Pricing, like value, might fluctuate more than you think. Two experts from both the consulting and SaaS worlds agree on setting prices based on value. Find your value pricing through ideation.
What is the most money you have ever paid for a book? Why do airline ticket prices change daily but not the value of what you provide? Is the value of what you provide magically constant, day by day?
And what is value anyway…? Ok, I prematurely digress, but let me answer the first question.
I was given a book, the Oxford English Dictionary, “worth” (whatever that means) about $400 dollars once, but the most I ever paid for one was $200 – Pricing Creativity by Blair Enns.
Actually, I got more than a book.. I got the 5 digital downloads of the book and a sort of glossy binder manual that now sits on my desk.
Absolutely remarkable book, even if you’re not “in business”, let alone in marketing, consulting, etc.
I “bought” another book for $0 that was almost as good – SaaS Pricing Strategy, by Patrick Campbell. SaaS Pricing Strategy is shorter and really more of an ebook but it’s terrific – one of the most engrossing PDF files ever penned.
Pricing Creativity is about pricing as applied to creative and technical consultative services; SaaS Pricing Strategy is about applying pricing to subscription SaaS software and mobile apps.
Each of these pricing books is interesting to me because firstly, my last name is Price and I – aha, just kidding! This post isn’t about nominative determinism.
No, it’s interesting to me – preamble – that tech products and tech services are two sides of the same coin, different ways of solving the same kinds of problems.
Jonathan Stark’s The Pricing Seminar really drives that idea home, albeit through a kind of sneaky, socratic teaching method. By the way, it starts on Monday and I’d recommend it.
So it’s interesting to evaluate both types of solutions, products and services, through the lense of pricing.
But it’s also interesting because creating (revenue) growth for a product using marketing strategy, something I’ve worked on, seems like a pointless exercise unless pricing is considered.
The four p’s of marketing: product, promotion, place, and price. Bit dated but worth mentioning them now and then – the digital world is so focused on promotion that product and pricing fall off the radar.
Nothing wrong with changing your pricing, either; you could change it every single day, like a stock price, or the aforementioned fluctuating airline ticket.
Pricing is something you should “edit” when you are about to design and invest in a digital marketing campaign, let alone build an ongoing digital marketing program.
How to think about pricing
Rather than fix the price, decide on a model for setting fluctuating pricing over time, in response to various factors, foremost of which is understanding your customer and the evolving ways in which she uses your product.
This truth bears out in the marketplace. If you look at, say, 50 of the top SaaS products under the lense of the archive.org’s wayback machine, you see a constant changing of pricing (with a few weird exceptions, like Slack – they nailed it the first time).
Which makes this the perfect place to insert Patrick Campbell’s definition of pricing:
Pricing is the exchange rate on the value you are creating
Speaking of value..
Blair Enns says the same thing, basically, in Pricing Creativity: that the best model for pricing services is value.
In fact, both books are predicated on the assumption that price be based on the value the solution creates.
And of all the pricing models, pricing on value requires:
- the deepest understanding of your customer
- the most creative thinking with respect to how you constitute and convey your offers
- the most research, due to items 1 and 2
And that is where ideation becomes so valuable, especially with services but more so than you’d expect with products.
There’s no limit to the ways in which digital products can be packaged and priced.
The trick for your SaaS product then is systematically uncovering as many of those ways as possible, to set yourself up to “pull a Slack” – and get your pricing right the first time.