Crealanta Magazine

Additional SaaS pricing strategies that counteract Stagflation

May 27, 2023

     This presentation was presented earlier on SaaS pricing of fees as well as packaging for stagflation protection by 2022. The content of this post was based on the most recent presentation that was given during the month of March 2023 by David Vogelpohl. For more information or to take a look at the presentation that was posted earlier, glance at more details inside the last paragraph in this blog post.

Pricing the price of software as a service (SaaS) can be hard enough in good times. But, discovering the best way to set an acceptable price to increase revenue even during times of rising inflation could be challenging.

This article provides tips for improving the packaging and pricing choices for your SaaS products in a low market:

What is the definition of Stagflation?

Simply put, stagflation is an economic phenomenon influenced by three major factors:

  • A slowdown in the economy..
  • The rate of inflation is quite excessive.
  • The rate of unemployment is extremely high.

More pressure is on than ever before

  • People's wallets are ones you want to draw attention.
  • Current customers' wallets do you want to see upgraded.

That's why taking the time to consider the SaaS pricing model becomes crucial for growing your business even during the midst of a recession.

Using Your SaaS Pricing Model to Fight Stagflation

This is the most efficient way to raise your cost because you'd not be alone in doing this.

A third SaaS software, applications along with digital goods customers had to increase price over the course of last year.

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

Incredibly, SaaS businesses tend to rise prices in excess of inflation levels.

This is not surprising since the pull of this lever is generally beneficial to increase the revenue of a business, but it's an uneasy choice to take due to the fact that most people do not have the funds for spending in a recession.

Looking at pricing and packages could be among the many options not properly optimized for SaaS.

What is the reason for the price increase? Are there any reasons to not look elsewhere?

There are a variety of options to help increase your revenue even when the market has been stagnant as well as increasing prices for your goods.

The possibility of increasing the amount of clients who purchase as well as increasing conversion rates and reducing the rate of customer churn is in all likelihood.

Each of these choices requires an enormous amount of time and effort from diverse departments in order to put them into practice.

Think about the effort and resources required to carry out the method to improve sales or lower the number of customers who leave using methods like PLG, products-led development (PLG) or bolstered initiatives that improve satisfaction with customers, it could be a difficult and overwhelming process. Think of the large or medium-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 large and medium sized shirt designs represent the time in time, money and effort. that are required in order to implement PLG and customer success strategies for increasing the retention of customers and lower the rate of churn.

Pricing changes for items require minimum effort and are easy like the t-shirt that is tiny above.

As Patrick McKenzie points out, it's as easy as reversing the lower number by a higher number:

A screenshot of a tweet quoting Patrick McKenzie.

At the end of the day, changing your costs might be the simplest, most straightforward option to consider if you are looking to grow your business quickly.

Optimizing your SaaS Pricing Strategy to Take Advantage of the latest MRR as well as. The growth in net revenue retention Mustache

If you're thinking of implementing various pricing strategies, an additional thing to think about is whether you'd like to optimize your strategy to be innovative in MRR and net revenues retention or both.

Then 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 expression "growth mustache" is a sideways bracket that an former CFO in my previous career has often been referring to. (I have also added the "mustache" title, as it looks like the appearance of a mustache for me.)

Growth is driven by the growth of monthly recurring revenue (MRR) as well as new customers joining the market, as well as by net income retention (NRR) that is the amount of your current customers' MRR and their ARR you're retaining or increasing.

In the event that your NRR reaches 100%, it can result in a rise in the profits you earn, but it is also a boost to your company's worth.

There's usually a leverage for operations when you have different packaging and pricing however it is important to consider the conditions where customers will enter the store, and more used. Modifying the cost of your goods could impact your capacity to gain new customers, maintain the ones you have already and grow their numbers as well, so it is important keep this in mind when you begin making adjustments.

Test a Different Pricing Model for SaaS that is Creative Combinations to increase the revenues

Once you've made the decision to modify your pricing choice, you'll have numerous options to evaluate. Pricing by feature, pay-as-you go plans and even cost-free pricing models. A flat price is different from the usage-based model which is a per-user plan which is the best for your SaaS enterprise?

There are a variety of options to consider, as the first reference point:

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

Explore these options to find ways to boost the effectiveness of your operations.

Certain situations involves formulating models of buyers of particular personas, which can result in an increase in the average revenue per user (ARPU).

In the case of others that are not listed the need to create a brand new add-on that permits them to increase the price.

If you're not sure the process could involve switching from a flat-rate pricing system or a customer-driven pricing model, you can switch to a more dynamic model that's based on features or on usage.

Be aware of the impact of any modifications to the pricing Strategies to SaaS.

If, for example, the client base is diminished by a tiny percent when prices are increased, but those who remain are still paying an increased price, and thus generating more revenue generally, some firms might be ecstatic about that change.

It is crucial to know what changes are important for your business's structure. An established SaaS businesses may have distinct priorities from an aspiring startup.

The phrase "success" could be written in the letters S, S, S and

If we think about the concept of packaging and pricing generally and combining it with the opportunity to earn additional money, and also the possibility to create an entirely brand new product.

