7 Tips for Pricing Your SaaS Product

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7 Tips for Pricing Your SaaS Product

Gauging how to price a SaaS (software as a service) product can be tricky, especially if you’re a newer entrepreneur. So where do you start?

From your own costs to perceived market value, there are a few key metrics to keep in mind. To find out which factors were the most important, we asked seven founders and YEC members their best tips for new entrepreneurs who aren’t sure where to set their price points.

Know Your Operational Costs

Phil ChenIn order to properly price a SaaS product, you must have a complete understanding of what it costs to provide the service. Entrepreneurs often do not understand their operational costs and price their SaaS products improperly, leaving little margin for profit. Fortunately, technology operational costs tend to trend down, helping keep your margins healthy over the long run — that is if you price your service properly from the start.

– Phil ChenSystems Watch

Perform Continual Tests

josh weissRun multivariate tests with several different pricing options and see which has the best results.

– Josh WeissBluegala

Price With Margins in Mind

Firas KittanehAvoid being the cheapest offer in your industry. You’ll never find sufficient margin to support strong marketing, excellent customer service and overall growth. Instead, start pricing your product with an incredibly healthy margin (after all of the costs are considered) and if need be, discount later to target a more price sensitive audience. Remember, it is generally easier to lower prices than it is to increase them.

– Firas KittanehAmerisleep

Do Customer Interviews

doreen-blochDoing prospective customer interviews is a great way for a new entrepreneur to figure out how much to price his or her SaaS product. This allows you to discover how much a customer is willing to pay for your product, which can then determine what your set price should be. Customer interviews also allow entrepreneurs to understand the factors that influence purchase so you can best position your offerings.

– Doreen BlochPoshly Inc.

Offer Multiple Versions

Andrew SchrageOffer multiple versions of your SaaS product, tiered towards the level of business owner it might attract, and price each accordingly. It’s unlikely that your SaaS product is going to fit into a “one size fits all” business model — make it attractive to businesses both small and large.

– Andrew SchrageMoney Crashers Personal Finance

Just Price It

Wade FosterPrice it, and then change it. Always grandfather. This way you’ll learn quickly, but you won’t upset old customers.

– Wade FosterZapier

Gauge the Competition

Alfredo AtanacioCheck the competition and try out their service before pricing your product if you can. Make sure your price is not the only competitive aspect of your product.

– Alfredo AtanacioUassist.ME

Featured Image: Maxx-Studio via Shutterstock

Scott Gerber
Scott Gerber is a serial entrepreneur, internationally syndicated business columnist, author (Never Get a 'Real' Job), TV commentator and founder of Young Entrepreneur Council (YEC),... Read Full Bio
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