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Doubling SaaS Revenue By Changing The Pricing Model

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Re: Doubling SaaS Revenue By Changing The Pricing Model

#61

Post by Evbn »

simonbrown wrote: post #42
dmytton wrote: post #4

Earlier quoted context omitted.

We had a few people pick up on this test (colleagues browsing on different machines) and they understood when we explained we were running a test. I think so long as you don't try and cover it up and offer those who discover the choice between the new/old pricing, it shouldn't cause any problems.

zcvosdfdgj (hellbanned) posted: 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.

Much better to honor the lower price for A and B, but promote the lower price to only B via special codes or something.

Re: Doubling SaaS Revenue By Changing The Pricing Model

#62

Post by the_bear »

adrianhoward wrote: post #56
the_bear wrote: post #40

Earlier quoted context omitted.

Agreed. I don't doubt that being ruthless about A/B testing pricing increases revenue, but I'm not wild about the implied attitude that customers only exist so that we can extract as much money as possible from them. The user experience should definitely be a factor as well. I don't think it's possible to support this claim with data, but I'm convinced that being ruthless and unfriendly with pricing can have a negati…

I'm convinced that being ruthless and unfriendly with pricing can have a negative impact on the business in the long term 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 ou…

Pricing is obviously a complicated issue, and I know there will never be a "right" or "wrong" way to price a product. I guess all I can say is that I don't agree that plan-based pricing is good for the consumer. One of my main objections is that I don't agree that plan-based pricing is easy/simple.

Take a look at Highrise: http://highrisehq.com/signup 37signals seems to have set the standard for plan-based pricing pages, so I think this is a good example to use. Right off the bat it's complicated because I to choose which plan I want before signing up. How in the hell do I know how many deals I need? Then I have to constantly monitor usage to make sure Idon't pass the invisible threshold. Uh oh, one of my employees added one contact and my price just doubled. That's the opposite of simplicity.

Now let's look at a more recent 37Signals pricing page: http://basecamp.com/pricing This is still plan-based, but it's much closer to being a la carte based on the number of projects used. I can't speak for 37Signals, but it would seem as if they don't think that the plan page they popularized is actually the best approach.

Things can definitely get too complicated if the units you measure with a la carte become too granular (like charging per byte of storage or something crazy like that), but there's normally a nice middle ground. Basecamp made # of projects the metric to focus on. My company charges per user and makes everything else unlimited which generally makes the cost scale linearly with usage (roughly) but it's still very simple and predictable so no one has to spend time checking the invoice.

My company is called "Less Annoying CRM" so we naturally attract people who are sensitive to the annoying shenanigans that are common with other companies, and this is one of the biggest things my customers tell me they like about our service. The pricing has a huge impact on the customer experience which is largely ignored in this blog post. (Note: I realize there is selection bias with my anecdotal evidence, so you can say I don't have the complete picture, although I think after 2.5 years of talking to potential customers every day, I've got a decent idea)

In addition to all of that, it seems clear to me that the purpose of plan-based pricing is to get the majority of your customers to pay more than they should by only allowing them to buy more resources than they need. This is obviously true with cable subscriptions and cell phone plans, and I think it's equally true with SaaS apps. This is even more apparent when you read blog posts like this one and understand how much thought goes into designing a pricing structure that extracts every penny possible from each and every customer.

If you want to make more money, then ok, but I don't buy the claim that this is in the customer's best interest.

Re: Doubling SaaS Revenue By Changing The Pricing Model

#63

Post by carterschonwald »

tptacek wrote: post #32
casca wrote: post #28

Earlier quoted context omitted.

The reason that Colin can get away with the picodollar model is that the type of people who use tarsnap would get annoyed if they were charged for 1gb if they were using 100mb. _For those customers_, there is a clear correlation between the price being charged and the value provided.

You've disastrously misunderstood what Colin is doing. Colin "gets away" with "picodollar pricing" because he is deliberately segmenting away most of his customer base. I am not entirely sure why he is doing that, but he has made a strategic decision in the short term to make less money in order to build his service up more slowly and, I presume, carefully. He exclusively wants the kind of customers who will not be a…

emphatic agreement.

Assuming the goal is to have only technically sophisticated users who want to use the most durable data store known to man (S3) and have a rock solid & secure backup solution, the pricing structure being 3-6 times that of s3 pricing is a great value on all sides.

actually: colin, could you tell us perhaps what the total monthly storage and or bandwidth volume is? I don't think that if has ever been stated on the internet :)

caveat: i've been playing with tarsnap on/off since it was first launched, and now that i'm doing my own wee startup, i'm using it quite seriously and religiously to backup my working directories. Love it. (however much i email the tarsnap user list with some confusion thats easy to sort out every time i've resumed using tarsnap after some hiatus :) )

Re: Doubling SaaS Revenue By Changing The Pricing Model

#64

Post by dmytton »

hythloday wrote: post #53
bravura wrote: post #51

Earlier quoted context omitted.