Take the innovation curve It can be described as a diagram that states the following: When we design something, it is then taken up by a wider range of people. Then it stalls. This is why it's so easy to fall into belief that the only way to come up with a new source of revenue is to design a completely novel product.

We can then detach from thinking and begin to think about how different earnings S curves could be created by modifying the package, plan or other add-ons, simply by giving users new ways to purchase directly from your company in addition to making use of the service you provide.

In the event that we take into consideration a use metric that is based on a value metric with older data, new strategies and plans, as well as the extensions could boost ARPU over time.

SaaS Prices and packaging Add-Ons

They can be used as an opportunity to increase your average revenues per user for current and potential customers with budgets that aren't as big since they are given the choice of deciding what products to purchase from you instead of having to pay, say the flat rate for bigger packages, that includes many choices they don't want or need.

So, for example, do you have an existing right to provide as a benefit without needing to perform any other engineering work? Do you think one of these benefits could be subdivided to make an entirely different SKU without having to create a new product?

Add-ons are available in numerous types, so you'll have the ability to choose from a variety of add-ons as well as create numerous bundles.

There is a danger since they can lower the upgrading MRR when fewer people upgrade to a bigger package. They can, however, be a powerful driver of NRR.

In order to minimize risk, be sure to carefully assess your rates of upgrading and downgrading when you make adjustments to your services or add-on services.

Additionally, you can hold off launching additional accessories until you reach the point where customers have enrolled to the main service. After they've used the item they purchased and are enjoying it, following purchases can be considered as upsells which can increase your rate of retention rates -- offer them additional products to further improve customers' experiences when they use your product.

Customers can buy the SaaS product for a reasonable price that will help build your MRR as well as ARPU with those more revenue.

A lower price can also help you gain advantages when trying to increase market share as well, particularly by reducing prices for competitors slightly.

Design a new Pricing Tier which will determine the average price per user (ARPU)

Could it be that the ARPU-boosting tier you require is available in your current plans?

In the case, for instance, you're operating a tiered price model, that offers options of $15 or $150 choices, then you're trying to find the ideal price level that will bring in more revenue, it's somewhere between these two levels and around 75 dollars.

Segmenting SaaS Plans will help you determine the value of your Service, and will help you increase your ARPU.

Another alternative is to separate your containers according to demands of your customers.

In this instance, WP Engine functions as a controlled WordPress platform which manages a variety of kinds of sites. But, they also recognized the potential to concentrate on WooCommerce customers in particular which is why they created a package that targeted only the WooCommerce users.

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

The company could concentrate on the requirements of their clients within the particular market segment in order to attract their attention and also to gain more customers' attention. Over time, WP Engine was able to improve its value for the clients it served, resulting in increased revenue for WP Engine.

The payment Frequency enhances leverage

Pricing plans that are annually based gives the customer the benefit of discounts, but they have to be paid for all through the year upfront. However, it also provides the chance to lower the churn rate and increase the value of the duration of the customer's lifetime and also LTV.

To further reap the benefits of this strategy, and to maximize the effectiveness of this strategy it is possible to give more aggressive annual pricing discounts to new subscribers, or those who wish to change from monthly charges to annual fees.

The price at the beginning could make the process easier for customers.

Tips When you're selling the Enterprise plan and your cost appears a bit higher when it is paid for each year, you should reduce the price to $5000. Most procurement departments adhere to an policy that requires employees for approval before they can purchase more than $5000 worth of goods, therefore if you are able to limit prices below this amount, it will be simpler for clients to pay for the purchase with credit cards without having to go through the internal hurdles within your business. It's possible to vary this and it's not necessarily a requirement, but it's a good rule of thumb to follow.

The Inflation Rate isn't Even You: Make a Change to Your Strategy

If you are considering making changes to the SaaS company's pricing strategy the ability of prospective customers to pay for the product is not all you need to consider. The pace of inflation could change drastically over a short duration. The variation could be diverse across the world and across all regions.

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

The financial headwinds that relate to different regions may cause localization to become more important when you provide your SAAS service worldwide.

Remove unnecessary buying tensions by implementing Localization

The phrase "localization" typically refers to a variety of aspects, such as but not only:

  • The preferred payment must be accepted in the region which you're selling products.
  • The price is localized.
  • The currency is localized.

Each one of them has each with their own benefits, not only for the buyer but also to increase your earnings.

The cost for localization of services is two times higher than the B2C rate of SaaS companies. Be sure to provide an adequate reasons behind the various pricing rates for different regions or countries, should a prospective buyer is presented with more than one price.

Local currencies are easier to get approval for as well as easier for your customers within your target market to understand. If new customers can view the SaaS charges in their local currency, it is the process much simpler to them shop, and eliminates the need for conversion prior to making a decision.

How can we help?

This piece of information was just given to David Vogelpohl in a webinar which was presented by Cumul.io. You can watch the webinar through the YouTube channel.

David Vogelpohl For more than 25 years and more than quarter of a decade, David Vogelpohl has led teams in the creation of elite engines of growth and also developed programs for large brands such as WP Engine, Genesis, AWS, Cloudflare, and other brands. David is a presenter with practical insights who is keen on practical elements which can be utilized for increasing the development of.

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