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

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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

The fastest growing SAAS companies averaged $250k in MRR and were only losing around 3.2% of that revenue each month to churn

Net-revenue churn improves with larger Average Contract Value (ACV), likely due to more structural churn among SMB customers and higher switching costs associated with larger contracts

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

Companies with longer contracts (2+ years) reported the lowest annual unit churn

The median SaaS business generates 16% of its new Annual Contract Value (ACV) from upselling to existing customers

SAAS companies that are focused mainly on enterprise sales have higher levels of professional services

Improve Your Pricing Schedule And Turn More Profit

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

Gross dollar churn among companies with an internet go-to-market strategy saw a meaningful increase, up from 8% in 2015

56% treat “Existing Customer Renewals” as high priority

More Growth Strategy Stats

At Twitter, 10 percent of tech roles are staffed by women

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

Customer Acquisition Cost (CAC) = sum of all sales & marketing expenses/ number of new customers added

The median startup spends 92% of first year revenue on customer acquisition, taking 11-months to payback their Customer Acquisition Cost

More than two thirds of SAAS companies experienced annual churn rates of 5% or higher

Since churn is so important, wouldn’t it be useful if we could predict in advance which customers were most likely to churn?

51% of large (revenue >$2.5million) SaaS companies use field sales as their primary method of distribution

If the numerator of your quick ratio is growing that means your revenue is growing. It’s important to keep increasing revenue to counter any MRR (Monthly Recurring Revenue) that is lost to churn

The median SaaS business generates 16% of its new Annual Contract Value (ACV) from upselling to existing customers

The largest SaaS companies (>$75million yearly revenue) attribute 2.5x as much new revenue to upselling than the smallest SaaS companies (<$1.25million): 28% versus 11%