[HN Gopher] Pricing a SaaS product (2019)
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Pricing a SaaS product (2019)
Author : helsinkiandrew
Score : 128 points
Date : 2021-01-28 13:23 UTC (1 days ago)
(HTM) web link (www.bannerbear.com)
(TXT) w3m dump (www.bannerbear.com)
| polote wrote:
| One rule to know about pricing which is counter intuitive. (And
| that has been repeated countless times on HN)
|
| _Your pricing is never high enough_
|
| If you want your prospects/customers to take you seriously they
| have to find you expensive. If you seem cheap they will not take
| you seriously.
| danenania wrote:
| Another way to think about this is that even if you built a
| product to scratch your own itch, you may not be your own ideal
| customer. In that case, your instincts on pricing could be way
| off.
|
| You might be cost-sensitive and look for a good deal when
| buying tools and infra to support your own projects. But buyers
| at larger companies aren't spending their own money, so their
| thought process is very different.
|
| As long as the price fits in the budget and isn't an outlier
| compared to other products they pay for, then it's not going to
| be what they focus on. They'll care much more about quality,
| trustworthiness, ease of integration, support, and things like
| that.
|
| That's why putting your price at the high end of the
| 'acceptable' range is a win-win. You don't leave money on the
| table, and you make an implicit commitment to high quality and
| good service, which the customers you really want value more
| than a bargain.
| TriNetra wrote:
| I recently read a story in the book 'Influence - The Psychology
| of Persuasion' (by Robert B. Cialdini):
|
| > I GOT A PHONE CALL ONE DAY FROM A FRIEND WHO HAD RECENTLY
| opened an Indian jewelry store in Arizona. She was giddy with a
| curious piece of news. Something fascinating had just happened,
| and she thought that, as a psychologist, I might be able to
| explain it to her. The story involved a certain allotment of
| turquoise jewelry she had been having trouble selling. It was
| the peak of the tourist season, the store was unusually full of
| customers, the turquoise pieces were of good quality for the
| prices she was asking; yet they had not sold. My friend had
| attempted a couple of standard sales tricks to get them moving.
| She tried calling attention to them by shifting their location
| to a more central display area; no luck. She even told her
| sales staff to "push" the items hard, again without success.
| Finally, the night before leaving on an out-of-town buying
| trip, she scribbled an exasperated note to her head saleswoman,
| "Everything in this display case, price x 1/2," hoping just to
| be rid of the offending pieces, even if at a loss. When she
| returned a few days later, she was not surprised to find that
| every article had been sold. She was shocked, though, to
| discover that, because the employee had read the "1/2" in her
| scrawled message as a "2," the entire allotment had sold out at
| twice the original price!
|
| > It is easy to fault the tourists for their foolish purchase
| decisions. But a close look offers a kinder view. These were
| people who had been brought up on the rule "You get what you
| pay for" and who had seen that rule borne out over and over in
| their lives. Before long, they had translated the rule to mean
| "expensive = good." The "expensive = good" stereotype had
| worked quite well for them in the past, since normally the
| price of an item increases along with its worth; a higher price
| typically reflects higher quality. So when they found
| themselves in the position of wanting good turquoise jewelry
| without much knowledge of turquoise, they understandably relied
| on the old standby feature of cost to determine the jewelry's
| merits.
| loceng wrote:
| Pricing psychology is so interesting, where there seems to be a
| hierarchy as well; which flows into the idea or rule that you
| should never limit how much someone can spend.
| intrasight wrote:
| "is never high enough" isn't really actionable info. I need to
| set a price, and it will be somewhere between $10 and $1000
| month. You could of course try to fill the area under the
| demand curve, but that poses it's own challenges. I settled on
| $1000/mo because for the customers that will really benefit
| from my software, that is how much they benefit.
| dubcanada wrote:
| Do people not take Walmart seriously? Office 365 is also
| extremely cheap compared to what you get. Do people not take
| that seriously?
|
| I don't think blanket statements like, you're SAAS product is
| not expensive enough, work. You should take a tailored approach
| for what works for you.
| graerg wrote:
| >Do people not take Walmart seriously?
|
| Depends on what you mean by "people". For a lot of average
| consumers/customers, Walmart _isn't_ taken seriously. They're
| not aware (and don't care) about the incredible
| supply/logistics magic that Walmart orchestrates behind the
| scenes. They'll pay a premium to buy stuff elsewhere to avoid
| the inferior goods connotations associated with Walmart.
