top of page
Search

How to Create a Value-Based SaaS Pricing Model

In a nutshell, value-based pricing is where you base your SaaS pricing model on how much the outcomes your customer gets as a result of using your software are worth.


Imagine you're selling a SaaS platform that gives the customer tons of nifty insights about how to maximize their health.


One way you could approach developing your SaaS pricing model would be to calculate how much it cost to create the platform and along with costs of delivering the ongoing service, and then add a bit extra to make a profit.


But this is a HUGE missed opportunity.



Here's a few reasons why A COST-BASED SAAS Pricing MODEL isn't ideal


  • It doesn't reflect the value of the outcomes a customer gets

  • Your costs will definitely go up over time

  • Customers don't think about or care about what it costs you. They care about what's in it for them.


Creating a value-based saas pricing model

If you instead used a value-based pricing as the basis for your SaaS pricing model, you're tying your prices to the outcomes your SaaS product helps your customers achieve. If it helps them stay healthier, be more productive, and makes their life easier, what's the worth?


What we're talking about here is calculating the perceived value of the outcomes your SaaS platform delivers, which believe it or not, is totally possible. Some low-hanging fruit here for SaaS founders is typically around the time your platform saves them, the money it saves them, or maybe the additional revenue they'll be able to generate. But, I encourage you to go into as much detail as possible.


An EXAMPLE OF a value-based saas pricing model

One client I worked with on this in the SaaS insurance space thought they were delivering about $1000 of value via their platform each month, but after going through some simple exercises, we were able to unlock about $17,000 of provable perceived value each month. If you knew that you were delivering this much value each month, wouldn't you feel 100% more confident pricing based on what you know customers are getting.


The outcomes you get for customers are probably going to be super valuable to them, but there's going to be a range of interest and willingness to pay. Some people are going to be extra interested and want the best of the best, and others are going to be interested but not be willing to pay that much.


When you price based on value, you're going to be able to slice and dice your features and functionality into solid pricing tiers that get each customer type the results they want and are willing to pay for.


The key here is to understand what your customer's job to be done is and what they are willing to pay. If they see your product as a game-changer and can't live without it, they'll be more willing to pay a premium price.


Once you understand the job they're trying to get done, it's so much easier to understand and calculate the perceived value, and then set a price that aligns with the value they'll get from your awesome product or service. It's a win-win situation because customers feel like they're getting their money's worth, and you get rewarded for providing something truly valuable!


Recent Posts

See All

Comments

Rated 0 out of 5 stars.
No ratings yet

Add a rating
bottom of page