The Thousand Solutions Blog

Additional SaaS pricing strategies to combat Stagflation

Jun 3, 2023

     The discussion was earlier regarding SaaS cost and pricing along with packaging, for protection against inflation starting in 2022. This article was based on the most recent presentation which was presented in March 2023, presented by David Vogelpohl. If you're interested in learning more details about the presentation or go through the slideshow that was posted previously, check up more specifics within the last section of this blog post.

Pricing of software as a service (SaaS) is often difficult enough, even during positive economic times. Finding the most effective method to set an acceptable price that will increase revenue in times of rising inflation isn't a simple task.

This article provides suggestions that can help you maximize the cost and packaging options of your SaaS products that are on a smaller market

What exactly is Stagflation?

In simple terms, stagflation is an economic phenomenon which is influenced by three major components:

  • The speed is slowing down..
  • The level of inflation is extremely high.
  • The percentage of unemployed is very high.

The pressure is greater than it has ever been

  • The pockets of individuals could be the ones that you're likely to attract the attention of.
  • Payrolls for customers are ones that you would like to see upgraded.

This is why taking the time to examine how SaaS price structure crucial to grow your business in an economic slump.

Using Your SaaS Pricing Model to Fight Stagflation

This is the most effective method of raising your price since you won't be alone when you make this move.

Third SaaS software and applications as well as the customers of digital products had to hike prices over the course of last year.

Graphs showing that over a third of companies raised prices recently.

It's amazing how SaaS firms tend to boost rates that are higher than inflation.

This shouldn't be surprising considering such a pull can be beneficial to increase the earnings of an enterprise It's just not an easy choice since the majority of people do not have sufficient funds to make investments during a recession in the economy.

Examining pricing and package options may be one option that are not optimized for use with SaaS.

What is the reason for this price increase? Is there a reason to avoid other options?

There's an array of ways to increase your earnings regardless of there has been a slowdown in the markets as well as the cost of your products.

It is possible to growing the number of customers who buy from you, while increasing conversion rates, and decreasing the rate of customer churn, which is close to 100.

All of them requires a lot of effort and time from diverse departments to complete the operate.

Take a look at the work and funds that are required for this plan to increase sales, or to reduce the percentage of customers who are unable to continue using strategies like PLG or the creation of new products (PLG) or a redesigned strategy which increase satisfaction among customers. It's a lengthy and tough job. Think of the huge size or mid-sized T-shirts.

Table with headers Strategy, Acquisition, and Churn, then rows labeled PLG, Customer Success, and Pricing and Packaging. Each cell includes a t-shirt of Small, Medium, or Large.

The medium and big style of the shirt represents the price of energy, time and money. This is the essential elements in order to establish PLG as well as strategies for increasing customer satisfaction for enhancing customer retention as well as reducing the amount of customers who quit.

Changes in price for certain items take only a little effort. They are just as simple to alter a t-shirt to be slightly larger.

According to Patrick McKenzie points out, it's as easy as replacing the lower number by the higher number.

A screenshot of a tweet quoting Patrick McKenzie.

On the last day, adjusting your price may be the right solution if are trying to grow your business rapidly.

Improve your SaaS Pricing strategy in order to benefit from the latest MRR and. the increase in net revenue retention Mustache

If you're considering applying different pricing methods Another aspect to take into consideration is whether you'd like to improve the method so that it's innovative with regard to MRR, keeping net revenues, or both.

Also, there's"the "growth mustache."

A graphic of a sideways bracket with Growth at the top and New MRR and NRR at the bottom.

The phrase "growth mustache" is a bracket that may be utilized in a diagonal way, as an ex-CFO in early in my career used to explain. (I may also use the "mustache" title, as it resembles an actual mustache.)

Growth is driven by the increase in monthly recurring revenues (MRR) as well as new clients entering the market along with the net revenue retention (NRR) which is the quantity of your existing customers and their MRR, as well as the ARR you're retaining or increasing.

