- In my own journey in scaling SaaS companies,
as a founder, as an operator, as an adviser
to over 250 SaaS companies, there's two things I learned.
Number one, we as founders especially in the early stage
and actually I've seen it in the later stages as well,
we tend to undercharge for our product.
And number two,
because we tend to undercharge for our product,
our prospects and our customers
tend to undervalue our products.
This is something that's pure human behavior.
The price of something often indicates the quality
and the value they're going to receive from it.
You price way too high and you don't communicate the value,
then people will not perceive that value,
but you price way too low, you don't communicate the value,
then they'll look at it and say,
this can't possibly be worth my time.
So, in my journey, when I raised prices thoughtfully,
growth ensued, win rates went up,
competitive dynamics improved in the market.
And when I worked with founders,
I've seen founders five X their pricing
and through that transformation,
they were able to actually increase win rates
and conversion rates and their growth accelerated.
On today's Unstoppable episode,
I'm gonna walk you through the three principles
that you absolutely need to know
to actually optimize your SaaS pricing strategy
and when you actually optimize
your SaaS pricing strategy,
you'll be able to accelerate the growth
of your SaaS business.
Intro.
(upbeat music)
(Beep) What's up everybody,
Welcome to Unstoppable, I'm TK and on this channel,
I help SaaS founders like you grow your SaaS business faster
with an unstoppable strategy.
Now, if you're new to this channel, welcome.
I drop an episode every single Sunday
with actionable strategy
on how to grow your SaaS business faster.
So be sure to hit that subscribe button and that bell icon,
that way you'll get notified
every single time I drop an episode with the TK energy.
And if you're already part of this community,
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welcome back, it's really awesome to see you over here.
Now, I remember in my last company, ToutApp,
that's the company that I started.
We pioneered the sales engagement space.
We sold it to Marketo.
There was one point in time in the company,
where we were in a bit of trouble
and I had to book a meeting with two of my investors.
It was Marc Andreessen and Ben Horowitz.
And in that meeting I walked them through
exactly what was going on, what the dynamics were,
especially by that time I had computed all different angles
and what's going on with the company as we do as founders.
And I walked them through all of it.
And after I did, there was this moment where I'm like.
"Okay, what do you think we should do?"
And I was waiting for this like
really complicated advice, I guess, I'm like,
well, these guys are some of the smartest in the business,
and Ben spoke up and he said,
"You know, what I think you should do
is just raise your prices.
I think that if you raise your prices,
a lot of these core issues will solve itself
In fact, I think that's true
for a lot of portfolio companies that we have"
And so I was like okay, seems simple enough.
And went back to the team
and we said, we need to raise our prices.
But what we learned was, you can't just double your prices.
Like, you can't just increase the price.
You have to go at it in a surgical way.
And so we did.
And when we did, Ben was right.
We solved a whole bunch of core issues in the business.
Our renewals went up, our growth rate went up.
We were able to fix the competitive dynamics.
It just caused the chain reaction to the business
that made everything kind of rise up.
And that's where I really learned, like okay,
you can actually optimize your SaaS pricing strategy,
but if you do it in a proper way,
then you'll actually be able to improve
and fix a lot of underlying issues that
may not be directly obvious that it's related to pricing.
And I did the same thing with other founders that I advised
through my coaching programs
and I saw win rates go up and growth accelerate,
all because they looked at pricing in a strategic way.
And so, having learned all of that,
I wanna walk you through the three principles
you absolutely need to know so you too
can optimize your pricing strategy and accelerate growth
and change the competitive dynamics in your market.
So let's go in to principle number one.
If you're excited, you can go and smash that like button.
Let's dig right into it.
So principle number one that I have to say,
almost to reiterate just so it's in your head,
is you have to raise prices.
I have rarely seen a company where
they're in the early stages and they're getting to that,
you know, they have some revenues and they're scaling,
they go to market and they're seeing competitive pressures
or they're really trying to feel like,
well, what's wrong, why is this not hitting?
Raise prices, like, I can give that as a blanket to you
and you are most likely undercharging for your product.
And because of that, you are actually hurting yourself
out in the market.
And so principle number one is raise prices.
And a lot of times founders get scared about raising prices
because the don't wanna rock the boat,
they don't wanna risk the revenue.
And so what we always say is grandfather, existing customers
and freeze the plan, no new features in that plan.
And then number two, raise prices for new deals
and a pro tip here is existing pipeline.
Tell them the prices are going up
so they can use the new prices for a limited time.
What this does is it de-risks
any price changes you're gonna do.
You don't risk your existing customers.
You tell your existing pipeline,
like, hey we're gonna raise prices, but right now,
if you join and so it creates urgency to say,
look, prices are going up but we'll lock it in for you.
If you join now versus dragging along,
then they see the different value.
