Why is SaaS pricing important?
When pricing your SaaS product, you don’t want to simply go with a value that ‘feels right’. Instead, be more scientific about it. Here are reasons why this is important.
Defines the value of a product
First and foremost, the pricing communicates to your customers how much your product is worth.
Ideally, you’ll want to focus on a market where you can already determine how much customers are willing to pay for a product like yours. Beyond that, you must pay attention to whether or not there is an inelastic demand (i.e., where changing the price will not significantly impact demand).
Impacts customer acquisition and retention
Getting the pricing model correct is also essential to increasing customer acquisition and retention. After all, if your pricing model is too expensive, it will likely deter potential customers.
Impacts business scalability
SaaS pricing can also affect the ease at which you’ll be able to scale your business. On the one hand, you don’t want a pricing model that will cause difficulties with scaling either due to its complexity or rigidity.
Failure to get these aspects right may limit your ability to grow smoothly as a business and potentially restrain any brand-building efforts.