In recent article written by software developer expert Josh Melick, he has detailed one of the biggest issues which companies in this sphere are having when it comes to the sale of their products. The main area which Josh has focussed on is the pricing structure which SaaS providers have in place, and how it should be improved.
Josh focused on what he calls a Three Dimensional approach to pricing structures, stating that too many companies are only focused on one or two of these dimensions. Most SaaS providers focus on offering three plans, with the main differentials being number of users and the amount of usage which they are allowed. Josh however believes that a time frame should be added to this structure. There are numerous benefits of this, mainly that price increases are made more easily to keep revenue in line with costs. Additionally however he points out the importance of upselling as part of this, and this is how SaaS providers can do more to upsell.
The price hike which providers wish to make is up to them of course, but Josh recommends that somewhere in the region of 7% makes the most sense. Using that however we can push clients to upgrade their plan, in exchange for a lower price hike. If companies have a member who is on a silver plan, they can offer the gold plan for just a 5% price hitch on the previous year. This encourages users who enjoy the product to upgrade, knowing that they are getting a much better deal on the overall price rise.
Another great way in which SaaS providers can increase the number of customers who do take an upgrade is by bundling plans together. This is especially successful for clients who have already been impressed by the software which has been created. The majority of software developers have a range of suites which they can offer the customer, which usually fall within the same niche. Offering an upgrade which features additional software packages is a great way to encourage more people to seek the upgrade, thus making the company more money on an annual basis.
Josh suggests that a 12 month plan would be the best option, as the third dimension, and this can also be manipulated to increase interest in an upgrade. For example a silver member could be offered an additional 2 months for free if they decide to upgrade their membership to gold. This will lose the company a small amount of money in the short term but in the long term they will then be able to count on more gold members, which will ensure more revenue going forward.
The key point which Josh is making in his article is that the pricing structures are wrong from the outset. An improved pricing structure like that which he details, is the perfect basis for pushing to upsell to those customers which an SaaS company has.