And then number three for new deals, use the pricing.
That's what you need to be doing.
And that way you don't overthink it.
And that's what we did and worked really well.
And that's what we did for any founder that I coach.
And that's what really worked well for them.
So principle number one,
is you need to be raising prices
but you need to stop being afraid of it.
And you can de-risk yourself by doing this.
And then over time,
you can actually convince these grandfathered people
to go to new prices by telling them to upgrade to new plans
which has new features and new bells and whistles
because they're in the grandfathered plan, super simple.
So once you're into principle number one,
then you might be saying, cool, how do we raise prices?
And the biggest thing I can tell you is,
it's not just about blanket raising the prices.
You wanna think about it
a little bit a little more strategically
in order to get it right.
And the key pieces that you wanna think.
I actually break it down into three key components
that you wanna think through separately.
The first component
that you really wanna think about separately,
before you even think about raising the price,
is your packaging.
So another way to think about it is your tiers.
A lot of times, you know, companies
in their early stages will just have like,
well, we just cost X dollars
per month or X dollars per year or whatever it maybe,
this is the package.
And what they don't do is think about,
where are they in the customer journey
and how do you think about what they need right now?
Why they would upgrade over time?
What are the more advanced features?
And they don't really think through
what are the different ways we can slice and dice
the features set that we offer, the ROI we offer,
the value that we offer into different pieces.
And we package that separately
so that when customers look at getting into the platform,
they actually have choices on how deep they wanna go.
Do they wanna start small?
Do they want to go all in?
Are there different pieces that they value differently?
And that's the art and packaging and tiers.
Before you think about what is the price?
What you really wanna think about,
is how do we package the different pieces we offer
in our platform and chances are,
if you've got some revenues and you're scaling
or even if you're in the late stages.
I was at Marketo as an SVP strategy there
'cause they bought ToutApp.
Even at 400 plus million ARR,
we were repackaging and recycling the tiers
and raising our prices to compete in the market
in a better way and it paid off.
And so, no matter what stage you're in,
you can start to rethink
what you're packaging and your tiers will be
to better articulate the value
and the pricing that you're gonna present to customers.
Whether you're sales led or product led.
Now, once you start thinking about packaging and tiers,
the next thing you want to think about
is your actual price, right?
And in this kind of case,
you wanna think about cool for these packages,
what are the different prices we wanna do?
And on its own, you just wanna go into this thinking about,
what is the value you're delivering to the business
and how do you price compare to that?
Versus the cost of building the software
or running the AWS services.
Software businesses are supposed to have 90% margins
when they're highly efficient.
It's supposed to be super cheap for you to services.
That's why these are incredible businesses
but you still need to price it pegged to the value
you're delivering to your customers.
whether it's a business value or a personal value,
whatever it may be.
So you wanna rethink your pricing.
Like I said, I've worked with companies
where we five Xed our prices.
And even with that, our win rates went up
and we were actually better able to win customers
'cause they're like, okay, no, I see the value
and I see they look at the company differently,
and the product differently and the decision differently.
So once you have the packaging and the tier,
then you wanna revisit how much you're pricing for this.
And then the third piece, which often gets forgotten
is to think through terms.
And this is one of the things that can
really materially change your business.
We change this in ToutApp.
I change this in other companies I've coached,
in helping founders think through it.
Now the obvious thing is you could do monthly
but you can also think about payments on a quarterly basis
or a yearly basis or even a five year basis.
We have one company in the program
that has revamped their pricing and they do five year deals
because that's what's normal in their industry.
Now, if packaging is the first piece, second is price.
Then you also wanna think about terms
because these three things together
essentially form your pricing strategy.
A lot of times, people just fixate on the price
but they don't think about the packaging and the tiers.
A lot of times people think about the price
and the packaging, but they don't think about the terms,
but in combining these three things
and thinking about it holistically
because we thought about it holistically in the past,
we were able to surgically change our pricing strategy
and that led to a material change in the business.
Now there's one more principle
that you need to be thinking about
as part of this SaaS pricing optimization.
Now, before I go into that, let me pause here for a second.
Are you starting to see the power in this?
Are you starting to get a little excited
about how you can revamp your pricing?
And that can solve a lot of issues
in your business that you may be facing,
whether it's competitive dynamics,
whether it's differentiation,
whether it's getting customers
to just get started in a small way and then grow over time.
If you're starting to see the powers,
can't I just get a yes in the comments below
and also smashed out like button for the YouTube algorithm.
It really likes it when you do that.
If you're starting to get some questions
around how you would approach pricing,
put in the comments below as well, I try to answer it.
Every single comment that's there
to make sure that you get maximum value from this channel.
Also, pricing is just one of the ways
that you can grow your SaaS company.
There are other ways.
