
When I raised my B2B SaaS’s prices - stevoski
https://discuss.bootstrapped.fm/t/when-i-raised-my-b2b-saass-prices/7017
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harryf
As an occasional B2B SaaS buyer, the key point in getting your pricing right /
wrong is knowing where the limits are for;

a) I can just get this on my company credit card without needing approval

b) OK for this price it's going to show up as a line somewhere in a budget and
/ or I'm going to have to get approval from my boss ( 1-2 meetings work )

c) For THAT price I need to trigger a whole enterprise process, have a ton of
meetings, make the case

Mostly you want to stay in a) for volume sales. Once you start getting into b)
and c) you start needing support agreements, enterprise sales people etc. plus
b) and c) make work for the customers that are your "adopters" in the
enterprise - they need to love your product for that to happen.

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tiffanyh
Would you mind sharing where the price cliffs are for (a), (b), and (c)?

Just curious.

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caseysoftware
At many companies, people can expense up to $50 with minimal (no?) prior
approval via providing a receipt. That's a great place to be for tools that
are useful in your job but not required.

Beyond that, most companies need more documentation or prior approval from
your boss (only). The upper limit for that is often $500. That means whether
something is $60 or $499, it can take exactly the same effort.

Above that, it often requires boss' boss' approval or a real line item in the
team/department budget. The upper limit for this is all over the map, I've
seen anything from $1000/month or $10k/year. Once you cross into this zone,
assume customization, a more complex sales process, and you've left the realm
of expense reports and moved into Purchase Orders (POs).

Above there, this is starting to look like enterprise software sales which is
a beast unto itself. This likely turns into competitive bidding, a dedicated
sales force, custom contracts & TOS, and a lot of other things. _IF_ you can
be successful here though, you can do quite well, especially if you've figured
out how to make it repeatable and scalable.

~~~
forgingahead
This is a great comment - I would add that for the $50 price point / pricing
stage, it is also low enough for an "operator" (someone using your SaaS to
help their daily work) to just put their credit card in first, and then worry
about claiming back from their company later.

The "pinch" of buying is therefore low enough to encourage uptake. If the base
price level is higher than this, then that itself becomes another mental task
for the potential customer to work through before pulling the trigger. This
doesn't mean you shouldn't have higher priced plans (you must!), but from my
experience $50 or even $99 as the upper end of the "base" plan is a good first
threshold to get prospects to be ok with putting their credit card in.

~~~
corty
But with all those things, beware of the recurring expense problem: I would
agree with all those cliffs, for one-time expenses.

As soon as payments are recurring, things will be more complicated: Being
bound to a contract beyond the current year is often subject to approval, at
least when recurring payments are involved. Not yet paid but binding future
obligations have to occur in various reports and need accounting involvement.
Better have short contracts with autoextension or at least the possibility to
pay up front for a fixed term.

~~~
cutemonster
> Better have short contracts with autoextends

Does that mean monthly recurring payments?

Or is that too short? did you mean yearly?

> the possibility to pay up front for a fixed term

What's a good fixed term, maybe one year? Or a few years?

~~~
corty
> Does that mean monthly recurring payments?

Usually yearly should be fine, however, monthly would reduce customer anxiety
(not sure if thats very relevant for B2B) but increase possible administrative
overhead on your side.

> What's a good fixed term, maybe one year? Or a few years?

Longer than your usual recurring term. I'd say 2 to 5 years. The right term
depends on the overall cost of that package: you should price them below the
next-higher aforementioned cliff of course. If you usually offer yearly $20
contracts, and you have determined a typical cliff to be at $50, you could
offer a 3year package for $49.

Also consider other factors: you might not want to support a version for the
whole fixed term. And you definitely don't want to sell anything perpetual or
semi-perpetual.

~~~
cutemonster
Thanks for the help

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jrott
As the price goes up we tend to get larger organisations as customers.
Unfortunately, they are also more likely to ask for custom legals, T&Cs, and
security audits. In all cases, I say no. That may change in the future.

this was a particularly interesting bit. I've got a feeling that the
organizations that care about custom legal and security audits can be charged
way more than $50 a month. If people are caring about that you're probably
beyond a developer with the corporate card in terms of who is buying.

