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

Growth rate accelerates in the expansion stage ($2.5M – $10M ARR)

Growing faster has twice as much impact on share price as improving margins

The very best SAAS companies keep monthly revenue churn at around 0.58%, that’s only about 7% revenue churn a year

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

If your Net Revenue Churn is high (above 2% per month) it is an indicator that there is something wrong in your business; this will become a major drag on growth

Japanese company Hitachi accounted for three percent of the world’s market for diagnostic imaging in 2017.

Software and online services are in a period of dizzying growth

54% treat upselling and add-on sales as high priority

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

The very best SAAS business has a negative churn rate and will have a Dollar Retention Rate of greater than 100%

More Growth Strategy Stats

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

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

Analyzed by contract value, field sales are primarily evident for companies with median deals over $25K. Inside sales strategies are most popular for companies with $1K-$25K median deal sizes

The average SaaS company spends just 6 hours determining their pricing strategy

Less than 20% of new revenue came from existing customers in the form of up-sell and expansion sales

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

SAAS companies need to track the number of visitors, trials and closed deals; And also track the conversion rates, with the goal of improving those over time

In 2017, IBM generated 37.8 billion U.S. dollars in global IT services revenue, making it the largest IT services company in the world in terms of net sales

in 2016, women-led companies received $1.46 billion in investments from venture capitalists. Male-led companies, on the other hand, received $58.2 billion

Between the SMB and Enterprise customer types, the top-quartile performers not only have net-revenue churn that is 14% to 23% percentage less than the average performers but also have net-revenue churn that is negative in an absolute sense