Pricing your product is hard, let’s take that as a given.

Price too low and you’ll leave money on the table.

Price too high and you’ll scare customers away.

Try to make your pricing appeal to everyone and chances are you’ll overcomplicate things.

But price too simply, and again, you’re probably leaving money on the table.

And pricing also helps you build the right product.

If you try to make your pricing appeal to everyone then, chances are, you’re trying to make your product appeal to everyone and this is rarely the route to success.

Price high and you’re positioning yourself for a certain breed of user and need a product to match their needs

Price low and you get customers with a different set of expectations and your product will to fulfil an entirely different set of requirements.

Get pricing right, and you’ll unlock the biggest possible growth lever to catapult your business to the stars, here’s why…

Reader Note: Whilst many of the observations in this post link to our specific findings and more broadly SaaS companies in general, there are also insights that will be applicable no matter what kind of business/product/service you offer.

Why is Pricing so Important?

Tell me if this graph looks familiar?

Like many businesses, we’ve experienced this common scenario, where reality fails to keep up with expectation.

And so, in rationalising what has happened in the past and deciding what to focus on in the future, a whole raft of concerns come to mind:

  • Is our product solving our customers needs?
  • Are we targeting the right customers?
  • Which groups of customers are getting the most value from our product?
  • How do we attract more of those customers that can benefit the most?

Questions like these, naturally lead on to questions like:

  • Are we pricing our product correctly?
  • Are our product plans the best they could be?

Now split testing pricing isn’t easy.

The last thing you want is a user buying one day and then the next they see the product for sale at a lower price.  If ever there’s a recipe for a user going on the rampage and tarnishing your reputation across as many social media channels as possible then this is it!

Nobody wants customers like these, right?

At its core, a price is your exchange rate on the value you’re creating through your product or service, the interplay of 3 separate areas:

Stick that number on your website and you’re telling the world that whatever you’ve produced is worth $X.

The goal of your marketing then, is is to convey the value of your product to the prospective user such that their perception of that value is broadly in line with (or slightly exceeds) the price you set.

Did I mention that pricing was difficult yet?

However a study at Harvard Business School revealed that a 1% improvement in pricing can improve your revenue by 11%.

And a subsequent study looking at 100s of SaaS companies suggested the effects could be even more pronounced:

In fact, pricing (i.e. monetization in the chart above) can have a far larger impact on revenue growth than either Acquisition or Retention.

Sounds great, right?

Changes in pricing can enhance every aspect of your business. And just as aspects of your business change so, therefore, should your pricing.

But if pricing is the cornerstone of your monetization strategy and can have such a dramatic impact on revenue, then why is it that, according to Jeanne Hopkins at Continuum, pricing is the most overlooked component of business strategy?

The average company spends only 6 hours in the entire lifetime of the business planning their pricing. But as we’ve pointed out, monetization has a greater impact than both acquisition and retention on your company’s bottom line.

And understanding your customers’price sensitivity, or willingness to pay, is the most important component of your monetization strategy.

We (as in marketers in general) don’t understand growth

While obsession with acquisition may seem intuitive – marketers writing about marketing – it indicates that we as modern marketers don’t understand the multidimensionality of marketing, nor that growth isn’t just a top of the funnel exercise.

For instance, the video hosting service Wistia constantly changes their pricing plan. These changes have been an essential part of their company’s development. CEO Chris Savage said that the only way to collect data on their prices was to charge something and experiment—and then learn fast from what they discovered.

Over time Wistia has adjusted their value-based pricing according to how their customers use their product. This benefits Wistia’s customers because it ensures that they are paying a price that matches exactly what they want from the product. Meanwhile, Wistia is able to help their bottom line by optimizing their monetization (in not under-charging), and enhance the integrity of their customer relationships (in not over-charging).

Other methods of pricing like cost-plus pricing and competitor-based pricing don’t relate directly to your customers’ experience with your product. There’s a good chance you’ll end up over-charging or under-charging for your product. Adjusting your pricing according to a value metric will help you understand your customers and your product’s value.