~~~
leesalminen
Indeed. I operate a B2B SaaS company as well. We also said “no” a lot in our
first 5 years. It wasn’t worth the overhead. But as we grew and our processes
matured we started talking to enterprises. Turns out that we’d already figured
out most of what they wanted/asked for at that point.

We have a list price on the website and also a “contact us” enterprise plan
over a certain size. Once an enterprise ends up in that funnel, everyone
involved knows multiple zeroes are being added to the TCO. It’s never been a
problem for us.

Larger orgs really will pay significantly more just to have their hands held.

~~~
goatherders
Yup. I worked for a hosting company once that added a zero to the price of
service for an NBA team that wanted a 12 hour SLA instead if a 24 hour SLA.
Another NBA team bought the highest priced of solutions i offered and told me
as they were signing, "we know the least expensive option was probably
overkill for our needs, but it is important that we have your full attention."

~~~
nitrogen
I have been occasionally "in the room" for conversations where a contract
between an enterprise and a vendor is being discussed. I was initially
surprised that enterprise buyers specifically wanted per-X billing, to ensure
that the vendor was equally incentivized to maximize X as the buyer was. But
it makes sense.

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thayne
>I’ve never put up prices for existing customers.

I think this is key. New customers will evaluate based on the current price
not historical prices, but if you increase the price for existing customers,
they will feel cheated.

~~~
seanwilson
What do you do if you want to experiment with lower prices? If you lower the
price for existing customers during the experiment, it's going to hurt if you
end up putting the price back.

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behindsight
Call it a flash discount/sale/promotion for new/existing customers.

Adjust the terms as needed.

~~~
seanwilson
> Call it a flash discount/sale/promotion for new/existing customers.

Not sure if you mean this, but the problem I find with offering sales (where
you mention the end date) is you can't tell if some customers are only buying
it because they don't want to miss out on a limited offer so it doesn't help
you learn the real value of your product.

Like when people buy clothes in a sale they end up never wearing, or people
that buy Steam sale games and never play them.

~~~
triceratops
Wouldn't usage metrics tell you that?

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krm01
Our [1] UX/UI design service with a monthly retainer had similar results when
raising prices for new customers (old ones are locked in at previous rates).
same conversation rates, more revenue, zero complaints, bigger customers. Big
difference is that we charge $xxxx/mo. So raising our 4-figure prices resulted
in a huge revenue increase. We’re probably going to double prices in a few
weeks to see what happens.

[1] [https://fairpixels.pro](https://fairpixels.pro)

~~~
Drdrdrq
Fyi: faq entry "how will I communicate..." is cut off on ff mobile (limited
height and overflow hidden?).

Nice concept otherwise - charge subscription instead of per-project and allow
endless iterations. Brilliant!

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polote
yeah $50 is still not a lot for the service you provide, if shneider electric,
weework, ... are really your customer, you could probably 10x your price. You
have to think on the value your bring to them instead of the the complexity of
your service.

Actually for your product I would expect the price to be around $200 per month
for a <300 people company

But the price has a big impact on what people expect from you, so if this is a
side project, you may prefer keep it low

~~~
axaxs
I agree that it's a low price, but disagree one should just raise it because
they can. Keeping prices low helps prevent competitors from undercutting, or
even competing in the first place, in my opinion. If this service were
charging say, 500 per month, they'd likely have a lot of knockoffs enter the
space.

~~~
opportune
If I'm a huge business getting a lot of value out of a $500/mo SaaS product
that does everything I need and is reliable, it would be a pretty bad decision
to take a chance on a new $200/mo service offering the same thing.

~~~
axaxs
That's true for a while, but companies churn a lot as new things come about. I
can't even tell you how many travel/HR, ticketing, chat, and video
conferencing systems my rather boring company has gone through in my tenure.

More importantly, new customer acquisition. At 500 a pop, someone like me
could be inclined to give it a go, and I'm just one not-so-motivated guy.
That's great passive income with a handful of customers. For 50? Not worth the
effort since now I'd need a handful x 10. At 500 a pop, companies with way
more resources will outpace and outspend you for that. Less likely for 50.
Just my opinion.

* To be clear, the above is a hypothetical. I have zero interest in copying anyone's work, or really any side project at the moment.

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bachmeier
I don't want to rain on anyone's parade, but you don't learn anything from
this exercise. Unless you somehow know how many new customers would have
signed up without a change in the price, you can't infer anything from this.
It's tempting to compare with earlier growth rates (as the author did) but for
a small, growing business the growth rate isn't going to be constant over
time. What is really problematic, though, is trying to do this type of
comparison when we're literally in a different world due to the pandemic.

