For SaaS Vendors, Pricing and Payments Are the Keys to a Better Buyer Experience and Monetization

Just like consumers, B2B buyers care about payment flexibility, frictionless checkout experience, and no haggle pricing

For B2B SaaS vendors, a few things are obviously top priorities. You need a great product that delivers real value and clear ROI. You need a strong sales and marketing function to bring customers on board. And you need amazing support infrastructure to keep your customers happy.

But there’s another crucial function that many SaaS vendors often neglect: the ability to deliver a compelling buying experience for your customers. That’s enabled by paying attention to the checkout experience — by making payment smarter and more streamlined, and eliminating friction and back-and-forth emails and queries with sales teams, SaaS vendors can elevate their entire sales strategy.

That might sound a bit counterintuitive: after all, the whole point of the subscription economy is that customers sign up once, with no need to deal with repeatedly negotiating contracts or buying upgrades and add-ons. If the SaaS checkout process is a one-time thing, is it really that important?

The reality, of course, is that for SaaS customers it is not a one-time thing and the checkout experience is more critical than ever. Far too many potential buyers still wind up walking away from planned SaaS purchases — not because the product doesn’t meet their needs, but because the buying experience isn’t aligned with their own priorities and strategic requirements. 

The perils of hyperbolic discounting

What drives SaaS buyers to look elsewhere? It’s partly the simple fact that just like B2C buyers, any business purchaser is first and foremost just a regular human being. We might think of business transactions as purely rational, but the reality is that enterprise buyers are people, and they’re prone to the same inherent biases that affect consumers. 

One such bias is known as hyperbolic discounting — a phenomenon that leads people to weigh short term costs and gains more heavily than their longer-term well-being. This bias helps explain why both businesses and consumers will often choose a higher total contract value and cost of ownership if it means they can defer payments. Effectively, short-term payments hurt more, so buyers often see them as outweighing the long-term value of a purchase. 

For SaaS buyers, this isn’t just an irrational bias, either. Businesses need to manage cash flow over time, and young enterprises need to ensure they have money available to use as growth capital and invest in themselves. It makes sense for buyers with limited resources to factor the opportunity cost of a big up-front software investment (even an annual pre-paid contract) into their procurement decisions, even if it means declining to make a purchase that will deliver significant ROI over time.

Farewell to “one-size-fits-all” pricing

What does all this mean for SaaS vendors? Well, for starters it means that your checkout experience — including pricing and payment systems — are a vitally important part of your broader sales funnel. You need marketing and sales teams to bring people to the point of making a purchase, of course. But you also need effective payment and pricing strategies to ensure you’re eliminating friction and aligning your buying experience with the specific needs of your customers.

Instead of being met with an invoice for a large, annual pre-paid or multi-year contract, they were able to spread their payments out over time. That “buy now, pay later” approach works to drive sales in the consumer space, and similar strategies can work to accelerate sales in enterprise SaaS too.

Of course, many SaaS vendors already offer customers annual pre-paid subscriptions and some offer monthly subscriptions. These are typically “one-size-fits-all.” For larger contracts, sales teams have one policy for all customers and an exception policy which requires approvals and lots of friction. For smaller purchases, on the other hand, companies use a self service checkout flow where every customer gets the same price and payment plan no matter their willingness to pay, lifetime value, or risk of churn. 

Now imagine a buying process that is tailored to each customer cohort or even each individual customer. Imagine the customer having control over exactly how much they pay and when, based on their cash flow and budgetary needs. Perhaps a customer would prefer to defer the payment for 30, 60, or 90 days, or perhaps spread payments out over a 3-month period — or a 6-month period, a 12-month period, or even a 36-month period? With a flexible, dynamic buying experience, you can enable customers to decide how much value they assign to longer-term payment plans, and to select the payment plan that’s best for them. What if a checkout tool exists that could recommend the best payment based on the customers’ cash flow while optimizing the SaaS vendor's consideration to offer pricing (or discounting) based on the customers risk, propensity to buy more and willingness to pay (i.e perceived value to the customer)?

A better experience 

With smart, AI-driven back-end tools, SaaS vendors can deliver this kind of frictionless experience while also programmatically tailoring their pricing to any given buyer’s risk of default future growth potential, and value of the product to them giving each buyer a fully customized buying experience. 

Using Ratio’s game-changing payment and pricing technologies, vendors can leverage these capabilities to create a significantly better customer experience, with no need for awkward negotiations or costly discounting to match customers’ cash flow, while still receiving the cash upfront for the total contract value And not to fear, Ratio can fully operationalize your billing and collections for all your customized payment plans.

The end result: a truly frictionless buying experience that leverages the value buyers attribute to longer-term payment plans to drive up contract values, close more deals, and keep your customers happier. For both B2B SaaS vendors and buyers, using an integrated and intelligent online checkout experience with  smarter pricing and customized payment plans delivering  a better buying experience is a true win-win strategy. 

To take your SaaS business to the next level and learn more about Ratio’s unique approach, learn more on the Ratio Boost page.

published on
October 19, 2023
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.
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