| iujjkfjdkkdkf wrote:
| For electronics or clothes maybe, for many household things
| Walmart had name brands and people know that. I dont go
| there (and I assume pay a premium) because I dont like
| places that treat customers as cattle, and would happily
| pay a few cents extra for a shopping experience that hasn't
| had every ounce or humanity stripped from it. Granted I'm
| in the minority and it's hard to even find places that
| treat their customers like people anymore.
| rootusrootus wrote:
| > Do people not take Walmart seriously?
|
| I tend to think that they mostly sell cheap crap, that even
| their brand-name stuff has been renegotiated with the
| manufacturer so they can sell you a lower quality version in
| order to have the lowest price. They have definitely done
| this with some products, and at least attempted it on others.
|
| So yeah, their pricing definitely affects my perception of
| their products. I avoid Walmart.
|
| Office 365 has the clout of Microsoft behind it. I don't know
| that the general rule applies as well as it does to some new
| SaaS company I have never heard of before.
| dubcanada wrote:
| If you have money and you want to pay more for the same
| thing you are more then welcome to shop around. But just
| because what ever premium brand name store you use is
| "better" because it costs more, doesn't mean it isn't the
| same thing as Walmart.
|
| Pricing is not as simple as "charge more" because it
| increases the premium factor by applying a this costs to
| much for me so it must be good factor.
|
| There are hundreds of other factors you need to consider
| and I don't think applying a double my price equals success
| to your pricing schema always makes sense.
| rootusrootus wrote:
| > pay more for the same thing
|
| I think you missed the point. Walmart absolutely has
| negotiated deals in the past for products that appear to
| be the same but are not. Levi's jeans is one example.
| They tried to do the same thing with Snapper, as I
| recall, but were rebuffed.
|
| If that's okay with you, great, you are matching the
| price of the product with the quality. But as a result of
| them doing it and not being completely transparent about
| it, I question what other products they've done the same
| thing with.
| arbuge wrote:
| You may avoid it, but hundreds of millions don't, so the
| point stands. "Cheap crap" is obviously one possible way to
| go, and companies like Walmart have grown very successful
| that way.
| bryanrasmussen wrote:
| are there hundreds of millions of enterprise customers
| for your SAAS product?
| dubcanada wrote:
| Sometimes shooting for enterprise customers doesn't work.
| Some products need the little guy to survive, not global
| international enterprise companies.
| rootusrootus wrote:
| Many people are totally fine with buying cheap crap. As
| long as they know that going in, that's great. Walmart is
| indicating with their prices that they're offering lower
| quality merchandise, which many people find acceptable
| because the cost is lower. It's honest.
| ufmace wrote:
| You're kind of both right IMO.
|
| The great majority of products created by techies interested
| in startups are priced much lower than the market will bear,
| and so their prices should rise.
|
| There definitely is a market out there for the cheapest
| possible version of something. Usually, turning a profit
| while moving a product at the cheapest possible price
| involves maximizing volume, cutting quality to be bare
| minimum, and ruthlessly eliminating overhead. Like, if there
| aren't thousands of people on the internet complaining about
| how crappy your quality is, you probably need to cut it
| further. I haven't studied it, but I have a hunch that most
| of the type of people who surf HN for business advice aren't
| interested in being in a commodity industry where you have to
| do these things to have a viable business. Or if they find
| themselves in one, they aren't going to be ruthless enough in
| the right directions to make it. They better find the right
| place to get advice for that sort of business, or they won't
| last long.
| alberth wrote:
| Question: is there a buyer who'd be only will to pay $49/mo and
| not $99/mo?
|
| I ask because BannerBear has 3 tiers: $49, $99, $399.
|
| It seems like if you're willing to pay $49, you'd also pay $99
| ... and as such, why not just eliminate the $49 plan.
|
| https://www.bannerbear.com/pricing/
|
| EDIT: Why the downvotes? It's a genuine question and if you don't
| think so, please just comment why you don't think so to advance
| the conversation.
| rat9988 wrote:
| sales tactics to show that you get a lot of value in that tier
| per dollar spent.
| gnicholas wrote:
| It's well-known that people are influenced by the number and
| relative value of options. It may be that very few people
| purchase the $49 option, but that its mere presence makes
| people more likely to purchase a higher tier.
|
| And by having the $49 tier present, the company can advertise
| that their pricing "starts at $49".
|
| Also, there are probably some people whose purchase authority
| is limited to $1,000/yr.
| alexellisuk wrote:
| Completely agree with the reasons. Most all of my indie company's
| software is free and OSS - so no opportunity to capture any
| value.