~~~
LeonB
I take your point generally but I think it's overstating it to say you learn
_nothing_. Definitely the signal can be hard to isolate form the noise, but if
it's a big enough signal you'll hear it.

For example: if sales fall off a cliff, it's reasonable to interpret that as
"perhaps I over did it." and so on.

~~~
bachmeier
> For example: if sales fall off a cliff, it's reasonable to interpret that as
> "perhaps I over did it." and so on.

But (a) that's not the outcome, so it doesn't help here, and (b) with the
pandemic, even if sales went to zero, you'd still need some way to know the
effect of that.

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bumpkinjunkie
Have you heard of Van Westendorp's Price Sensitivity meter? It could give you
numerical insight into how you might raise prices further (vs. guess and
test).

~~~
Axsuul
Successful SaaS companies are always testing their pricing

~~~
kolinko
I ran a successful SaaS and didn’t test. While it’s easy to test basic
conversion, it’s way harder to test the prices’ impact on churn and an effect
on PR.

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wtracy
I'd say that the author missed the chance to add sales copy and/or message the
trial users with "Our prices are going up on [date], act now to lock in this
rate!"

It seems like you could squeeze at least a temporary bump in conversions out
of that.

~~~
lubos
For most bootstrapped SaaS businesses, the number of active free trial users
is so low, it's not worth your mental capacity.

Also. You really don't want customers who will buy from you at $29/mo and
won't buy at $39/mo. This is because if $10 makes difference in their
purchasing decision, the value they are getting out of your subscription is
roughly what you charge. This segment of customers will churn the fastest as
they will be constantly on the edge revaluating whether your subscription is
"worth it". You might as well not care about whether they become customers or
not. So why bother with cheesy tricks to make them convert. It's not worth it.

~~~
jwr
As a self-funded SaaS owner, I agree 100% with the above answer. Totally
correct.

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bithavoc
> What did I tell existing customers about the price change?

> Nothing. I probably should have, but it fell off my to-do list.

This pisses me off, I started paying for Notion back when they limited the
number of blocks monthly and then at some point they changed the pricing to
unlimited blocks in their Free plan, and I didn't notice until last month. I
googled, I couldn't find any announcement, no tweet, nothing. I felt betrayed,
It's been over a month, and now I find myself using Notion less and less every
day.

~~~
stevoski
OP here. I didn't raise prices for existing customers. FTA:

> I’ve never put up prices for existing customers. I’m okay with people
> getting the price they started with indefinitely. It is the way I’d want to
> be treated as a customer. Anyway, within a couple of years, as existing
> customers churn, the “problem” of older customers paying less will simply go
> away.

~~~
fnomnom
i think the problem is that the poster could have used the free plan now

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deviation
Reminds me of my mother-in-law's wedding photography business. She was
struggling with the what-ifs of raising prices and losing her valuable
customers. She took a business course and they recommended she double her
price. Double.

She gained more customers than ever before.

I guess when it comes to wanting a premium product, whether it's a wedding or
software in general- people are less likely to follow-through if the price is
unusually cheap because it gives the smell of "maybe they have terrible
support" or "maybe they cut corners in x or y".

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ramirez60
Have you explored any non-digital marketing channels for growth yet? I am
working on a sales model for companies like yours that sell to small/medium
sized businesses. Would love to chat if you had some time to discuss. Is there
a good way to contact you?

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tarasmatsyk
Always enjoy a good read, thank you Steve!

Also, this thread has some gems too, glad I found it.

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lol768
>January 2020: start actually charging the new prices.

So you just started billing them a different amount without even warning them?

~~~
stevoski
FTA:

> What about existing customers?

> I’ve never put up prices for existing customers. I’m okay with people
> getting the price they started with indefinitely. It is the way I’d want to
> be treated as a customer.

~~~
lol768
I think this could have been stressed a bit more clearly in the section I
referenced - since it's vitally important!

