
SaaS Pricing: Lessons from Changes - a13n
https://blog.canny.io/saas-pricing-lessons/
======
pedalpete
The one thing I've learned from our pricing inquiries over the last year, is
that customers will often pay far more than you suspect, provided the product
is packaged correctly.

I'll do a write-up once we are more settled in our pricing about our pricing
journey, but in a nutshell.

1) early 'customers' said they wouldn't pay anything, or maybe $50/year - we
have no business

2) giving them pricing < $100/year for x number users where they would likely
spend $200 / year was a no go.

3) giving them pricing of $800/year with more users than they would likely
ever have was interesting to them

4) telling them it was $800/year without limitations on the number of users,
and they think it's too cheap.

5) tell them that it's $800 per x number of users so they would need to spend
$5000 per year where they are currently spending $3000 on their alternative,
and they are still interested.

This is one of our customer segments, the thing is, many of these customers
would likely only have paid $150 on a per-use plan. But they want to pay more,
and not have to think about per use.

The challenge for us, is our cost for each of their users is high, and as this
is a new market, it is very difficult for any of us to forecast usage. We're
learning.

Don't undersell yourself, and I've learned that focusing on the packaging is
as important as the actual $$.

Also, how many people are charging the same amount in $ and €? We give the
same dollar amount to both groups, don't undersell on exchange rate either (I
don't think).

~~~
sbinthree
People were more excited to pay $500/month when we through in a "white-label
PDF quick start guide" than $300/month. Only after being beaten over the head
with that request on calls did we change things, now they love it.

~~~
pbourke
Could you clarify what you mean by “white label,” here? Your customers were
going to sell the service to their customers?

------
pmalynin
I recommend anyone trying to decide pricing for their SaaS, or any product in
general, to study a bit about Consumer Surplus.

There is a very classical paper "A Disneyland Dilemma: Two-Part Tariffs for a
Mickey Mouse Monopoly" that discusses, amongst other things, two part
"tariffs" (admission + ride) which allow "the sellers to capture part of the
residual surplus through an appropriately chosen fixed fee."

Which is exactly what the Article has ended up rediscovering at the end.

Quite a few economists and companies have given this problem a lot of thought,
so it might very beneficial to study the body of literature that developed
over the decades.

~~~
pedalpete
A link to 'A Disneyland Dilemma':
[http://people.bath.ac.uk/ecsjgs/Teaching/Industrial%20Organi...](http://people.bath.ac.uk/ecsjgs/Teaching/Industrial%20Organisation/Papers/Oi%20-%20Disneyland%20%281971%29.pdf)

~~~
gknoy
The typical HN convention seems to link directly, or use a zero-indexed
footnote. For example, if all you are doing is providing a link, there's no
need for extra markup:

A PDF of "A Disneyland Dilemma":
[http://people.bath.ac.uk/ecsjgs/Teaching/Industrial%20Organi...](http://people.bath.ac.uk/ecsjgs/Teaching/Industrial%20Organisation/Papers/Oi%20-%20Disneyland%20%281971%29.pdf)

If you are writing more than just the link, it's common to use a zero-indexed
footnote:

The pdf [0] was originally published by MIT press, and can be found online
[.... pretend I wrote more prose]

0:
[http://people.bath.ac.uk/ecsjgs/Teaching/Industrial%20Organi...](http://people.bath.ac.uk/ecsjgs/Teaching/Industrial%20Organisation/Papers/Oi%20-%20Disneyland%20%281971%29.pdf)

------
erikrothoff
This article really resonates with me because we're going through the exact
same problem. The most profound thing we've learned is the value of anchoring
the users expectations. Our initial price for a consumer product was $2/month.
It really only was a finger-in-the-air decision. Now we've grown and companies
are starting to use our product. We had a large company with 5000+ employees,
ask for the price for 200 users on our product. Since the only price available
was the consumer pricing they were expecting a discount on that. Between
25%-50%. 200 employees using our tool daily, for only $200 per month! Now that
we have introduced a business option at $15/month per seat, it's impossible to
convince them otherwise.

