TL;DR: Stop approaching your SaaS pricing from a Cost+ perspective; Start approaching it from a Desire+ perspective
One of the biggest problems I see B2B SaaS companies struggle with is pricing – and, to make that more concrete: Leaving money on the table.
The value delivered is often entirely out of sync with the charged price.
Now, I am not saying we should be ripping off customers; on the contrary.
Pricing is complicated. But if we challenge our pricing around specific rules, it can become a fun exercise.
I’ve said it many times – price is a story. And virtually all SaaS companies forget this.
Concerning this, I love Jonathan Stark’s simple Max Price formula: (Buying power * Desire)/Available options.
If you analyze its components, you’ll see this is about the foundation of your business (As you know, I like to refer to this as your Traction Foundation):
- Buying power: segmentation, i.e., clarity of who you’re for / not for
- Desire: your compelling value proposition
- Available Options: positioning or better: taking position
It’s precisely what many B2B SaaS companies forget when they design their pricing. Instead, too many make pricing a boring numbers game where only cost, contribution margin, and competitors’ pricing play a role.
So, what if you’d change that?
In the coming weeks, I’ll explore the different approaches to make your price another element in the mix to create desire with your ideal customers.
Question for you to reflect upon:
What’s the story your customers tell themselves when they see your pricing? (….are they potentially internally laughing?)
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