
SaaS Pricing Strategy: The 10x Rule - brissmyr
http://sixteenventures.com/saas-pricing-strategy
======
manuelflara
I agree that the pricing for B2B apps should be "a no brainer" for your
customers. Although sometimes it's hard to quantify (put into dollars) the
value you provide. Maybe you just remove frustration, without saving much time
or money. I wrote an article the other day about all the paid services I use
and how little correlation there is between the amount I pay for each and the
value I get: [http://www.manuelflara.com/thoughts-on-pricing-for-
developer...](http://www.manuelflara.com/thoughts-on-pricing-for-developers/)

------
mhoad
Apologies for the blatant plug but for anyone interested, I also just wrote
about another SaaS pricing strategy yesterday here:
[http://technicalmarketing.io/cro/saas-pricing-technique-
deco...](http://technicalmarketing.io/cro/saas-pricing-technique-decoy-
effect/) I figured it might be helpful for some people here.

~~~
read
It's pretty impressive the Decoy Effect practically doubled choice selection.
Thank you for this.

Two questions:

(1) would trying this with products that don't include anything physical alter
the effect?

(2) how ethical is it to use the Decoy Effect?

~~~
svasan
Decoy is unnecessarily pejorative here. This is known as price anchoring.
Anchoring is an influence tactic based on human psychological bias.

I am not really sure why ethics would come into this discussion. Do ethics
come into picture when you are considering/selecting databases or programming
languages?

edit: rephrased.

------
stickhandle
The key message is not the 10x rule, it's quantifying the value you create for
your user. Further, the supporting message is to actively price anchor against
that value.

------
ankitoberoi
Very well put, which is why it is extremely important for startups to actually
figure out the value which they can create for their customers.

This is easy said than done though, depending upon what business you do.

Normally, I like to test pretty much everything (start with 10x, compare with
9x/11x maybe) but when it comes to prices, I personally feel A/B testing them
is a bad idea.

------
notastartup
can someone help me understand this? does it mean to simply charge 10x the
cost, thus 10x the margin?

does a metered pricing fall into value? meaning if someone generates 1000
reports should it cost them 100 dollars? what if it's an all or nothing
situation. the value comes from when they receive most of the 1000 and no
value when it falls lower than 300? does a metered pricing make sense in this
case or does a monthly subscription makes sense?

~~~
ankitoberoi
It's not 10x the cost. To make it simpler, what you charge is 1/10th the value
which you create for your user.

So if your user benefits by making an additional $100 by using your product,
you charge him $10.

~~~
notastartup
what if the value differs for each user? a user might find generating 10000
reports will save them $60 while another user generating 1000 reports will
save them $100? what if they don't know how reports they generate will save
them any money at all or claim so?

~~~
mdda
Doesn't that mean that the second user is in a niche that will pay more for
the service? Could there be a different way to charge, so that people are
paying according to the value to them (instead of the # of reports, which may
be your metric, but apparently may not be really relevant to value)

~~~
notastartup
yes! I highly suspect that is the case. It seems like the number of reports is
not important but the user's ROI goal from the collection of reports is where
the value is.

So in this scenario, say you don't know what the end user is planning to do
with the collection of reports and that the user themselves might not have a
clear idea of ROI until the report is in their hands and they are able to
extract some value from it. Simply having more of it does not necessarily
guarantee value but rather what they do afterwards that determine the value of
the reports and the quality of the reports (which they choose the data
source).

Does this make sense? Basically the issue I'm raising is, what if you can't
predict a positive ROI from the reports generated by the user of your software
until their intentions with the report is known and after they take action?

...but someone will argue the act of generating the reports automatically and
the volume of reports generated IS the value. This argument also has merit
because if they were to hire someone to do this, it would cost them X amount
of money and using software saves them X amount of dollar and time. The
quality of the data source they chose to generate the reports is outside of
the software's control.

Maybe I'm just overthinking this...but it does seem like metered billing makes
sense because in order to generate the same number of reports, it would cost
time and money. If somebody determines that they can do it better and faster
and cheaper but still wants to use the software and not pay for even 1/10 of
the cost of hiring someone to do it, then maybe they are a niche to not pay
attention to. Maybe there's no money in that niche, and it should be ignored
altogether. Perhaps even targeting this niche that is resistant to paying for
even 1/10 of the cost of generating reports without the software should not
play a factor in pricing.

