Ask HN: Is it ok to price your SaaS higher at the start?
How do you price your SaaS at the beginning?
I have the fear of charging too much because the product isn't fully ready yet (although it gets the job done), it has only a short list of features...
How do you go about charging for your SaaS?
Charge based on the value given to your customer. If your small set of features offers value, talk to them about what that value is. Don't guess - actually ask your early adopters what they feel is fair. After all, you'll need to be in close communication with them anyway to be sure the product matches their needs, which means you'll need an open and trusting relationship, so include price in those discussions.
By definition only a subpart of your fulltime users will convert to paying customers. So in order to be able to try the pricing I would say you must have at least 20+ fulltime customers and you should also be able to generate like 10+ fulltime customers a month. If you have less than that I would say it's better to focus on making the product better and increase conversions from signup&disappear to fulltime users. Once you have thise basic numbers it would good and brave to try the pricing.
1) Ask a couple of customers what is fair 2) See what competitors are offering
then just publish a pricing. You will learn a great deal and iterate.
Once you provide value, you have a product.
The higher the price, the more you filter out price sensitive customers. That's a good thing because price sensitive customers have the same demands as price insensitive customers, but leave you with less money to service those demands.
The higher the price, the more likely customers are to partner with you.
Features are over-rated to the degree the Unix philosophy is appropriate. The Unix philosophy is appropriate more often than not. You can deliver a more reliable product and higher levels of service the fewer features you have to support because fewer features means fewer misunderstandings about how your product works and what it will do.
Good luck.
At first glance I thought this was a perfect definition (following the CHARGE MORE motto from patio11). I realize now it's a perfect and easy definition BUT it does not cover all scenarios.
> price sensitive customers have the same demands as price insensitive customers
No, that is not always true even though I feel is true for more than 50% of cases. Example: On an airplane customers in the first class are demanding larger seats and amenities than other in smaller classes.
You are describing a specific scenario where all customers have the same cost per customer and so clearly serving the ones with higher margins is better.
You are also describing a situation where customers have different feature requests and so the smallest pool of customers makes the feature set smaller and the product more specific and efficient. This is more generally true across most scenarios. In order to act on it as you said you should select higher paying customers. The problem is pre-pricing you don't know what each customer is willing to pay. So this is a good rule if you know a bit about the pricing offer but don't have complete dataset. Once you do have complete data though the perfect solution would be something resemblembing a first degree equation. Because clearly is better to make 1000$ x 100 customer than 2000$ from 5 customers. So it boils down NET_PROFIT X CUSTOMER for each possible group. Essentially there is not a generic solution of the argument QUALITY VS QUANTITY or MORE POOR CUSTOMERS VS LESS RICH CUSTOMERS. It depends on how poor is the poor and how many and how rich is the rich and in which quantities. It's a first degree equation, not a yes/no answer.
To summarize CHARGE MORE offers tremendous value and insight for how compact a rule it is to memorize. There are specific scenarios where other strategies work better. Also the more people will apply blindly the CHARGE MORE the more that type of customers will be saturated with offers and serving other less paying customers will offer better opportunities for profit.
First class customers get better seats etc.
The people sitting further back complain and create grief at least as much per passenger. First class passengers are easier to manage because there is more staff to take care of them, more toilets, better food. All that is possible because they are price insensitive.
It's no more effort for an airline to install larger seats. And price insensitive customers are more profitable...they don't use more fuel, engine maintenance, take longer on the taxiway, etc. etc.
clearly is better to make 1000$ x 100 customer than 2000$ from 5 customers
If you are making $1000/customer your customers are not price sensitive. The OP concerned about charging too much. The generic advice is stupid things like freemium and $5/month that make a business unsustainable.
MORE POOR CUSTOMERS VS LESS RICH CUSTOMERS
If you are in business, targeting people with money to spend is a sound generic strategy. There are businesses that target people without money. Typically, they charge predatory rates. "More poor customers" is the 1% of all Chinese fallacy.
This fear has no merit. You can always do x off for limited time and not specify the time. Look at how Intuit is pricing QBO.