How Often Should The Pricing Committee Be Meeting And Making Changes?

Quote Info

Once you have your pricing committee in place, they should be making minor changes to your pricing strategy every quarter and major changes to your pricing strategy every six months, regardless of the size of your organization. In reality, given organizational size, larger organizations may move a bit slower and smaller organizations a bit quicker, but this cadence is exceptionally important, because this is how quickly almost every vertical in SaaS is moving.

Every 3 months make small tweaks that don’t require major customer communication

At the end of every quarter you should be evaluating your pricing strategy’s performance based on goals you’ve set as an organization (improving LTV/CAC, increasing QoQ growth, etc.). You should also be analysing your main pricing metrics (value metric, price level, feature packaging, etc) by pulling or collecting necessary data.

The three month cadence allows you to constantly be re-evaluating where you stand in the market and how your customers are changing. Yet, even with wide data swings, you’ll likely not make major changes every three months, because customers would be placed into too volatile of a pricing environment. This is why we recommend making minor changes that mainly impact your upgrade and downgrade rates to keep your pricing momentum, but to not have to communicate to the whole of your customer base.

What are “minor” pricing changes? Here’s a good list:

• Reduction in amount of value metric given: Reducing the number of visits or quantity of the value metric you provide each tier allows you to spur upgrades, and more often than not, you’re giving away too much already

• Reducing your discounting thresholds: Getting rid of all discounts is a noble goal, but in enterprise software they have their merits. You should still be working to reduce these constantly though, especially if your organization is discount happy.

• Moving features from plan to plan or adding in new features: Never underestimate the power of features on upgrades. Moving API access or non-essential features one way or another can be gold for upgrades.

• Design and funnel changes: Don’t underestimate the impact of proper funnel management, pricing page design, and even shifting your marketing channels on your pricing’s bottom line.

• Value proposition alignment: One of the easiest things to change are pixels on a page or email when it comes to your messaging.

More SaaS + Software Stats

It’s 9x cheaper to retain existing customers than acquire new customers: costing $0.13 to acquire any additional dollar of revenue

How To Make Pricing A Constant Process In Your Organization

In contrast, Internet Sales strategies have a significantly lower CAC of just $0.42

If you are charging $500 per month, you can afford to spend up to 12x that amount (i.e. $6,000) on acquiring a new customer

After $10M in ARR, the median growth rate slows to just under 50%

SAAS companies invest between 80% and 120% of their revenue in sales and marketing in the first 5 years of their existence

As companies scale their growth engines, a slightly-above-average churn rate becomes harder and harder to offset with net new revenue growth, especially when the goal is to outpace it by 4x

For a SaaS business of almost any scale, the valuation impact of better retention is in the tens of millions over time

Sustaining growth is really hard

SaaS, and other recurring revenue businesses are different because the revenue for the service comes over an extended period of time (the customer lifetime)

More Growth Strategy Stats

If your Net Revenue Churn is high (above 2% per month) it is an indicator that there is something wrong in your business; which may have a dramatically negative effect on your company’s growth. Source: Mckinsey

Internet sales-driven companies have a much greater reliance on marketing, with 65% of the median company’s CAC budget devoted to marketing

Is your SaaS business viable?

Customer’s lifetime value (LTV)= average revenue per user (ARPU) / monthly churn rate

The median cost for a SaaS company to acquire a dollar of new customer revenue is $1.18

orecasts suggest that global blockchain technology revenues will experience massive growth in the coming years, with the market expected to climb to over 23.3 billion U.S. dollars in size by 2023.

The median monthly revenue churn for large SaaS companies is 0.75%, translating into an annual revenue churn rate of 10%

Non-renewal rates are higher than gross dollar churn rates and higher for shorter duration contracts. Source: ForEntrepreneurs

High-growth companies are 8X more likely to reach $1 billion in revenues than those growing less than 20%.

A 1% increase in pricing strategy yields an average 11% increase in profit