Here's what I find really surprising: Making the word "Free" in the call-to-action much less prominent did not reduce conversion by very much. The original page prominently says: "Sign up for a free trial" and gets a 6.9% conversion from visitor to trial user. The new page unprominently says: "Money back guarantee" and "Free Sign Up" in the top right corner. Conversion is 5.2%, which is almost the same considering th…

I don't want to be pedantic, but 25% fewer conversions is not "almost the same", it's quite the loss. You need to increase your funnel 33% somewhere down the line to make up for it (which I'm sure they did - I'm just making the point that X% -> X-d% is significant if X and d are small).

Depends if you're maximising for revenue or signups. The number of signups decreased but the revenue increased significantly, making up for the loss in signups. Of course if you can increase signups now with the new pricing then that would also show revenue increase.

Re: Doubling SaaS Revenue By Changing The Pricing Model

#65

Post by dmytton »

bravura wrote: post #51
patio11 wrote: post #2

Happy to answer questions to the extent that I can. Speaking of which: if it isn't transparently obvious by now, I really, really like getting feedback about how my advice worked out. If you ever implement a suggestion from me (particularly with an A/B test), please, drop me an email. Even if the result was "Well, that was sure an epic failure", because negative confirmation is useful, too. (If you want to share resu…

Here's what I find really surprising: Making the word "Free" in the call-to-action much less prominent did not reduce conversion by very much. The original page prominently says: "Sign up for a free trial" and gets a 6.9% conversion from visitor to trial user. The new page unprominently says: "Money back guarantee" and "Free Sign Up" in the top right corner. Conversion is 5.2%, which is almost the same considering th…

We request a credit card when the trial expires.

Re: Doubling SaaS Revenue By Changing The Pricing Model

#66

Post by gizzlon »

adrianhoward wrote: post #56
the_bear wrote: post #40

Earlier quoted context omitted.

Agreed. I don't doubt that being ruthless about A/B testing pricing increases revenue, but I'm not wild about the implied attitude that customers only exist so that we can extract as much money as possible from them. The user experience should definitely be a factor as well. I don't think it's possible to support this claim with data, but I'm convinced that being ruthless and unfriendly with pricing can have a negati…

I'm convinced that being ruthless and unfriendly with pricing can have a negative impact on the business in the long term 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 ou…

"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"

Couldn't they just 10x their number of servers and pay for that?

Re: Doubling SaaS Revenue By Changing The Pricing Model

#67

Post by gizzlon »

Silhouette wrote: post #43
Retric wrote: post #36

Earlier quoted context omitted.

99$ a month is reasonable for bootstrapped company's. It's not reasonable for most hobby's, but 50$/month or 100$ / month are both rather high for a hobby website so there is little real loss.

99$ a month is reasonable for bootstrapped company's. 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 b…

"There are dozens of companies pitching useful-but-not-that-useful tools and services to these bootstrapped businesses"

Dozens? Seem low, I would say dozens each week ..

Re: Doubling SaaS Revenue By Changing The Pricing Model

#69

Post by Ecio78 »

gizzlon wrote: post #67
Silhouette wrote: post #43

Earlier quoted context omitted.

99$ a month is reasonable for bootstrapped company's. 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 b…

" There are dozens of companies pitching useful-but-not-that-useful tools and services to these bootstrapped businesses " Dozens? Seem low, I would say dozens each week ..

And the problem is that sometimes, if they're successfully, they are acquired and they shutdown their services :)

Re: Doubling SaaS Revenue By Changing The Pricing Model

#70

Post by Silhouette »

adrianhoward wrote: post #47
true_religion wrote: post #33

> The minimum buy-in for the service is now $99 a month, which should scare away the idiots. I'm scared, and as a potential customer I hate to be labeled an idiot. I'm very happy with New Relics system even though they're priced higher than you per server, they at least offer a price PER server instead of tiers.

I'm scared, and as a potential customer I hate to be labeled an idiot. The idiots being scared away doesn't necessarily imply that everybody who is scared away is an idiot :-) Yes - you will cut out some very nice people who would make lovely customers by segmenting like this. However if this ends up: * getting more money using the new pricing model * removing a large chunk of support costs by getting rid of the high…

.... as a business should I care?

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.

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