The only newsletter you need to master SaaS pricing.
Past newsletter issues
TLDR: Pricing is not a democracy. Don't involve the org.
There is a misguided intuition that since pricing affects everyone, then everyone should also be involved in making pricing decisions. This is wrong...
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TLDR: Don't try to win the negotiation today. Try to win the series of negotiations across the lifetime of the customer.
At the enterprise level or at any larger ACV most pricing negotiations have several elements, such as:
1) Price paid
2) Length of contract
3) Terms of renewal
Most SaaS vendors focus on '1' and sacrifice '2' and '3'.
So they would prefer:
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TLDR: Higher price means more ressources to build a good product.
The price you charge for your product is also the money you have to pay for everything:
1) Customer Acquisition (CAC)
2) Building a better product
3) Overhead
4) Profits
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TLDR: Credit Systems are usage-based pricing 2.0. If you get it right.
Credit systems work like this:
1) Buy credits upfront
2) Spend credits to use the product.
3) Unused credits roll over to the next period.
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TLDR: You are - probably - underpricing your largest customers.
Most customers I work with try to apply some form of 'linear' pricing to an 'exponential' world.
Let me explain: Whatever pricing model you have it probably runs on some kind of metric or measurement - e.g. Users, API calls, CPU cores, Employees, AUM, Store Locations etc..
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TLDR: Don't trust your sales reps - they are working with asymmetric information.
Let me tell you a story: We just completed a mystery shopping exercise for a $40M ARR US B2B SaaS company.
They were convinced their competitors were undercutting them on price.
Most of their sales people said so.
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TL;DR: Value-Based Packaging is more important than Value-Based Pricing.
My first principle of pricing: Price the customer, not the product...
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TL;DR : Charge your pricing metric in blocks to increase executed prices at least 2-5%.
Metric Granularity is the technical term (that I invented, full disclosure) of the size of the unit you charge via your pricing metric. So if you charge $100/user/mth - then the metric is #user while the granularity is '1', if you charge per single, individual user...
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TL;DR: How to charge different $$ in different countries
Lots of my customers ask about charging different prices in different countries. And it makes sense: US wants to pay more than Europe, who wants to pay more than China. So the same price - 100 - might be too cheap in one country and unsellable in another...
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