SaaS pricing traps that kill your growth

In this webinar, Upsales CEO Daniel Wikberg and CFO Elin Lundström discuss the key SaaS pricing traps that kill your growth, how to identify them early, and how to avoid them.

The truth is, not many SaaS companies spend time thinking about their pricing, but they should do! Luckily, we've done the research for you, so you don't have to.

Top Three Takeaways

• Many SaaS companies put little thought into their pricing, with many deciding to launch a product, looking at competitors, and pricing using that limited information.
• Most companies that think they have a pricing problem actually have a targeting problem.
• Discounting your product by as little as 10% can lead to you needing to double sales just to receive the same amount of profit.

The Discount Trap

Upsales actually stopped discounting a decade ago, a decision which has led to almost 50% more in ARR today.

But how is that possible?

Upsales noticed that many of the sales reps were using the full discount they could offer to close sales, but this meant lots of clients that were undervaluing the service Upsales offered.

As Daniel explains, one of Upsales' biggest clients heard they were paying more than one of these discounted clients, which ultimately led to them cancelling their contract.

This significant impact led Upsales to review its discount system and eradicate it for good.

Daniel admits there is still a place for discounting, especially early in a business's lifecycle as it tries to get a foot in the door, but after that, it should be used sparingly, if at all.

Daniel explains, "You should lose one out of five deals due to price. Otherwise, you are too cheap."

The Competitor Trap

Rather than looking at competitors and basing your price on them, you should look at your own data, see where your current clients are seeing success, and base it on that information.

That's not to say you should pay no attention to your competitors, as they can still be very important for benchmarking your business.

However, they should have less focus when you are setting the prices of your business.

The Upsales team also warn against setting up rigid packages, where customers may only want to access 80% of the features in that bundle. That can then lead to complex conversations around discounts and bespoke packages, which take plenty of time and effort that could be used elsewhere.

Instead, Upsales recommend offering a set price fee and a series of features that can be added as and when needed for an additional fee for complete control and transparency with the client.

The Feedback Trap

Upsales used to offer a monthly subscription, whereby the clients paid on a month-to-month basis. However, after seeing 50% of the clients churn within a year, they quickly realised this option needed to be scrapped.

Using this feedback, they restructured their pricing system and now spend all their time focusing on higher-value clients who invest annually.

Looking at which deals you win and lose will also offer you vital feedback on who to target going forwards.