by Karen Schmelzer
The pricing page is one of the most crucial stops that buyers make on their purchasing journey. Despite its importance, many software-as-a-service businesses haphazardly set prices based on the competition and fail to optimize pricing page elements over time. These missteps could translate into a lot of money left on the table.
With the pricing page being so crucial in a buyer’s journey, it’s extremely important that businesses take time to constantly optimize it in order to maximize conversions.
Focusing on these three goals will help you create value-based pricing pages that deliver the best conversion rates and cash flow to your business:
- Know Your Customer (and Value)
- Match Personas with Plans
- Optimize Your Cash Flow
Know Your Customer (and Value)
Buyer personas are the best starting point for building effective pricing pages. While it’s easy to put together vague buyer personas, the real value comes with collecting industry and user data and validating your hypotheses. You might be surprised to learn that some buyer personas you weren’t originally targeting outperform your existing customer personas.
You can build a buyer persona in three steps:
- Brainstorm – Brainstorm five or ten rough buyer personas that represent your existing customers, potential customers or long-shot opportunities. These buyer personas should include names, profile pictures, job titles, company details, motivations and any other details that may be relevant to their purchasing decision.
- Research – Find real existing or potential customers that fit each buyer persona and talk to them. What features do they care about the most and least? What value-based messages resonate with them? How much are they willing to pay to solve their pain points? These are critical questions to vet your buyer personas.
- Filter – Filter out three buyer personas that are the highest value opportunities for your product. These buyer personas should have the greatest willingness to pay and care deeply about your product’s core features. You must find a balance between on-the-fence enterprise buyers with deep pockets and highly motivated entrepreneurs with shoestring budgets.
The most common failures in the process are coming up with too few buyer personas and failing to conduct actual research. Without customer research, it’s impossible to learn what types of customers are interested in your product, what features they care about the most and ultimately, how much you should charge them — all key elements to pricing pages.
Match Personas with Plans
These data-driven buyer personas make it easier to come up with optimal pricing and effective messaging. Each buyer persona should have a unique pricing plan that targets their specific pain points and value propositions in order to maximize conversions. It’s important to limit the number of buyer personas, or plans, to three or four to eliminate decision fatigue on the part of buyers.
Download our free Buyer Persona Worksheet to use as a guide for creating your own buyer personas.
There are several things to consider when creating effective pricing plans:
- Freemium – Freemium plans are a great way to introduce customers to your product before charging them, but you have to be careful to avoid giving away too much value for free. The best plans encourage enough usage to reach an upgrade point and then convert on-the-fence buyers to real customers.
- Anchor Plan – Mid-priced anchor plans are useful for anchoring the price point at a certain level. With this level as a base, you can create more affordable “basic” or “essential” plans and more expensive “premium” or “enterprise” plans that seem more reasonable by comparison.
- Enterprise – Enterprise plans are a great way to accommodate large companies with unique requirements. Since enterprise buying processes are unique, you can discount them on a case-by-case basis and tailor them to specific needs.
An example of Basecamp’s pricing page that matches buyer personas.
The most common mistake when creating plans is looking at the competition rather than relying on your buyer personas. The lowest-priced or most feature-filled plans don’t always sell the best. For instance, Salesforce has healthy competition from much simpler CRMs and Basecamp has many free and open source project management competitors.
Optimize Your Cash Flow
One of the most attractive features of the SaaS model is recurring revenue. In fact, most SaaS businesses measure their success by monthly recurring revenue, or MRR, rather than looking at top-line revenue. The downside is that recurring revenue businesses experience fluctuations in cash flow that can make it difficult to forecast.
There are a few ways to optimize cash flow:
- Annual Plans – Annual plans generate immediate cash flow and provide customers with a ‘discount’ that may compel them to purchase now. Moreover, you don’t need to worry about justifying your value on a monthly basis and instead focus on growing the business over the long-term.
- Usage Plans – Usage-based plans charge based on the number of users, data or other factors. These plans can help keep costs under control and generate more scalable revenue that grows alongside the success of your clients. You can offer fewer plans targeting more customer types.
Finally, keep in mind that pricing is a process. There’s a lot of room for experimentation in terms of both the actual dollar amounts and the marketing language used on the page. Measuring on-page conversion rates, conducting A/B tests and/or gathering other insights and analytics can help support the decisions surrounding the optimization of cash flow.
An example of MailChimp’s usage-based plan calculator.
Chargify helps SaaS businesses with high volume and complex pricing better understand their revenue, run price experiments, personalize offers, manage discounts, streamline commissions and take a more holistic approach to revenue management. Our platform allows customers to continue improving pricing over time based on real business performance data.
Beyond establishing pricing and the pricing page, billing and subscription management platforms like Chargify remove friction in the customer experience and help optimize revenue. Businesses can manage customers’ plans and reduce churn from failed to delinquent payments with dunning management tools — helping ensure consistent cash flow over time.
And, you can leverage detailed analytics to analyze churn rates and proactively monitor subscription changes and revenue movements to see potentially positive or negative trends materializing before they affect your entire business.
Talk to a Chargify B2B SaaS expert today to learn more.
The Bottom Line
Pricing pages are the goal line of software-as-a-service sales and marketing funnels. By taking the time to plan, optimize and experiment, you can maximize your conversion rates and long-term customer satisfaction. The key is using data-driven buyer personas, developing targeted pricing and copy and constantly tweaking it to improve conversions.
