How important is being in a similar "pricing range" as your competitors in a SaaS business?

My website is in the SaaS field; so I feel that price is more important to customers than in other industries, especially since through my survey responses everyone has been saying to lower my pricing. How important is being in a similar "pricing range" as your competitors in a SaaS business?


If you can win a customer on price, you can lose a customer on price. But its not price, that customers are sensitive to...its value. To answer your question, its important to be in a similar pricing range to your competition if you want to play the pricing game and commoditize your product. But I would argue that the reason you customers care so much about price is because you are not giving them anything else to care about. What do customers value most, communicate that to them, desensitise them to price and sensitise them to value. More than happy to discuss this with you further...Jon

Answered 8 years ago

Jon Manning's answer is spot on.
I will add that you have not done a good job of picking your customers. Instead, it sounds like you're trying to attract generic, undifferentiated customers. Pick a clearly defined subset of customers who most value what your SaaS product delivers and then hit them with that specific message.
For instance, your customer is never "every company between 50-500 employees in Industry X". It's companies in Industry X that highly value powerful, easy sales reporting OR maybe companies who value that the schedule notifies every employee of their activities via their smartphone.

When a customer thinks "these software guys really understand us", you're no longer competing solely on price. They may gripe about price, but they will buy if the value is clearly there.

Answered 8 years ago

From experience, I can tell you that customers will always say that prices are too high and you need to lower it. They will not be doing their job if they don't. So take the survey voices with a grain of salt.

One of the first things you need to do is determine who are you competing against. Next determine what attributes you offer that they don't and are important to your customer. Maybe you offer 24 x 7 support and your competitor does not. And maybe your customer values this. If so, determine how much is this feature worth to them. That should give you a good idea for price.

Perhaps the most important part is to then go and show the customers this analysis. Make them aware of the value you have created. Show them how their product or service is better because of you.

Hope this gives you some framework to address your question. All the best

Answered 8 years ago

If you have a strong VALUE PROPOSITION, and your product is distinctly different from competitors, then clearly define and highlight your value; benefits of service and your UNIQUE SELLING PROPOSITION. Strong marketing copy and a brand strategy is essential to that end.

Simultaneously, as mentioned by Jason, target customers who want the value you provide in exchange for meeting the need they have. If you have a truly phenomenal product, positioning is the cure. Otherwise, split your market by offering a modified version of your tool to your secondary target audience, which is priced within the range of competitors, then upsell full or advanced versions of your product to your primary target audience.

If your product closely matches your competitor's product, you might price match or offer a discount within competitor’s price range, but only offer a discount for a limited time. When you have enough customers (by way of revenue) who use your tool and want the value provided, you might grandfather in “inaugural customers” as a thank you and charge new customers the price you can confirm via analytics.

In the end, your final price may be higher than what the survey SAYS, but lower than what you FEEL it should be. One way to be sure is to do a fee analysis. The difference in price is usually between cost and profit. Founders who give up some profit in the short-term do so for long-term gain.

Call me if you need more "clarity" or if you’d like help with content marketing, marketing strategy, product positioning and branding. My two cents add up💰


Answered 8 years ago

I would recommend you look into blue ocean strategy.

Answered 8 years ago

In my experience and industry, it helps to be in the ballpark as the competitors but not the same. If you are much higher, you better have a great story and message. If you can't differentiate your product for the price sensitive buyers then it is hard to stay in the running. Pricing is a hard topic and you might have to experiment a bit.

Answered 8 years ago

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