It was a few years ago, early in the days of Exotel, the cloud telephony startup when co-founder Shivku walked into a customer’s office (Practo) again to ask what Pricing he had given them. That is how confusing pricing a SaaS product can be! Exotel has grown a lot since then and now maintains a clear cut pricing on their website for all their customers to see. But how does a company arrive at a price point? How does a startup know how much would a customer be ready to pay them?
One obvious benchmark is to look at what the competitors are priced at. WebEngage, providers of an in-site customer engagement suite has an interesting journey. Co-founder Avlesh Singh says, “We had a few competitors in the space and we weren’t really sure of the pricing. We were right up there in terms of functionalities but to remain competitive, we naturally priced ourselves lower than others and by a margin that customers would make a note of.” WebEngage has grown since then, raised funding and managed to acquire close to 13,000 customers (paid customers haven’t been disclosed yet).
Their pricing plan has evolved and their biggest change came in when they recently jacked up their pricing which was impending from 20 months (along with a very transparent blog post explaining the move). Pricing is a very iterative process and your beta phase will be the most crucial phase when your product is ready to be used and the only thing you’re doing is that of talking to the customers. There will always be players in the market- free ones and the others who’re charging a bomb. It’s very important to position correctly such that you don’t look as a paid alternative to a free tool and also not as a very young startup charging to steeply.
Wingify, the makers of Visual Web Optimizer had another problem. “Beta testing is a good strategy but it works well in established markets. We were in a bit of a grey area where users aren’t able to rationally determine its price as they would do in established markets,” says Paras Chopra, the founder of Wingify. Paras went on net to do his own research and did a good case study of a company in a complementary industry which was in a similar position (which he detailed in this blog post).
The other area companies experiment with is the limits within a plan. For instance, WebEngage has a number of responses a customer can collect for their survey and the limit for this responses collected is different for different plans. The bar was set too high in case of WebEngage and no one was hitting their limit which never required a customer to upgrade or move out of a free plan. Some usage from beta users will give a good sense of what is a reasonable limit. Wingify and Clicktale (the case study), both experimented with this as well.
The key with pricing comes down to the fact that even if you’re a startup, you can charge a reasonably high amount given that your product is delivering value. Confusion at the beginning is okay and it is also okay to change your price plans but transparency is crucial and if the reasons stem out as logical conclusions, customers would understand. It's also a more of a thing that you learn with experience, just like in the case of an autowallah where you know the pricing once you've stayed in the city and traveled via autos long enough.
Vijay Sharma, co-founder at Exotel helps to put down a few points that turn out to be helpful while pricing a SaaS product:
- Being a SaaS business the pricing has to be ON the website. Experiment during the beta phase but have it clearly on the site once there is some sense within the company about pricing.
- Position yourselves well (for instance, Exotel is a telephony company and also SaaS so there are 2 sides- people equate them to both, an Airtel/TATA/Reliance and also to a Salesforce/Freshdesk). For any SaaS company, balancing is tough but even within a segment, you need to find your spot.
- Be transparent. Be crystal clear when it comes to pricing. You don’t want customers coming to know of different pricing for different customers and creating a ruckus.
- Prepaid works well in India.
- Try out different things. Pricing is a very iterative process.
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