Additional SaaS Cost Pricing Strategies to combat Stagflation

     This presentation was made earlier about SaaS fees and pricing as well as packaging to combat stagflation in 2022. The present article is based on an updated presentation made in March 2023, presented by David Vogelpohl. For additional information, or to watch the earlier video, check out the further details at the close of this blog.

Pricing the cost of software as a services (SaaS) isn't an easy task enough, even in the most favorable times. However, figuring out the right pricing to increase revenue in times when inflation becomes more difficult.

This article gives tips for making the most of pricing and packaging of your SaaS products even in a smaller economy:

•       What is stagflation?
•       Utilizing your pricing model to fight stagflation.
•       Enhancing the effectiveness of your SaaS Pricing Strategy for the New MRR in comparison to. the net revenue retention.
•       Try out creative SaaS pricing model combinations to generate revenues.
•       Rate of Inflation can fluctuate. Vary your strategy.
•       What can I do to help.

What exactly is Stagflation?

In simple terms, stagflation is an economic phenomenon that is influenced by three major factors:

• The economy is slowing.
• Inflation is high.
• A high rate of unemployment.

It means that there's more pressure than ever on:

• Your wallets and the pockets of potential clients you'd like to impress.
• The wallets of existing customers would you like to see upgraded.

So, taking the time to think about your SaaS pricing strategy is essential for you to keep expanding your company even in the economic climate.

Using Your SaaS Pricing Model to Fight Stagflation

It's the easiest solution to raise your prices to the point that you're not alone If you do such.

A third of SaaS software, applications, as well as digital products users increased their costs in the last year.

Incredibly, SaaS companies tend to grow at rates that are higher than the rate of inflation.

Pulling this lever -- not a surprise, is generally a way to boost the revenue of a business, even though it's not an easy choice to make at a time when customers aren't receiving as much in the way of spending as they would in a stagnant economy.

But, thinking about pricing and packaging is one of the a few options that have not been optimized for SaaS.

Why are prices rising? Are you actually required to do something different?

There are many other methods to earn more cash when markets are sluggish, apart from increasing the cost of your products.

Possibilities of increasing sales and conversion rates, increasing the rate of conversion as well as reducing the amount of churn can be all alternatives.

However, all of those choices require a lot of effort in terms of time and energy by different departments in order to achieve the plans.

Consider the time and money that will need to be invested in acquiring more customers and reducing the rate of turnover using methods like Product-led Growth (PLG) or bolstered initiatives to improve the customer experience, it can become a lengthy and overwhelming process as illustrated by the large and medium sized T-shirts.

Every one of those massive or medium-sized shirts represents the amount of time, effort, and resources. It takes to put into place PLG and to increase customers' satisfaction and to improve customer acquisition, while decreasing the rate of churn.

However, changing the price of a product requires only a few minutes and can be done very fast, as signified by the tiny t-shirt on top.

As Patrick McKenzie points out, it's as easy as replacing the number by a larger number:

At the end of the day, changing pricing could be the most simple, easy option to implement when you need to grow its revenue fast.

Enhancing the effectiveness of your SaaS Pricing Strategy for new MRR and. net revenue retention: the Need to Grow

If you're considering changing your pricing strategies, another thing to consider is whether you wish to optimize for an entirely new MRR in addition to net revenue retention or both.

And then there's"the "growth mustache."

The grow mustache is a sideways bracket a former CFO I worked with often referred to. (I included the "mustache" description, because it looks like the word for a mustache.)

Growth is fueled by increasing the monthly recurring revenue (MRR) as well as new customers signing up and the net retention rate (NRR) which refers to how much of your current customers' MRR and their ARR that you're able to keep or increase.

And if your NRR exceeds 100%, then that's a multiplier to your profits But the same is true to the valuation you make.

It is possible to leverage your operational capabilities by changing pricing and packaging. However, you must also recognize that you're operating in an environment where customers could have less money entering the system and leave. How you change the pricing of your products could affect your capacity to draw new customers in, keep and expand existing ones, or both, so keep this in mind as you make modifications.

Explore a new pricing model for SaaS that is Creative Combinations for Increasing revenue

If you've determined that the time has come to make a change in your pricing is the best solution, there are many ways you can experiment. Pricing by feature, plans that pay as you go and freemium pricing models flat-rate pricing pricing, per-user plans -Which one is best for your SaaS enterprise?

There are a variety of ideas to think about as a starting point:

• SKUs:
• Platform tiered plans
• Product(s) tiered plans
• Persona tiered plans
• Single add-ons
• Bundles of accessories
• Entitlements:
• Features
• Utilization
• Help
• Pricing:
• Price
• Recurrence
• Geography
• Method of payment
• Discounts
• Free trials for trial

Check out those possibilities for strategies to improve the effectiveness of your operations.

A few may have to come up with a buyer persona-based pricing structure that is somewhat higher average of revenue per each customer (ARPU).

If it is the case for other businesses it is the introduction of a component which lets them increase prices.

In the case of others, this may be a change from a flat-rate pricing system or a pricing model that is based on the user towards a model that relies on the features of the product or user.

Be aware of the impact of any changes to your SaaS Pricing Plan

If, for instance, the client base is reduced by a little amount due to an increasing cost but all customers pay a more expensive price and earning a higher overall certain businesses may be happy with the price increase.

