Raising prices in SaaS can be one of your most effective growth drivers - but how often should you do it? It's really quite simple...
How often you should raise prices in SaaS is determined by two things:
Your Sales Cycle
Your Product Cycle
The sales cycle is the rate at which you get new customers in who can take a look at your product. And your product cycle is the rate at which you actually have new product to show them.
Update pricing in a cadence to match this. A simple average is a good starting point.
So if your sales cycle is 3 months and you ship meaningful upgrades and new features twice a year, upgrading pricing and packaging every 4 months is going to mean either
1) raise prices in close conjunction with shipping new product to customers currently in your sales pipeline, which is a good reason to change prices.
or
2) ship new prices to new customers that are just entering your pipeline, and who have no idea what your pricing was in the past - giving you the best 'clean' test of the markets sensitivity to those prices.
And remember: changing your packaging is changing your pricing: if your basic tier previously had features A and B and you now add C - you just effectively lowered your price*.
Your mileage may wary, changing prices can be operationally heavy, but if you are changing pricing less often than both your sales and product cycle, you better have some other 3000% ROI projects out there to spend your time on.
Check out the video below:
*Yes - pricing nerds will notice that it's the customer surplus that increased, making the current pricings value capture proportionally lower. The point is that ABC *feels* cheaper than AB at the same price.
Comments