropbox Business landing page (Source: Dropbox Business)
Dropbox Business landing page (Source: Dropbox Business)

The decision-maker sees this page and thinks, “If it works for them, it will work for us.”

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