Josh Melick knows just about all that there is to know about software developing and the challenges which many software devs in the industry face. It is for this reason that he has written a fantastic piece on his own personal blog about the mistakes which many SaaS providers make when setting up their pricing structures.
We all know just how competitive this industry is and that is why more companies, especially younger companies, should pay close attention to the advice which Josh offers, regarding those price structures. Here is what Josh had to say on those mistakes, and the fix to those problems, which even he concedes aren’t easy.
All Inclusive Sales
Many startups will offer one price sales for their software packages, with no add-ons and no future payments required. This, Josh rightfully says, is a big mistake. In doing this companies are not giving themselves the chance to gain a loyal customer, they are losing the chance to upsell to that customer and they are also denigrating the price of their product in the long run. A pricing structure paid on a monthly or an annual basis is always the best way to go about sales.
One or Two Dimensions Only
Now Josh points out that whilst the large majority of companies do have a pricing structure, which usually takes on three tiers of pricing, they are missing a trick in terms of the offerings of each level. some companies will only increase the number of users allowed depending on the price paid, and others will only focus on the users and the usage which the client is allowed. Josh however believes that the most critical aspect of these structure levels is the amount of time which you can have the product for. In adding a time limit it is much easier for software developers to increase price at the end of the time period, to match with ever-ever-rising costs which they face.
Even those which do have time frames on their products fail to give their customers the heads up regarding the price changes which they can expect once the duration is over. Customers don’t mind having the prices turned up on them, what they do mind is having the carpet pulled from under them. It is for this reason that more businesses have to be transparent in what they are doing regarding price hikes. Instead of being scared of telling the customer, give them absolute transparency around the price hikes and this will actually have the opposite effect. Gaining trust and loyalty is critical and through transparency more businesses will be able to do just that.
Josh points out that whilst this is the righty forward, it is not easy to change from the way things are now, to a better and more thought out structure. This will involve a lot of positive PR and promotions for those existing customers.