5 Main Principles to Keep in Mind When You Want to Launch Your SaaS Pricing

Starting in January 2024, I began interviewing SaaS founders about various pricing topics. From solopreneurs to scale-ups, I wanted to dive deeper into the reasoning behind the various iterations they went through on pricing.

In today’s newsletter, I have listed 5 main principles I learned from them about how to launch your first pricing offer.

Analyze your competitors

You want to remove as many frictions as possible in your first launch. No need to optimize your margin; validate that some people are willing to pay to use your product.

But prospects will compare your solution with competitors, and your solution will lack features.

Thus, at this point, you need to make your pricing a strong selling proposition when comparing your solution with your competitors:

• Start with a pricing lower than all or the majority of your competitors:

Being new, we opted to be either equivalent or cheaper to avoid price being a barrier for early adopters.

Mehdi Djabri, Co-founder at Iteration X

• If you want to position yourself as a premium option from the start, or if you offer a specialized set of features for a specific market, aim to price yourself in the middle range of your competitors’ landscape. You don’t want to be perceived as the cheapest, but still, you want to facilitate decision making.

We started with a price of 45€ per user per month because we wanted to be a bit more expensive than tools like Pipedrive since we had a field aspect that others didn't have. Additionally, our more direct competitors were at 200-250€ per month, and we wanted to be aggressive against them.

Arthur D’Achon, Co-founder and CEO at Sidely

Don’t start for free

You may start with a free trial, but choose not to offer your service for free.

People don’t engage with a product that is available for free. If no money is on the line with your product, no time will be prioritized to use the product. This leads to churn.

Louis, co-founder at Specify, chose a free-trial model but he and his co-founder decided against launching entirely for free initially.

We believed that the perceived value of our product would be negatively impacted if we were free all the time.

Louis Chenais, Co-founder at Specify

Price based on value

Price based on value rather than costs. The value should be significantly higher than your costs, as that’s where the opportunity lies. Focus on the unique value you provide; this approach yields better results.

We initially struggled with our pricing because we were too focused on covering our costs. Once we shifted to a value-based pricing model, emphasizing the unique benefits our customers received, we saw a much better response.

David Caughman, Director of Pricing and Monetization at Docker

And on value that favors upselling

The unit on which you price, and that reflects your value, should enable you to upsell your customers as they grow.

If your value is to facilitate collaboration, a “seat-based” pricing model may be the right approach. As customers grow in headcount, the number of users on your platform will increase, thus increasing the average revenue per customer.

That’s the reasoning behind Tggl’s pricing model as mentioned by Asma, one of its cofounder:

So for us, basically, what will influence the increase in pricing is the number of seats and the number of requests they make.

Asma Makni, Co-founder at Tggl

If your value is based on a specific usage, opt for a usage-based pricing model. When customers approach the limit you set on the various packages, block them and ensure you can upsell them effectively. This can have a huge impact on your revenue.

We recently implemented our in-app limits, we can see a direct revenue increase as a result of it

Luuk de Jonge, Co-founder and Product at Contrast

Make the implementation flexible from the get-go

You should assume that you will need to adjust pricing for specific customers and make changes to the pricing structure down the line.

Our initial concern was solving the problem of low response rates to customer feedback. Once we confirmed we could address this issue, we adapted our pricing model to better fit the value we were providing, showing the importance of flexibility.

Simon Robic, Co-founder and CPO at Screeb

We refer here to the need of having a feature flag system, whether built internally or with the help of a specialized third-party. This system will enable you to activate features or adapt usage limits for specific customers depending on what you negotiated with them without code.

Even better, you can connect your feature flag system with your billing system. This will enable you to change features from one plan to another without relying on engineers, making it much faster to update your pricing structure.

We connected Stripe with Unrevealed (a feature-flag management system) to easily switch features from one plan to another.

James de Wasseige, Co-founder and GTM at Cycle