There are things in life that we’re told are priceless. While I appreciate this and want nothing more than to put things like love and happiness in this category, I think that when you really break it down, most things in life have a price. Life costs money, love costs money and digital products cost money. I think most people are more than okay with this.
The psychology of value, pricing and consumerism are all a part of pricing strategy. Price things too high and people may not even engage, but price them too low and others will think the product isn’t of quality. While some are looking for a deal, others are looking for something superior. What is the target audience of your digital product? Are you trying to attract both bargain shoppers and sophisticated consumers? A strategic approach is critical when pricing software.
Strategy is thoughtful, anticipatory and intentional. It relies on research and data, instinct and intuition, and can save time and money in the long run by pricing correctly right out of the gate. So let’s talk about pricing models in IT industry! In this post we’ll cover some SaaS pricing strategies for digital products and their impact on users.
Embrace your competitive side: Know the market
You have to conduct a competitive analysis and assessment so that you can make informed pricing decisions and find the sweet spot for your product and company. Price your product in context with the competition and compare benefits including add-ons or value-adds. If your product offers bonus content, or more features, consider pricing slightly higher (actually, always consider pricing slightly higher) and equally consider offering discounts and exploring what kind of incentives make sense for your product and your brand.
Be careful not to compromise your marketing message by making explicit comparisons about the price of your product vs. a competitor. It’s important for you to know the reasoning behind it, as well as the data, but keep the focus on your product and its benefits so you don’t unintentionally steer customers in another direction.
Product market pricing fit: All hands-on deck
If you’re a part of product-market fit discussions then make sure these include pricing and involve team members with expertise from different backgrounds. Sometimes the simple approach is the best. Ask yourself and your team questions like ‘would you be willing to pay for this’? And follow ups; if the answer is no, then how much would you be willing to pay? If the answer is yes, then how much more would you be willing to pay? Navigating this threshold even with your own team is a valuable exercise and well worth your time.
Try before you buy and the magic ‘free’ word: Trial periods are always a win
Most companies offering SaaS allow customers to try before they buy, and rightfully so! These trial periods are ideal for consumers who want a test drive, and whether you choose a 7-day window or a 30-day offer, your customers will be happier with the experience and more likely to trust you, the product, the pricing and the process. In the free trial stage the experience is everything!
Consumers will buy your product only if they can experience something useful that adds value to their life. An autoresponder will automatically contact customers whose trials are expiring to remind them to renew but can also include a message about renewing before the offer expires. We recommend some kind of special incentive here for those who renew before the trial ends to make it even easier to say ‘yes’ and buy the full package. Free stuff, yes please! Whether it’s a bonus, a downloadable, a template or a guide offer a little something extra, it may just be the difference between a customer clicking or moving on.
Simplicity and Psychology: In pricing font, language and numbers
As most of us are familiar, psychological pricing refers to a method of pricing items to make them appear more reasonably priced and most importantly like a deal. We may know this intellectually, but it still works on us psychologically somehow. If it’s a bargain we’re looking for we’re likely excited by odd numbers at the end of the price tag, specifically ‘7’ and ‘9.’
On the flip side, if we’re consumers who wear designer labels and drive luxury cars, (or at least want to be) we wait to see even ‘00’s’ at the end. Know your consumers and what kind of customers you have and are looking to attract. For all, visual simplicity is most appealing, so keep the features lists minimal and impactful regardless of the number you decide to put at the end.
Value Based Pricing: Do your research
Price is a measure of value, but it’s also contextual. We know this from the soaring price of toilet paper in the U.S. when Covid first hit. From milk to real estate, things have a certain price and value dictated by the market, the demand, the trends and the messaging, experience and brand. What is your relationship like with your customer base? What do they expect from you and what would they be impressed (or un-impressed) by? These are all questions that lead to a determination of value.
Once the value is determined, direct conversations towards the emotional range and motivation of your consumers. Whether it’s through a narrative or imagery, how your product adds value to their lives (as evidenced by the free trial they experienced) will justify the value that you and your team researched, compared and ultimately set. Explore exclusivity and subscriptions and identify and maintain the appropriate cultural context and laser focus on product value.
Tiered and multi-pricing models: Layers, levels and options
Customers in the SaaS sphere are familiar with both models, tiered pricing referring to varying levels of service and access and the corresponding price points and multi-pricing maximizing opportunities for upgrades. Both offer various ways consumers can get involved and interact with the product. People find a price they’re comfortable with and ideally continue to add on as they come to rely on the product. Opportunities to price your product that are linked to usage, feature add-ons or cross-sell options just offer companies a wider range of possibilities.
Conclusion: Stay Creative
Pricing correctly is key when attracting and engaging your existing customer base and your aspirational one. Like everyone else you want to convert browsers into buyers, not scare anyone off and make a profit. Test different price points and employ a creative approach to value add-ons, features and benefits. Not all prices or methods lead to sales. To find out which one’s do is a creative and studied endeavor. But learning and understanding that fact, is priceless.