4 SaaS Pricing Lessons

Take a look at the subscription pricing options from two leading national newspapers The Wall Street Journal and The New York Times.

times-wsj

Take a few minutes to look at the two approaches to bundling and subscription pricing. Which one is done better and stand to drive more profit? What do these tell us about your SaaS pricing?

Here are a few things I would like to point out

  1. Branding – It is very important to brand your multiple versions. The WSJ branded the offerings and Times didn’t. Branding offerings is about telling customers how you think of them. It gives a much better way to position the offering than a utilitarian description. If you have three different versions take the time to brand them.
  2. Per Month vs. Per Week – Many SaaS product managers have asked me this question, “Should you list per month pricing or per year pricing”? Clearly the goal is have the customer stay longer but there is advantages to reducing the initial impact by anchoring on a lower price point. As a tactic it is preferable to show a price for the smallest period.
  3. Number of Versions –  WSJ has three versions but only two price points. Are four price points better than two? You remember my oft repeated statement, “If one price is good, two are better“.  So does this scale linearly? Can we say four prices are better than two prices? No. It depends on customer segments. As a rule of thumb 3 is an ideal number. A forced fourth version may pose more challenge to customers. The Times approach to restrict smartphone access does not make sense. In your SaaS pricing do not raise artificial fences.
  4. Entry level pricing – It is generally a good approach to have a lowest priced entry level version that allows customers to try your product. But if this is too good an option most will gravitate towards it. The Times approach priced it too good to pass, at $3.75 a week more will be willing to forgo the tablet access. Given we have significantly more smartphones than tablets (which is shrinking) this claim is validated in the data. Here WSJ approach is the preferred one.  As a scenario had the Times priced this at $5/week and not had the Tablet only option, they would bring in as much revenue (and profit) even if they see 25% volume drop.

How do you define your SaaS pricing?