So if you wanna dig into all the different ways
you can grow your SaaS business faster,
then I encourage you to check out my five point
SaaS growth strategy guide, it's completely free.
I'll link to it below,
I'll tell you more about it at the end of this video
but let's go to principle number three
and smash that like button if you haven't already,
the YouTube algorithm really likes it.
Principle number three
is how you present this pricing, right.
You think about,
you know, whether you're product led or sales led,
the customer goes through a journey.
They're discovering your website.
Maybe they're getting on a sales call or a demo call
or they're starting a trial.
Through all those pieces, at some point,
the pricing is presented to them.
Now that pricing on its own doesn't mean anything.
When you're presenting the pricing,
whether it's through a website or a product
or through a sales process.
And this is positioned in context to the value
and the transformation they're gonna be receiving from
your software product, from your SaaS product.
And so the third principle that you need to revisit
as part of your SaaS pricing optimization is your messaging
and specifically, your ROI, your return on investment.
Ultimately, when you are presenting the price for something,
any savvy business buyer,
which is pretty much every buyer today is thinking about,
cool, if I give you a dollar for the software product,
what is my return on investment?
And what does this transformation mean for me?
How quickly do I make my money back?
So I'll give you an example with TautApp
we used to sell software for sales engagement,
and we would say, cool, what's your average deal size?
And they would say, our average deal size is 50K.
I'm like, great.
What this platform does
is it generates more pipeline for you.
And so it will cost you 25K to get started,
to get your whole sales team on it.
And then you can grow from there
as you take on more features.
But even if one salesperson got one more deal,
you would make your money back and then some.
Obviously it's gonna do a lot more around that
and it's gonna help you 10X your pipeline.
So would you say that 25K is worth it?
This is part of that messaging
and then return on investment.
You see what I did there?
I crafted it in the context
of the value they're gonna be receiving,
their return on investment and what they can actually get
for the money they're spending on the platform.
And that's the power of a proper messaging
and ROI framework that you can follow.
And so, as part of the SaaS pricing strategy,
you also need to visit, what is our messaging?
What's our strategic narrative,
what's the transformation we're bringing
and how do we communicate the return on investment
they're gonna get based on the packaging and the pricing
and the terms that we're gonna be giving?
These key things go together.
And when you actually approach your pricing optimization
between your packaging, your price and your terms
and then you wrap it essentially
in a bow with your messaging and your ROI,
all of these pieces come together beautifully.
And that way, by the time you're presenting
your pricing and your positioning and your packages,
the buyer is already primed on the transformation,
the messaging that you're gonna be delivering.
The transformation they're gonna be receiving, the ROI.
And so when they look at the price,
they're like thinking already to like, okay, cool,
these guys are gonna help me do this is the transformation.
Here's what happens when we don't do this.
And this is the price, that seems like a no brainer
and the terms make it where there's zero risk here.
So let's get started.
And that's the power of optimizing your SaaS pricing.
So to recap, principle number one, raise prices,
just raise prices, de-risk it.
Principle number two, don't just raise the price.
Think about it in these three components,
what's your packaging and your tiers?
What's the price and how are you gonna change that?
And what are the terms?
And then once you have these three pieces,
look at it in the context of your messaging
and your ROI, revamp that so it reflects
and these two go hand in hand.
You follow these three principles,
you will be able to revamp your SaaS pricing.
You'll be able to optimize your SaaS pricing
and you'll be able to accelerate
the growth of your SaaS business.
That's the power in this.
And this is a framework that I've used
across multiple companies, in my own companies as a founder,
as an operator and also
as an advisor to other SaaS companies as well.
And so that's why I really believe in this.
And I wanted to share with you
so you can think about your SaaS pricing strategy as well.
Now, changing your pricing is just one of the different ways
you can accelerate the growth of your SaaS business.
If you wanna look at all the different ways
you can really accelerate the growth of your SaaS business.
And I encourage you to download my five point,
SaaS growth strategy guide.
It's completely free and it goes into all the key ways
you can actually accelerate
the growth of your SaaS business.
It'll link to different videos, you can dig into it more.
It's amazing, it's completely free.
It's my way to just really giving back
and helping as many SaaS founders as possible grow faster.
All you need to do is just go to
getunstoppable.com/strategy.
getunstoppable.com/strategy, just put in your email
and you'll get a download right away.
It's an amazing guide.
And it'll help you actually think through
all the different levers you have
to accelerate the growth of your SaaS business.
If you got value from this video,
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and we can all grow incredible SaaS businesses together.
If you enjoyed this video,
I drop an episode every single Sunday
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This is not theory, this is stuff that I've done.
I've helped others do and then I bring it to you
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When you are with us, yours is gonna be unstoppable.
I'm TK and I'll see you in the next episode.
(upbeat music)