If your NRR is at the 100% mark it could lead to an increase in revenue however, it also provides an improvement to your company's potential worth.

It's normal to run leverage processes when you're dealing with various pricing and packaging options But, you must take into consideration the conditions that customers will be expected to arrive and the way they utilize the store. The cost you set for the items you offer could affect your ability to bring in new customers. It is feasible to maintain the customers you have already, and also increase the number of them, and it is important to be aware of this when you begin making any changes.

Try a different Pricing Model for SaaS which is Creative Combinations for a boost in revenue

When you've decided to modify your pricing choice You'll be presented with various choices to look at. Price by feature pay-as you plan, in addition to free pricing models. The flat pricing model is different from pricing models based on usage, which is a model for per-user that is ideal choice for your SaaS business?

There are a variety of options to think about, for your first information source:

  • SKUs:
  • Platform tiered plans
  • Product(s) tiered plans
  • Persona tiered plans
  • Additional add-ons that can only be one
  • Bundles of Add-Ons
  • Entitlements:
  • Features
  • Utilization
  • Assistance
  • Pricing:
  • Price
  • Recurrence
  • Geography
  • Payment method
  • Discounts
  • Free trial trial

Check out these ideas to learn methods to increase the efficiency of your organization.

Certain situations involves formulating models for buyers of certain people, resulting in an increase in the ARPU. (ARPU).

If there are other brands that aren't they have to create an the brand's own that allows them to increase costs.

If you're not sure if you're at the right time to make the switch from a flat rate pricing system or model dependent upon the customer, it is possible to switch to a dynamic pricing system that is based on features or based on use.

Be aware of the implications for any change to Pricing Strategies used for SaaS.

If, for instance, the number of clients reduced in a tiny amount as prices are increased however the people who pay the higher price, thereby creating more income at the end of the day, some companies might feel elated about the improvement.

It's essential to comprehend what modifications are necessary for the organisation's structure. Established SaaS business may have distinct demands than startup companies that are in the developing.

The term "success" can be written as a letter S S, S, S and

In the event that we look at the notion of pricing and packaging as a whole, and then combine it with the potential to earn additional money in addition to the opportunity of creating a completely unique product.

Think about the The innovation the curve of Innovation. It can be visualized in a graph that shows that once we come to a new idea and it's then taken by a larger number of people. Then it stalls. This is why it's so easy to get caught up in the belief that the best way to find an innovative source of income is to come up with an original product.

Then, it is possible to take a step back from our thought process and think about the different ways revenue S curves can be formulated by changing the plan, package or adding additional features that provide customers with a different method to purchase directly through your business in addition to using the products offered by you.

In the event that we analyze metrics of usage that are based on a value metric which was derived from old data and plans, it is possible that the new strategies and plans, as well as the additions could increase ARPU over time.

SaaS Prices and packaging Add-Ons

These can provide an opportunity to boost your revenue get per client, for both existing and future customers who have budgets that aren't as big because they're offered a variety of what they want to buy from you instead of having to cover the costs of a flat fee for bigger packages. It's a wide range of choices they may not need.

In other words, do you have the authority in place to provide a benefit without having to do any more engineering? Are you of the view that one or more of these benefits could be split into an SKU that is completely distinct without needing to develop a brand new product?

Add-ons come in many varieties and give users the choice of choosing among many options and also creating various bundles.

There's a chance that the upgrades may reduce the possibility of upgrading MRR should fewer customers are upgrading to larger packages. But, they may cause a significant increase in NRR.

In order to reduce your risk, you must be aware of your rates of change as well as the decrease of the products you provide in the event that you change your service or add ons.

In addition, you could put off the release of other products after your customers have reached a point in which the clients have been signed up for the main service. Once they've tried the product they bought and are enjoying the experience, subsequent purchases can be considered an upsell that can boost the retention rates of your customers. You can also offer them more products in order to increase the satisfaction of those who purchase from the services you offer.

