SaaS Pricing - Why Care and Where to Start?

Hey hackers & founders,

First off, I wanted to say I’m new here and I absolutely love it already.

But I want to mention something important that I believe is not discussed enough around here.

Pricing. Packaging. Monetization. Business models. Revenue per customer. Value metrics. Raising prices.

Actually making money.

There’s talk about products, problems, and AI, but the main reason why we do it all is widely ignored.

As you know (and probably felt it) lack of money is why startups fail. Not driving enough revenue or running out of funding.

Duh.

I believe the main reasons why founders ignore pricing so much is simply because they lack the expertise, time & energy to work on it constantly, or don't have anyone around who knows about it.

But here are a few interesting facts that might make you think about iterating on your pricing and thinking about it from a new perspective.

• How you monetize your product is more important for revenue than how you acquire or retain customers.

• A 1% improvement in monetization can lead to over 12% increase in profitability.

• On average, companies adjust their pricing strategy once every 3 years, but change their product & marketing strategy almost each month.

Why does this matter to you?

If you choose to be one of those rare cases who actually thinks about their pricing and iterates on your monetization model more frequently, you have a much higher chance at winning the race.

• 98% of companies that change pricing saw an increase in revenue growth. (OpenView: https://openviewpartners.com/blog/saas-pricing-insights/)

But now the real questions start to rise:

• How do I pick the right monetization strategy?
• Which are the right metrics to track?
• How to understand why customers buy?
• How to price my product?
• How to package my features?
• How to raise prices without losing customers?

In the beginning of 2023 I got laid off from the last startup I worked at.

It failed because we couldn't make enough money to sustain the team.

That's why I started digging a lot into pricing and how to actually make money with early-stage startups because those are the critical moments where if you get it right - you're pretty much set for growth, scale, and funding.

Here's what I've learned about where to start with your pricing:

1. Figure out your main value metric.

This is the main unit of value your product offers. For example, Mailchimp's main value metrics are number of emails sent and number of contacts in your email lists. So they charge based on that.

It's the main reason why your customers use your product. To build a page. To send a text message. To scan a document. Each of those is the end-result that defines your main value metric.

Once you know what it is, you realize that your main value metric grows with your customer's usage of that value. This means you start thinking about how to make customers get more of that main value metric so you can charge them more.

This means your entire product strategy can get more aligned with how you charge customers and monetize your product so you can shift building towards growing revenue.

2. It's not about MRR. It's about revenue per customer.

This is the most important metric in any business. If you increase the revenue you make per customer, this increases all of your other metrics like MRR, ARR, and overall revenue and profitability.

3. Picking the right monetization model is everything.

Once you have your main value metric, you know what you need to charge for.

You can charge for:

• Features
• Usage (Most recommended)
• Seats / users (Not recommended)
• Flat rate
• A hybrid model with combinations (usage + monthly rate + features)

It really depends on your product so it's a good idea to try them all and see which one works best.

However - this takes time and it doesn't always happen the first time.

You need to keep trying different things until you see something that really takes you revenue off.

That's why we're working on Pricer right now (https://thepricer.co).

It's a pricing page builder for Webflow that lets you iterate on your pricing, test packaging and messaging much faster, and find the right pricing strategy before you run out of money.

Platforms like ProfitWell and Paddle are amazing at showing you numbers and giving you tools to bill your customers, but there are no platforms out there that help you actually streamline your pricing and optimize monetization.

My belief is that the pricing page is the most important page in your SaaS website. The more you work on it - the sooner you'll start increasing revenue.

With Pricer, you'll be able to quickly spin up beautiful SaaS pricing pages that make it super easy for startup teams to optimize their price points, messaging, packaging, and overall value proposition.

My goal with this is to give you guys a super easy way to try different monetization models by giving you pre-built templates for pricing pages for each type of strategy - usage, features, etc.

The mission of Pricer is to make monetizing your startups simpler than ever.

I'd love to get feedback on Pricer if you have any and how much you'd be willing to pay for a pricing page builder if it helps you find the way to monetize your product earlier and drive up your revenue in the growth stage.