Navigating SaaS Pricing from a CEO Perspective

A pricing strategy is crucial to the core of any business plan. It impacts all aspects, including profitability and the perception of your brand’s worth.

Cyclr CEO Fraser Davidson has been thinking about the impact of SaaS pricing and is sharing his insights.

SaaS Pricing Strategies

SaaS pricing strategies have been a lot on my mind lately. This was prompted by speaking to a couple of early-stage founders, and I wanted to share some insights and thoughts that have been brewing.

My views on pricing have been informed by my years at Cyclr and, more importantly, by all the start-ups I have been directly and indirectly involved in over the years.

I don’t claim to have all the answers, but I hope my experience might resonate.

Appropriate SaaS Pricing

One of the biggest pitfalls I’ve observed is that many young tech start-ups don’t price their product based on the problem they’re solving for their customers. As well as the quality of that resolution. Instead, they price based on what competitors charge.

If a competitor sets their price at £99 p/m, they want to match it. It’s an easy option, don’t let price be the barrier to sale.

However, I find this approach lacks finesse and an understanding of your unique value proposition.

Understand your Market Position and Product Value

Every market, including software, has premium and budget products. You need confidence in your market positioning and your product, or you’ll inevitably default to competing solely on price.

This is where the real issue lies, a market where the players seek to win based on competitor price matching alone is a race to the bottom. Once a product is priced cheap it is hard to raise, much better to be correctly perceived as the price for your value (and of course discount if necessary).

Consider this: you can’t invest in creating a market-leading product if you aren’t pricing in the investment required to do so. So many entrepreneurs take the stance that they will worry about financial contribution and margins ‘down the line’.

Founders can be prone to take the view that the graft of the founding team (who will work all hours) will be infinitely scalable. It won’t. At some point, you will have to employ a team on arms-length wages.

If you’re the cheapest product, you won’t have the finances to invest in the team to create and maintain the features and improvements that a premium product requires.

I say all this and recognise that it is easy to say and harder to do. I have made mistakes many times, Cyclr included and lived the journey of having to re-price (generally upwards) to reflect the proper value: positioning: investment in resource equation.