Test and Adapt - Deepstash
Test and Adapt

Test and Adapt

After saying all of this, you don't have to, and probably won't get it right first time. When you first go to market, irrespective of how well prepped you are, how well understood the market is, the chances are your pricing model will need to adapt as you grow and the market changes. The top tip that I would advise to here is that it's a lot simpler to reduce your prices than it is to increase them!

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MORE IDEAS FROM 8 tips on setting the right price for your tech service

Understand the market

Now, just because you're in the same market as your competition, it doesn't mean you have to copy their pricing strategy, nor should you look at competing on price. However, you should leverage the work that they've done to understand their buyers, and the psychology behind it.

Look at how they've segmented their customers (small, medium, enterprise ...). Understand how their pricing scales. Do they increase pricing based on:

  • features
  • users
  • business size
  • other consumption-based metrics

If there's a well understood theme across your market, you should probably consider adopting it.

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Understand your costs

There’s no need to go into this too much as for any business owner, this is 101 - but it is always the foundation of getting your pricing strategy right. Ensure you understand how much your product has cost to develop, how much it will cost to deliver and how that cost will scale as more clients come on board (more servers, more support staff etc).

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Perceived Value

So many technology companies go to market competing on price rather than value.

You definitely don’t have to be the cheapest, however, you also don't need to be the most expensive.

This largely comes down the phrase "If it's that cheap, it must be rubbish" - I've seen it time and time again, where SaaS companies have struggled by going to market with a super cheap pricing model, then had massive success by raising their prices considerably! Who knew?!

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If you're about to launch a SaaS platform, you can't really go wrong by analysing how some of the most successful businesses have approached their pricing matrix. I know it's cliché, but they will have spent a lot of time and money in understanding the customer, their psychology, the market, the budgets and many other factors.

SalesForce are masters for pricing; at first glance you might think that their pricing model is simplistic - fundamentally it boils down to a bronze, silver, gold style model. However, the way they've constructed the matrix heavily encourages you into the next level.

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When you first take your product to market, beyond the price, clients also want to see proof points and case studies. If they're the first customer, this will always make them nervous, particularly if there's a lot of money on the line. This is where the old adage of "No-one ever got fired for buying IBM" comes in. Choosing the ‘safe’, known option as opposed to the challenger is a defensible position for the person signing off the budget.

Don't be afraid to battle and do deals to get your first 20 clients in and using your product. The information you'll get from them will be invaluable. 

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I got a call from a large global business that liked the product, and wanted an unlimited license for their 10,000 employees and £500k/mo wasn't the budget they had in mind! Nor should it have been!

Our pricing model needed to adapt to allow businesses of different sizes to pay more, but scale relative to the value the solution was delivering them. We implemented a system where you had Up to 5 users, Up to 15 users, Up to 50 users and More.

The price ceiling is about understanding the amount of money you're saving the client. Most B2B SaaS solutions top out at about £10k/month/problem solved.

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The Existing Budget

Think of this as putting yourself in the shoes of the company exec pitching their budget - what saving or benefit will they need to demonstrate to win the approval of the CFO? Importantly, which exec will be the one to best position your product to get the green light on budget?

The top tip here is to work out where the money will come from in your target clients - which line item in which budget is going to give you the revenue you need, and who is in charge of signing it off - you'll sometimes be surprised, because it's not always the person you think it is.

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RELATED IDEA

How to price your products and services

Pricing is something we all do, but we don’t think about it very much.

Most startups focus on having the right product before finding the right pricing strategy for their business. That might be the wrong order.

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Madhavan Ramanujam, board member and Partner at Simon-Kucher & Partners (a global strategy consulting firm) answered this question during Office Hours at Redpoint in Aug 2021. He is the author of Monetizing Innovation.

Massive companies have been built using both pricing structures: Salesforce and Adobe bill per seat while Snowflake and Twilio charge per use. Deciding which to use involves considering factors such as customer preference and competition.

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The "Consumerization" of Enterprise

Slack, Dropbox or Zoom have applied specific strategies to win customers – tactics that resemble those of consumer companies rather than enterprise firms.

The go-to-market playbook for early-stage B2B founders:

  • Taking a consumer approach to enterprise
  • Product positioning through category-creation
  • Generating repeatable and non-associated revenue (e.g. “crossing the penny gap”)
  • Building a strong sales organization

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