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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.

PriceIntelligently

More SaaS + Software Stats

The median TTM revenue growth rate + adj. EBITDA margin for publicly traded SaaS companies was ~37%, implying that just under one half met or exceed “The Rule of 40%”

When determining Sales Capacity, “it’s worth noting that some percentage of new sales hires won’t meet expectations, so that should be taken into consideration when setting hiring goals. Typically we have seen failure rates around 25-30% for field sales reps, but this varies by company. The failure rate is lower for inside sales reps. can be counted as half of a productive rep”

SAAS companies with >$250K median ACV book nearly 25% of their contracts at 3 years or longer

86% of SaaS businesses treat “New Customer Acquisition” as their highest growth priority, both in terms of executive support and funding available

The median SaaS business loses about 10% of its revenue to churn each year and that works out to about 0.83% revenue churn a month

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

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

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

Because of the losses in the early days, which get bigger the more successful the company is at acquiring customers, it is much harder for management and investors to figure out whether a SaaS business is financially viable.

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

More Growth Strategy Stats

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

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

The fastest growing SaaS companies raise an average of $9.5M in Series A funding

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

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

55% of SaaS companies rate Customer Retention as the key metric to measure

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

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

26% of SAAS companies with at least $15MM in GAAP revenue had a revenue growth rate + EBITDA margin of 40% or higher.

The 2015 median revenue growth rate was 44%, while the median projected growth rate for 2016 is 48%