A short transcript excerpt from a conversation (hosted by Jason M. Lemkin) about SaaS pricing strategy and finding the right price point. Speakers discuss trade-offs between low-price high-volume models (users + advertisers) and higher per-customer pricing, and note that buyers have mental models for what SaaS should cost based on familiar products.
Is there a sweet spot for how much you charge? I think with a lot of people starting out like what I did, like, well, my business was two prong in that we had users and then we had advertisers. Our advertisers were spending six figures a year, but I had to acquire fucking 4 million subscribers in order to like make it work. And it was really hard acquisition. Yeah. And so is there like a price point where you're like, you want your average customer to be paying 50,000 a year?
I think that pricing is over discussed. And I'll tell you why there are. We have all now bought 200 at least. Most businesses have bought over 200 SaaS apps. Okay. It's too many 200 pieces of business software. And we all kind of know what stuff should cost. Like, we know what notion should cost. We know what HubSpot should cost. We're on Riverside. I don't know what Riverside is.
What do you guys pay?
300 bucks a month. Okay. Like, okay, let's say you pay 300 bucks, 400 bucks a month. Now if someone else has a better version of Riverside and they want 50,000, you're going to like a month, you're going to kind of bark, Right? But what if someone had something that was better than Riverside? It was $30 a month. It would seem too cheap, right? It would seem too cheap. So my point is there are organic price points and what you want to do is anchor around them. Go figure out the couple of products out there that are most similar to yours and charge the exact same way and either charge the same pricing or if you're nervous, charge a smidge lower. 10% lower, 20% lower. If you charge too much lower, you're telling the market you're not as valuable as Riverside, right? Or you're not as valuable as HubSpot and you can actually. Customers will bounce off you if you're too cheap. If you're too cheap, they will get confused. So anchor around the comps. If you're truly 10 times more valuable than Riverside, okay. And Riverside's very good. We're using it to record the session. If you're 10 times more valuable, maybe charge twice as much. Because you're telling the market we're ten times more valuable than the leader, right? We're ten times more valuable. But whatever you do, founders that say, there's no one like us, there's no comp. Try harder, try harder. It doesn't have to be the same as you. Just it feels the same. It feels a similar amount of value. A similar type of utilization. Do I use it eight hours a day? Do I use it once a month? Do I use it as an API? Is it metered? Is it per seat? Just.
