Match Pricing: Good for Buyers, Good for Sellers

What do enterprises look for when making a software investment? They seek products that deliver results. But they also seek out solutions that are affordable, and that they can buy without going over budget. In other words, when it comes to buying software, most businesses weigh purchasing decisions in much the same way that consumers do, seeking a good deal at a fair price. 

Given that, it’s strange that so few SaaS vendors offer consumer-style pricing options for enterprise buyers. If a consumer wants to buy a car but can’t afford the full sticker price, they are often given a range of pricing options to meet their needs: a customer might opt for lower payments over a longer period, say, ensuring they still roll away with a shiny new set of wheels. 

Turn SaaS pricing into a win-win

When it comes to SaaS procurement, though, the options tend to be less user-friendly. Many subscription offerings require up-front payments, and if budget-conscious buyers balk at those terms, there’s no alternative option — they either have to pay up or say goodbye.    

Fortunately, there’s a better way of doing things. The key is to stop viewing pricing as zero-sum, with sellers seeking the highest price possible and buyers, in turn, seeking the lowest possible total contract value. Instead, software vendors should explore ways to turn pricing into a win-win, delivering more value for customers while maximizing their total revenues over time.

The power of cash flow  

The key to turning SaaS pricing strategy into a win-win is to recognize that for buyers, a dollar today doesn’t have the same value as a dollar tomorrow. A cash-strapped startup might be far happier paying a slightly larger amount over time, if it means they can keep their capital reserves intact today.

That makes pricing flexibility an important differentiator for SaaS brands in today’s competitive software marketplace. By enabling buyers to tweak pricing and payment processes to suit their own needs, it’s possible to deliver more value for customers — while netting more total revenues over the lifetime of their contract.

Help customers count their pennies

The current slowdown in VC funding and corresponding reductions in tech budgets make this an especially powerful tool for today’s SaaS vendors. Customers are counting their pennies — and if you can offer them smarter, more flexible ways to spread payments out over time, you’ll be seen as a valued partner rather than a drain on their limited resources.

How it works

A thriving frozen-desserts company with almost $350M in annual revenues was shopping for mission-critical SaaS products. Despite its healthy revenue streams, the company was budget-conscious and couldn’t afford the $60,000 per year fee initially quoted by their SaaS sales rep.

The sales rep tried following the standard “zero-sum” playbook: if the customer couldn’t pay full rate, then the only option was to start offering discounts. The rep offered a discounted quote of just $48,000 per year — but the desserts company still balked at having to pay such a hefty sum up-front.

Fortunately, the sales rep had another trick up her sleeve: she was able to offer a monthly payment plan. Instead of prepaying for a year’s service, the desserts company accepted a $4,800 monthly rate over a longer contract period. The result: a win-win deal that made the buyer happier, while also generating more revenues for the SaaS vendor.

Game-changing flexibility

Flexible pricing options are game-changers for both SaaS customers and vendors alike. With the new fintech solutions now available; an out of the payment tech stack is needed to give their customers real choice and flexibility. 

Advances in AI also allow providers to quickly assess the risk and growth potential of would-be buyers, enabling them to operate with confidence and offer a high degree of customization at checkout. 

Aim for win-win deals

By leaning into these innovative new pricing strategies, SaaS businesses can provide the flexibility that their customers crave, create user-friendly sales processes, build stronger relationships, and still maximize their revenues over time. 

There’s no need for SaaS dealmaking to be fraught — it’s time for vendors to change their approach, and turn SaaS pricing into a true win-win scenario. Want to learn more about SaaS pricing for your win-win scenario? Reach out to the Ratio Team today.

Tags:
Finance
Trading
SaaS
published on
October 19, 2023
Author
Ashish Srimal
Co-founder & CEO at Ratio
Ashish Srimal is a SaaS entrepreneur and executive who has built SaaS startups and led large SaaS businesses.
SEE MORE CONTENT
Related Posts
Finance
Fundraising

5 Ways B2B SaaS Can Accelerate ARR Growth

Gartner predicts a whopping $232 billion in global SaaS spending by 2024. Yet, only some SaaS firms consistently hit growth rates above 30-40%. How do they do this? It’s due to the 'Rule of 40'. This rule demonstrates that a SaaS firm's revenue growth and free cash flow margin, when combined, should at least be 40%. So, a company growing at 30% should show a 10% free cash flow margin.

Ratio Team
November 8, 2023
Finance
BNPL

5 Things to Look for in an Ideal Subscription-Based Financing Partner

McKinsey predicts a whopping 3000% growth in subscription e-commerce by 2025. However, as businesses offer subscription-based payments, it can lead to cash flow challenges. In response to this growing demand, vendors seek solutions that allow payment flexibility without disrupting their sales processes, all while maintaining a steady cash flow.

Ratio Team
November 8, 2023
BNPL
Finance

Optimizing Robotics-as-a-Service Models for Subscription Economy

The Robotics-as-a-Service (RaaS) model is set to reach a $4 billion market cap by 2028, attracting businesses seeking enhanced productivity and efficiency through robotic automation. As RaaS gains traction, robotics companies encounter two main challenges: identifying a suitable subscription model and arranging working capital with flexible, subscription-based payment plans to their customers.

Ratio Team
November 7, 2023