Another learning is that some customers are just not meant for you.

~~~
NameNickHN
This is the exact reason why we recently changed our price structure. Now the
price of a resource increases with the size of the plan. Now discounts won't
hurt so much.

------
threeseed
Personally I think you're pricing is too high for startups.

UseResponse costs $15/month. And other SAAS products which are at the
$50/month mark are products like Intercom (which actually is three products)
and are further ahead in terms of more features and polish.

I just don't feel the value proposition is all that great. And for $600 (cost
of a year) I could feasibly someone get offshore to replicate your product.

And I am literally right now looking for a product like yours.

~~~
a13n
Thanks for the feedback! I'd love to learn more about what you're working on.
Want to reach out on our live chat?

As we mentioned in our blog post, we tried lower pricing and it didn't work
well for us. Customers were less qualified and churn was much higher.

~~~
threeseed
I am just a typical SAAS startup and if we know anything it's that you should
trust the numbers over individual customers.

Anyway, I think I am going to tackle the issue from the other side though and
go with ProductBoard. It's a product management tool with feedback on the
side.

------
boyd
Nice post (and beautiful charts!). One other quick comment: _really_
appreciate that you never excluded single sign-on from your base plan.

I'm always disappointed when I see SaaS where you have to upgrade to an
"enterprise" account just to get reasonable security. Props to you and your
team for not forcing customers into that dilemma!

~~~
a13n
Thanks, the charts are from ChartMogul, which is free for under $10k MRR.
Can't recommend them enough. [https://chartmogul.com](https://chartmogul.com)

Honestly single sign-on is just a no brainer MVP feature for Canny. Your users
shouldn't have to make a separate account to give feedback for your product.
That would be like Intercom making your users make a separate account to live
chat...

~~~
fnayr
Is that a SaaS for SaaS's? Can we go deeper?

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osrec
That's some interesting insight. We trialled £7 per user per month for
[https://usebx.com](https://usebx.com), but found our corporate clients were
our main income source (paying >£500 per month for customised deployments).
We've recently decided that we'll try offering the hosted service for free to
single users in the hope that it attracts more corporate customers. Pricing
really is an art that I didn't give much consideration to before I started
trying to run a SaaS! Glad you are finding your optimal pricing structure... I
feel we still have a long way to go yet!

------
D_R_Farrell
Glad to see this! Really stoked to see you guys share all of this with so much
depth.

------
jamdav16
Fantastic write up, and definitely helping me as I'm due to launch my MVP in
the coming month or two. Subscribed to the blog, interested in both business
thoughts and digital nomad experiences :D

~~~
a13n
Thanks for reading and we're glad you liked it! Definitely reach out if you
think there's something else we could write about that would be helpful.
Content marketing is harddd.

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ksec
I am going to ask a slightly off topic question. I hope someone could point me
some direction.

How do different industry price things? Is there a book or other resources on
the subject on how to price different items? Clothes, Disk washers, Food,
Software, Services.. etc. Or Phones.

Because different industry and products have different way to do cost
calculation, and different margins. Or depends on companies etc. Just
wondering if i could learn more on the subject.

------
osrec
I'm interested to know, how did you guys handle pricing changes for existing
customers? Did you change their pricing structure too? Or were they left on
the old plans?

~~~
GregMartinez
The article mentions how they handled it.

> While you’re making big changes, take care of your existing customers. If
> you’re raising prices, grandfather them to their current plan. If you’re
> lowering prices, give them some alternative options.

~~~
osrec
Ah, I missed that. I guess I was more interested in cases where they had
difficulty in getting existing customers to accept the changes.

------
petagonoral
Might just be me but I'm finding the axes on most of those charts not quite
correct.

~~~
a13n
Could you be more specific? The survey charts?

~~~
petagonoral
Well, the 'Customers' chart which has date as an axis.

But, you weren't running A/B tests so all those pricing pages weren't active
at the same time. I think something like 'time since inception (months)' would
be more insightful.

Ditto with 'Average Revenue Per Customer' & 'Churn'