However, you must be aware of the changes that will influence your strategy for business. Established SaaS business may have very different priorities from one that a start-up is.

Success is spelled with 3 S's

Often when we think of pricing and packaging we couple our ability to increase profits with the ability to create something new.

Consider the Innovation curve,, which is a figure that states: we design something; it grows in popularity; then it stalls. It's easy to become trapped in thinking that the only option to create a completely new revenue source is to design a completely new product entirely.

It's possible to break down these thoughts and contemplate the ways in which new income S curves might be created by modifying the packages, plans additions, packages, and so on in providing customers with various ways to purchase from you and also to access your platform.

Also, if we consider a use metric based on a value measure that is over-aged the new plans, along with add-ons can increase ARPU with time.

SaaS Prices and Packaging Additional add-ons

The addition of add-ons is an effective way to increase average revenue per user for existing and new customers on an income-based budget as they are able to have the luxury of choosing what features they wish to buy -- rather than paying, say, flat-rate prices for a larger package that includes a set of choices they don't require or want.

As an example, are an existing set of entitlements that you can provide as an additional feature without having to create additional engineering efforts? Could one of those functions be sliced out to create an entirely different SKU that isn't an entirely new product?

Add-ons can be found in various styles that means you can choose from an array of options or create bundles.

They carry a substantial chance of being a risk since they could lower upgrade MRR in the event that fewer users are able to upgrade to more powerful packages However, add-ons could provide a significant boost to the growth in the creation of NRR.

To minimize the risk, carefully measure the rate of your downgrade and upgrading as you begin making adjustments to your package as well as other services.

Furthermore, you could not pitch additional add-ons until to the point that your customers have signed up in your primary product. Once they've utilized the product they've purchased and have enjoyed itas well as after any additional purchases that they make are thought as upsells that will improve your sales retention rates and pitch the add-ons they've purchased to further enhance the experience you provide them with the product.

It allows users to access into the SaaS product with the cheaper price, which will allow you to grow your MRR as well as ARPU by generating additional revenues.

Also, a cheaper price point can also aid you to gain an advantage when seeking market share as wellparticularly when you can beat competitors' prices just slightly.

Creating a New Pricing Tier that drives Average Price Per User (ARPU)

Could it be that the ARPU boosting tier that you require can be found in the existing plans?

If, for instance, you're using a tiered pricing model which offers $50, $100, or $300 alternatives and the most effective pricing level for generating more profit is somewhere in between about 75 dollars.

Segregating SaaS Plans into Segments to Define the worth of your service and improve ARPU

Another option is to divide your packaging according to individual customer demands.

As an example, WP Engine is a controlled WordPress platform, which manages various types of websites however, they recognized the opportunity to promote WooCommerce users specifically and therefore, they created specific products targeted specifically at this particular group.

WP Engine was able to focus on the customer's needs within this particular segment in order to attract their attention and gain additional enrollments. Over time, WP Engine was able to offer more value these customers as well as boost the revenue of WP Engine.

Payment Frequency Increases Leverage

The annualized pricing option offers buyers the benefit of a discount by paying all year long in advance however, it also offers customers the advantage of decreasing the rate of churn and improving the overall value, also known as LTV.

For further benefits from this strategy, you may provide greater discounts for annual subscriptions on new subscribers as well as customers who wish to move from monthly costs to annual costs.

A price period may help users to take the pricing easily.

Tips If you're offering an Enterprise plan and your price begins to appear a little more than it actually is when you pay annually and you want to keep that cost below $5000. Many procurement departments have an procedure that requires employees to obtain approval to spend more than so it's best to maintain costs below that amount and make it easier for customers to easily make payments using credit card without having to navigate internal barriers within their organizations. It's possible to vary, and it's not an absolute requirement, but it's an excellent idea to test.

The Inflation Rate isn't Even It's Time to Change Your Strategy

When you think about changing the way you run your SaaS price policy, the potential customer's willingness to pay isn't just the sole factor to be considered. Inflation can vary a lot over a short time. It is different in each country or region.

The negative impact of financial performance on the company when compared to other areas could indicate that localization is more crucial for those who sell your product via saas globally.

Get rid of unnecessary purchasing friction with the Localization

The process of localization usually comprises a number of components, which includes but not limited to:

• The preferred payment is accepted for the region the product is sold into.
• The cost is per person.
• The currency is localized.

Each has an additional advantage that is not limited to customers only, and also for profit margins also.

Localizing pricing converts at 2 times for B2C SaaS firms. Be sure to provide justifications for differing prices for different countries or regions such as if a potential client manages to see multiple prices.

Local currencies are simpler to be approved for as well as easier for customers in your target market to grasp. When new customers get to see your SaaS costs displayed in a currency they're used to and understand that it's straightforward for them to shop without the hassle of math involved in conversion before they can make a decision.

How can You help?

The information in the above piece was provided by David Vogelpohl in a webinar held by Cumul.io. Watch the presentation on the YouTube channel.

Other articles related to SaaS prices and costs could be interested in:

David Vogelpohl For more than 25 years, David Vogelpohl has led teams building elite engines of innovation and technological advancement for the top companies like WP Engine, Genesis, AWS, Cloudflare, and numerous others. David is an actionable in-depth expert who shares real-world techniques that are able to be applied for boosting growth.

This post was posted on here