Customers can buy the SaaS service at a fair price. This can boost your MRR of your company and also increase ARPU. It will lead to higher revenues.

Lower prices can help you in increasing your market share particularly through reducing costs for your competitors a little.

Design a new Pricing Tier which will determine the price that consumers pay (ARPU)

There is a chance that the ARPU-boosting plan you want could be included in your existing plans?

For instance, if you have the tiered pricing model, which offers a choice of $15 or $150. This is the case when you're trying determine the most effective price that is more profitable. There's a middle ground between these two which is around 75 dollars.

Segmenting SaaS Plans will allow you to identify the benefits that could be derived from your service and can help increase your ARPU.

Another alternative is to break into containers according to the needs of your clients.

In this case, WP Engine functions as an uncontrolled WordPress platform, which manages different types of websites. They also realized that they may be able specifically concentrate on WooCommerce users specifically. This is the reason they developed an application that was targeted at the WooCommerce users.

A screenshot of the WP Engine pricing page for a segmented pricing plan for WooCommerce users.

The business could focus on the requirements of its clients in a particular industry to draw their attention, and to draw more attention from its clients. In the course of time, WP Engine was able increase the value of the customers they were serving as a result of which led to a rise in revenue to WP Engine.

Leverage grows with amount of payments.

The pricing plan on their basis offers the buyer the benefit of discounts. They must, however, be paid all through the year, as well as in advance. It also gives you the chance to cut down on the amount of time spent on churning and improve the worth of the of the customer's lifespan and also LTV.

In order to maximize the benefits of this method, and for maximum effectiveness this approach, it's feasible to offer discounts higher than annual prices for new subscribers or customers who want to change from monthly charges to annual fees.

The price at the beginning can make it easier for clients.

Guidelines If you're selling the Enterprise plan, that's slightly more than what is paid annually You should lower your price by $5000. A majority of departments in procurement have a rule that requires employees to obtain approval before they are allowed to spend more than $5000. If you can limit prices to less than this it's easier to let customers purchase items using credit cards, and not needing to confront internal barriers in your company. There is a possibility to alter this but there's no need to make it so, however it's best to observe.

Inflation isn't the only thing that's happening: it's time to change how you run your business

If you're considering changes to the SaaS pricing policy for your business it is important to think about the customers who might be able to buy the product is not all you need to take into consideration. The pace of inflation may be quite different in the shortest duration. There could be a wide variety of variances all over the world in addition to across the world.

An inflation graph of the annual percent change in consumer price index in Brazil, US, India, Germany, and China from 2008 to 2022.

Headwinds to financial performance in various regions could make localization more crucial for those who are able to offer your SAAS service across the globe.

Reducing unnecessary stress when buying by introducing localization

The phrase "localization" can be applied to numerous factors, including however, it does not limit itself to:

  • The preferred payment should be recognized by the country that you are selling your products.
  • The cost is localized.
  • It is a local currency.

Each one is accompanied by every one having distinct advantages and disadvantages that are not just for the client but also to boost the profit of your company.

Localization costs for services is two times higher than B2C rates of SaaS companies. Make sure you provide adequate explanations of the reasons for various pricing rates in various locations or countries for the case where purchasers receive different prices.

Local currencies are much easier to approve and easier for clients who are in your area that you prefer to work with. When new clients can see the SaaS costs in their local currency, it is simpler for them to shop without having to convert prior to making a purchase.

What can we do to help?

The information was provided in the presence of David Vogelpohl in a webinar which was held by Cumul.io. It is possible to view the entire webinar via YouTube. YouTube channel.

Other blog posts about SaaS cost and prices could comprise:

David Vogelpohl For more than 25 years, and for more than a quarter century, David Vogelpohl has led teams in the creation of high-end engines that can grow. He also has developed software that are employed by big businesses such as WP Engine, Genesis, AWS, Cloudflare, and numerous other businesses. David is a professional speaker with real-world experience. He's a keen eye on issues that are relevant and can help increase the efficiency of.

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