I did a guest post on Bob Walsh's 47Hats site this week where I talked about the Sixteen Ventures mantra that "Pricing is Marketing" in the context of SaaS & Web Apps, especially startups. The goal of writing posts on that site is simple; to introduce Web App startups to the ideas and techniques that have been cultivated over the last few years in SaaS that they might not know about. Primarily, the post focused on value-based pricing and these five elements to help you develop your pricing strategy:
- Your Pricing Strategy Goals – Market Position, Hyper Growth, something else?
- Ensure Market Alignment – Know how they buy, what they’ll pay, and how they’ll pay
- Market Segmentation – Do you have one-size-fits-all pricing, is that the right strategy?
- Distribution – Will you sell direct or through channel partners or App stores?
- Sales Model – Do you have a sales force or will you use an automated process?
If you aren't familiar with those, I'm happy this was your introduction. Remember those as they are the key to a robust and successful pricing strategy.
The other thing that I brought up, that is critical for SaaS & Web App companies, startups or otherwise, especially those that leverage an automated sales process, is the simple idea of not copying other companies' pricing pages. I even singled out 37Signals as one not to copy since they are the sacred cow. And a commenter had an issue with that. Here is what he said, my emphasis added:
...instead of saying something like “Don’t copy 37Signals pricing page” - which I think is bad advice. Considering they’re one of the most successful SaaS providers in the space, I would think their page is the first page you’d want to start your experimentation on.
My response to his assertion that I was giving bad advice, contained in a much longer comment that covered other topics, was the following. This, by the way, further explains a blog post I did last month called "Admit it, you copied their Pricing Page":
The item that you called “bad advice” is “don’t copy 37Signals pricing page”. Why would I say that? To get people to pay attention. Its a gimmick; and it works.
You see, we do a lot of pricing page analysis and I can assure you, most people don’t even go as far as to completely rip off the pricing page for Basecamp. If they did, they’d probably be better off than they are. But why I say that, other than to get readers to react, is unless you are building a horizontal collaboration product in the same market, and have the same market position as Basecamp, you just shouldn’t do it; it makes zero sense. The Basecamp pricing page might work well for them, but you need to know what you want to happen and then design a page around your goals and your market. Taking their layout and drop shadows is one thing; I’m talking about using them to figure out your pricing strategy.
Something I’ve written about a lot in the SaaS world but realize I’m talking to a new audience here is to your point of 37Signals being “one of the most successful SaaS companies.” Remember this, SaaS is not a market; its a business architecture, delivery method, business model. Whatever you want to call it, but its not a market. Collaboration, CRM, ERP – those are the analogs. The markets are Construction, Healthcare, Automotive. So, if you have a SaaS Automotive ERP and are competing against Plex, you should look at their pricing to know what the market expects; and then come up with your own. This is the problem when you think “they’re a SaaS company, I’ll just copy what they do.” It doesn’t work that way. That is what I mean by “don’t copy 37Signals.” Can this be argued against? I’d love to hear it.
No argument yet... do you have one? Comment here or there; the floor is yours. You can read the rest of my comment, along with the article, over on the 47Hats blog.
Would you like help with your Pricing Strategy? Take advantage of our Pricing Page Tune-Up™ & Overhaul services or schedule a Quick Start session with Sixteen Ventures today.
Author: Lincoln Murphy (@lincolnmurphy on Twitter)