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Don't Blindly Model Your SaaS Pricing on 37signals

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Re: Don't Blindly Model Your SaaS Pricing on 37signals

#31

Post by jacques_chester »

jcampbell1 wrote: post #5

The discussion around annual pricing seems misguided. You should charge customers in whatever method they prefer to pay. For some customers, putting $400/month on a card is much easier to deal with than a $4800 check. The oposite is true in other organizations. Requiring pre-payment for software and using customers to fund working capital to pay sales associates seems myopic. Get the working capital from somewhere el…

Cashflow.

Cashflow, cashflow, cashflow.

Getting paid up front is better for cashflow than getting paid monthly.

Re: Don't Blindly Model Your SaaS Pricing on 37signals

#32

Post by jacques_chester »

GavinB wrote: post #9

If you want to sell services to large companies--even low cost ones--you need to offer invoice payment. At a big company, the corporate credit card is for meals and travel, not for paying vendors.

I intend to use invoice payments as a segmentation device. Want to pay by invoice? Expect to pay a lot more.

(I think I picked this idea up from Patrick McKenzie -- another one is offering SLAs to expensive clients).

Re: Don't Blindly Model Your SaaS Pricing on 37signals

#33

Post by kanzure »

jcampbell1 wrote: post #24
GavinB wrote: post #9

If you want to sell services to large companies--even low cost ones--you need to offer invoice payment. At a big company, the corporate credit card is for meals and travel, not for paying vendors.

In my experience, if you send a proforma invoice, a W9, a federal tax id, and a soul sourcing statement, at the end of the signup form, many times a check will just show up in the mail. It is possible to do invoice payment without having a high touch sales process. You just have to preemptively provide all the stuff the AP department needs. I really think 37 signals is leaving quite a bit of money on the table by not…

> You just have to preemptively provide all the stuff the AP department needs.

Do you have an example of a SaaS operation doing this well?

Re: Don't Blindly Model Your SaaS Pricing on 37signals

#34

Post by jacques_chester »

Entire books are written about pricing[1].

It's time for me to point out, again, that no other business parameter will affect cashflow and profitability more than your pricing.

You can adjust your costs all the time.

But prices are sticky. Customers remember that something used to be cheaper.

Really, again, let me emphasise this.

Pricing is the single most important business decision you can make.

Rails vs node.js / Ruby vs Haskell / bootstrap vs foundation / backbone vs sproutcore / trendoid vs hipster / cats vs dogs?

Only tangentially relevant to your success.

Pricing? Critical. Central. Essential.

Do not leave it to gut feelings.

[1] http://chester.id.au/2012/09/12/review-the-strategy-and-tact...

Re: Don't Blindly Model Your SaaS Pricing on 37signals

#35

Post by sirrocco »

lackiem wrote: post #30

Really great article and very refreshing to read. We recently adjusted the pricing on one of our services http://www.advantly.com to include a lower price monthly package and 2 other value added packages that require annual subscriptions. It has proven to be successful for us and the subscriptions to our annual packages have increased.

Hi,

One thing I found really confusing : On the gold package what does select features mean ? What can I select ? ( I later realized that it's the select package features but it took me a few minutes :) )

Re: Don't Blindly Model Your SaaS Pricing on 37signals

#36

Post by lackiem »

sirrocco wrote: post #35
lackiem wrote: post #30

Really great article and very refreshing to read. We recently adjusted the pricing on one of our services http://www.advantly.com to include a lower price monthly package and 2 other value added packages that require annual subscriptions. It has proven to be successful for us and the subscriptions to our annual packages have increased.

Hi, One thing I found really confusing : On the gold package what does select features mean ? What can I select ? ( I later realized that it's the select package features but it took me a few minutes :) )

Thanks for the feedback on that. Maybe we need to rethink the name for that package. Now that you point that out, I can see how that can be confusing.

Re: Don't Blindly Model Your SaaS Pricing on 37signals

#37

Post by spatten »

jcampbell1 wrote: post #24
GavinB wrote: post #9

If you want to sell services to large companies--even low cost ones--you need to offer invoice payment. At a big company, the corporate credit card is for meals and travel, not for paying vendors.

In my experience, if you send a proforma invoice, a W9, a federal tax id, and a soul sourcing statement, at the end of the signup form, many times a check will just show up in the mail. It is possible to do invoice payment without having a high touch sales process. You just have to preemptively provide all the stuff the AP department needs. I really think 37 signals is leaving quite a bit of money on the table by not…

Would you not have to customize this for every country that you do business with, though?

Hmm. Sounds like a complete and utter horribly painful schlep. A schlep that puts you right in the path of the money. Interesting.

Re: Don't Blindly Model Your SaaS Pricing on 37signals

#38

Post by blrgeek »

jacques_chester wrote: post #31
jcampbell1 wrote: post #5

The discussion around annual pricing seems misguided. You should charge customers in whatever method they prefer to pay. For some customers, putting $400/month on a card is much easier to deal with than a $4800 check. The oposite is true in other organizations. Requiring pre-payment for software and using customers to fund working capital to pay sales associates seems myopic. Get the working capital from somewhere el…

Cashflow. Cashflow, cashflow, cashflow. Getting paid up front is better for cashflow than getting paid monthly.

Not to mention there ain't no chance the customer's skipping to a different service in 6 months.

Re: Don't Blindly Model Your SaaS Pricing on 37signals

#39

Post by jacques_chester »

spatten wrote: post #37
jcampbell1 wrote: post #24

Earlier quoted context omitted.

In my experience, if you send a proforma invoice, a W9, a federal tax id, and a soul sourcing statement, at the end of the signup form, many times a check will just show up in the mail. It is possible to do invoice payment without having a high touch sales process. You just have to preemptively provide all the stuff the AP department needs. I really think 37 signals is leaving quite a bit of money on the table by not…

Would you not have to customize this for every country that you do business with, though? Hmm. Sounds like a complete and utter horribly painful schlep. A schlep that puts you right in the path of the money. Interesting.

"Where there's muck, there's brass".

Re: Don't Blindly Model Your SaaS Pricing on 37signals

#40

Post by bravoyankee »

Pricing low has nothing to do with being rude. That statement is a major disconnect from reality.

I also think that there are many service out there that are buying into this 'high pricing' doctrine and are giving prospective customers sticker shock. These starving young companies can't afford to do that so early in the game.

The other day I saw a site on HN selling business ebooks to startups: "how to drive more traffic to your website" $99, a customer segmentation ebook for $39, a copywriting ebook for $49. All this stuff is way overpriced. Dozens of quality articles can be googled up in a few minutes for the same information. I know because I did just that.

The people that tell these young startups to jack their prices are not being helpful or even honest. Maybe its a way of trying to justify their own high pricing.

I suggest young startups get users by any means possible, even if it means discounting heavily. They need habitual users, and that requires making it affordable enough that the enduser uses the tool / service for a long enough time that it becomes a habit and the tool becomes too entrenched in their workflow.

If anything is rude, it's telling young startups how to price their businesses when it looks like they don't have a clue on pricing even their own.

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