|
| I created the open source tunnel project called inlets which now
| has 8k GitHub stars, the same thing happened - lots of people
| used it, got value and didn't pay a sponsorship or for support.
|
| So seeing the problem, I then went on to create a paid version
| which adds value and features for companies. The main issue was
| that many developers anchored the pricing to ngrok, but ngrok is
| not the same product, for one, it's a SaaS with rate-limits and
| is a cloud service.
|
| inlets PRO doesn't have any rate-limiting, can act as a VPN,
| integrates natively with Docekr + Kubernetes and can be self-
| hosted too. That's the value of it. So when asked, I advise Ngrok
| customers to stay with what they know, they aren't the target
| market.
|
| It still makes anchoring a challenge though, and Neil Davidson of
| Redgate talks about this in Don't Roll the Dice - another eBook
| the author may enjoy reading - https://www.red-
| gate.com/library/dont-just-roll-the-dice
| jahewson wrote:
| > The main issue was that many developers anchored the pricing
| to ngrok, but ngrok is not the same product, for one, it's a
| SaaS with rate-limits and is a cloud service.
|
| You're hooking me in to an interesting pitch here.
|
| > doesn't have any rate-limiting, can act as a VPN, integrates
| natively with Docekr + Kubernetes and can be self-hosted too.
| That's the value of it.
|
| That's just some stuff it does though, not the value.
|
| As an underwhelmed ngrok free user, you could probably sell me
| this product somehow. We have lots of pain around webhooks in
| CI, especially with parallel builds.
| jFriedensreich wrote:
| I was about to write both products went out of business but one
| was just rebranded and still has the same higher base pricing and
| seems to be doing well, so it seems it worked out very well.
| Maybe increasing the pricing also played a role in identifying
| the other roduct as too unattractive to continue and focus on
| bannerbear sooner than otherwise...
| f430 wrote:
| Good advice but its a hard sell in overly saturated markets and
| most people are just shopping for the lowest price.
| js4ever wrote:
| After all the good advices in the article my first idea was to
| check where they are now after 2 years. The site is down, dead in
| the water. So maybe the advices where not that good ...
| mlboss wrote:
| 2 days back there was an article about how they scales to $10k
| MRR. https://www.bannerbear.com/journey-to-10k-mrr/
| jwbaldwin wrote:
| Site is still very much up and running. Even postd about a
| recent 10k/mmr milestone.
| js4ever wrote:
| Ah I was referring to the site linked in the article
| https://www.votemojo.com/ But it seems they changed the
| domain
| darrenwestall wrote:
| We put our prices up by 50% to new customers this month, we've
| see no difference in the amount of customers we've earned - just
| a higher revenue per customer.
|
| Charge more.
| yblu wrote:
| In my case, I charge $4/month for a developer tool and every
| week or so I would receive a survey response (that people do
| after uninstalling it) calling me names for charging money.
| Apparently there are people who want the tool enough to
| complete the survey and curse the creator but not enough to pay
| $4/month for it. So for me, pricing is really hard.
| jimkleiber wrote:
| Just reflecting out loud here, as I struggle with this as
| well.
|
| The way you said it makes me think that at $4/month, you
| might actually be competing with free, as the prices seem so
| close. If it's $20/month, they may not say "oh but why isn't
| it free" or even more so at $50/month.
|
| At low prices, maybe it just seems too much of a hassle to
| sign up and pay, ie, "Ugh, just $4/month? And I have to go
| thru the burden of signing up and giving my credit card and
| all that?" Whereas at $50/month, the paying process pain may
| feel relatively smaller.
| Michael_Sieb wrote:
| We at Type Studio try to offer our SaaS completely free, as we
| believe everyone should find out if the product is helpful.
| Especially as students ourselves we don't have the possibility to
| pay monthly fees for all the services we like to use. That's why
| our approach is to offer a completely free version of our video
| and make people who only want to edit 1 video a month happy with
| it. But of course we also have to think economically and make
| sure that our business is sustainable.
| idlewords wrote:
| My experience has been that no one can give you as much grief
| and hostility as a free user. Even charging a buck a month
| leads to an enormous step up in customer courtesy in my world--
| I don't know if it applies equally to yours.
| [deleted]
| utdiscant wrote:
| We use many products with low price - that doesn't make me trust
| the products less. For me the reason to charge more is just that
| customers are willing to pay more than you think.
|
| When you double the price, it is likely that the people who
| bought would still have bought at the new price. So you are
| leaving money at the table by not raising the price.
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