SaaS Pricing Strategy Best Practices

You’re a brave futurist, embracing SaaS wholly and willing to put so much effort into pursuing your business dream through this novel and powerful approach. But, you face an impasse here, with your SaaS pricing strategy, because this is a pivotal decision that will define part of your identity to customers, and in so many ways, affect how your software and business works for years to come.

This is something that’s hard to change on the fly, especially early on, so you really need to do your best to not mess up with your SaaS pricing strategy. But, beyond just the many ways you can formulate how your prices in general operate, you also need to consider ethics and humanities in how you apply your pricing.

This is important, and I don’t see enough people out there talking about the ethics involved n SaaS and pricing especially, so I feel I’d be remiss if I didn’t point out some best practices that honor good karma and good business, when it comes to this new industry. Good ethics mage a good company, so heed these well, they will make or break you!

First and foremost, if you’re using ads, be sure to know what the ads are. Watch out for ads that may offend people via content. SaaS, unless adult-oriented, shouldn’t have mature or controversial ads of any kind. Know your ad company and know their clientele. This seems like common sense, I know, but you’d be shocked by how many companies don’t keep an eye on what goes into these ads.

Now, let’s focus on actual prices, not monthly guaranteed revenue generators like ads. This is where ethics are important. If you have a free version of your software, be it a demo or a crippled version of the paid account, then where is your overhead coming from? Is it going to be passed on to your paying customers, causing their prices to inflate? Chances are, you didn’t think of this when you decided to work free access of any kind into your plan here, so be glad I pointed this out. It’s becoming a major complaint by business analysts that free costs paying customers extra. It’s tempting to do this, but in these situations, the ethical thing to do is bear the cost as revenue loss. Greed truly is a source of evil and wrongdoing.

Do you plan on charging for account terminations? If so, don’t. This is highly unethical but many businesses do this, and it’s something that’s an affront to everything people stand for. Charging for a service is logical, charging for discontinuation is just plain evil.

Apart from these ethics, aiming for a price that undercuts traditional software and competing SaaS is important. Just remember that when undercutting software, it should undercut long-term prices with upgrade history of said traditional software. Merely undercutting the price of a disk with the price of a month of service is misleading and is also not entirely ethical.

These are SaaS pricing strategy best practices I think need to be looked at more often. Everyone talks about strategies that work, and how to make them work, yet nobody really talks about the ethics of pricing. Maybe now they will?

Omri Erel
Omri is the Head of Demand Generation, as well as the Lead Author & Editor of the SaaSAddict Blog. Omri established the SaaSAddict blog to create a source for news and discussion about some of the issues, challenges, news, and ideas relating to SaaS and cloud migration.
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