A customer should receive 10x the cost of the product in value to their business.
That’s what I recently learnt from Cobloom as I dive into SaaS pricing strategies as I approach the launch of my first BigCommerce app.
I’m also wanting to build off the great flexibility of SaaS by offering our apps for free on non-production stores to make it easy for teams to test.
Thanks again Martin Boddy for the recommendation.
Transcript
I am this close to launching my first BigCommerce app. And then I realized I’ve got to price the thing. I thought kind of getting back into development of learning React and all of the new technologies was going to be the difficult thing, but pricing is hard. It’s really hard. So I wanted to share a little bit in terms of the tidbits that I picked up kind of as I’ve dived deep into this area about pricing SaaS apps.
Now firstly shout out to Martin, our Chairman, who put me on to Cobloom who are a essentially a SaaS pricing consultancy, so perfect recommendation. They have webinars, blog content, and a newsletter series for, for pricing and they give away a huge amount of tidbits. They’ve been really helpful when I’ve been thinking about this.
One of them I want to call out is a 10X rule in terms of pricing your product around the value that it brings. And so if your product brings about a thousand pounds a month in terms of value to the customer or perceived value, then it should be charged about a hundred pounds a month. So that 10X difference.
That was really helpful. So I know that when I’m thinking about each app that I build, whether or not it saves somebody’s time in terms of managing their catalog or perhaps ideally increasing revenue on store, you can look into pricing that way. So I found that really helpful as a starting point.
I also looked into the BigCommerce marketplace itself. There’s about 500 or so apps on there. And many of which are priced based on a monthly subscription, but had a look at, in general, it seems like the starting fee appears to be about $30 a month. Many apps, many SaaS apps have tiers.
So whether that be, that was the next thing I looked into, whether that be a product based on product features. So do you get more features at a high level plan? Common on things, here’s an example from Shogun, they have different features based on price points. We’ll all be familiar with this.
So then you’ve got to go down the rabbit hole of deciding what features are in what version, thinking about your target customer and things like that. So I’m certainly interested in, and I think that’s going to make sense. You know, there’s a broad range of merchants that are selling on BigCommerce from those that are just starting out all the way up to enterprises, which has certainly a target market that I’m very interested in. So you want to kind of receive the value that you create.
There’s also those that price based on, and they try and get other metrics to decide on recouping the value that you generate. And so one way of doing that is judging that the number of orders and the amount of revenue that goes through the store or in this case the number of products that go through the store.
But when I’m not as keen on, particularly when you have sort of like this many, this many options. I think that’s probably confusing. So the other recommendation from Cobloom was maybe to aim for about three different tiers of pricing, which is certainly from the small apps I’m building right now probably I’m not going to get there straight away. I think I’ll probably launch with a single tier. Just getting something to market will be an achievement. And then look into how do I create a second tier so that I can have a low barrier entry to those smaller stores and maybe giving a more restricted feature set, but the features that they’re going to make use of most of the features rather than having a large feature set that they weren’t won’t use most of.
And then I can break out a second tier for the larger merchant, which has more advanced features that they perhaps would expect to even get on board. And I perhaps offer priority support as another value add of that second tier. So, those are the things I’m thinking about right now, thinking about the price points, what are the competitors pricing at?
How might I tier it? And the last item is around free trials versus sort of freemium. All of the recommendations I’ve seen, seems to be to value free trial over freemium. If freemium is the idea of having a free plan with the most basic set of features. The challenge being, supporting the number of customers on that plan when they’re not bringing you any value in the hope that they might upgrade at some point.
I think right now I certainly prefer the idea of a free trial. And I want to work with at least 14 days. I feel like usually when I know my target market is developers and agencies that are recommending apps to merchants based on a need. Then I want to make sure that they’ve got time to evaluate it and seven versus 14 versus 20 days, it doesn’t really make much difference to me on that at that early point.
And similarly, I want to kind of give it free for development stores. So if you’re an agency going through the project build you shouldn’t be paying for the app. You know, we’ll look into whether or not that gets to the point where that’s too costly and we need to work out maybe some feature restrictions. But I really like the idea of coming from our own perspective is when you’re trying out three different apps, you want to make sure it’s easy. You don’t have to go through the signup process. You don’t want to run out of your 14 day trial and then have to kind of sign up to find out whether or not it’s going to work.
So one of the benefits around SaaS is that it’s really quick to install and try over having to download code and install it on your server and deploy it and then get it to the client. It’s much, much quicker for people to try things out. So I want to go with that and make sure that it’s a great experience for customers, not only their user experience of using the app, but actually the ability to sort of chop and change and try ours out and recognize, you know, we’re not gonna be suitable for everyone.
Yeah, I think that’s kind of what I wanted to share today. The actual price point I settle on seems to change every week, but I think having something that starting around that 30 dollars a month and then looking at some more advanced features, at a slightly higher tier is kind of where I’m settling right now.