Of course, you absolutely should understand your costs and your competition, but don’t try to base your pricing strategy solely via these methods.

Understanding the value that customers get from your product, and pricing accordingly, is the best way to get a pricing model that drives growth.

And, just as the value customers receive from your product may change over time, so should the price you charge.

For instance, new features or improvements in how you communicate features to customers may both lead to an increase in the value received, and this can give justifiable cause to make an increase in your pricing.

Indeed, industry pricing experts suggest the sweet spot for making outward changes to your pricing plan is around every 6-9 months.  It often works well to coincide price adjustments with product adjustments, but this isn’t a steadfast rule.  Your timeline for making changes also depends on the growth stage of your company.

  • Newer companies: Make some sort of adjustment every 6 months.

In addition, new companies should be conducting reviews every quarter. It’s important to understand how your current strategy is working even if you’re not planning on making outward changes at that time.

Key Takeaway: If it’s been over a year since you made changes to your pricing strategy, it’s outdated – you’re missing out on a wealth of monetization opportunity.


So what are we changing at Wishloop?

3 things.

The first is directly related to pricing and the other two are related to the way we position our product and communicate and package its value.

1. We’re removing most of our tiered usage plans

For about the last nine months, we’ve sold Wishloop plans based around impression (or more accurately “interaction”) based tiers.

An interaction occurs whenever a campaign is triggered.  It therefore differs slightly from a page impression as a website visitor may visit several pages on a site in a session, but only trigger a Wishloop campaign once – e.g. if the targeting on the campaign is setup to only appear once in every 3 days for example.

We also had annual versions of each plan, so we had 28 plans in total!

This model has many benefits, the most obvious being that it provides a scalable quantititative framework so that users generating more interactions end up paying us more.

Sounds sensible right?  If you assume that Wishloop has value to any given user, then a user generating more interactions is likely to be getting more value and therefore happy to pay more.

We thought so too.  In reality though there were some unforeseen consequences…

By focussing our pricing model on interactions and having multiple tiers of usage with a low barrier to entry (i.e. low cost entry level plans) we’ve faced two major problems:

  • unbalanced support load from customers on entry level plans
  • issues moving customers between plans

Not only did we find that customers on the lower plans generally required more hand holding than our higher plan customers.

We also often had issues with unhappy customers every time they went up a usage tier.

In hindsight we banded the plans too closely in the beginning and users were being moved up before they felt they had received sufficient value.  Or perhaps by including the lower bands at all, we were simply opening the doors to extremely price sensitive users on the lower end, who would never be happy paying more even if they were receiving value.

Moving forward we will have two core plans: Standard at $47 a month and Pro at $77, each with an annual counterpart.  We’ll also offer some Growth plans for larger users (more info on the actual changes we’re making can be found below).

2. Removing our Free plan

Until now, we’ve also offered a free plan.  Anyone who completes the 14 day trial and doesn’t upgrade to a paid plan is automatically put on to our free plan tier.  This means thay’ve been able to continue using the service albeit with some limitations in both impressions (250/month) and features (only basic targetting for instance.)

Freemium plans, or free tiers of SaaS products, continued to be popular in 2016 with heavyweight companies like Skype, Dropbox, and LinkedIn all offering free versions of their services. But freemium, we’ve found, is not a reliable model for young B2B SaaS companies to grow revenue.

Our experience suggest that while Freemium can work when you already have a strong business and want to market to a larger audience, starting out with Freemium is very difficult.

For example, video hosting service Wistia monetized backwards by carefully building a pricing strategy and then, 6 years into their business, adding a freemium plan. The key is that they didn’t start with freemium to grow their revenue.

What’s So Bad About Freemium?

You might think that your freemium plan will hook users with a taste of the product and encourage them to upgrade to a paid plan for the full service.

This is exactly what we thought would happen too.  But this assumption rests on shaky ground:

  • Freemium conditions customers to view your product as, well—free.  Freemium plans can even lower your customers’ perceived value below 40% of the product’s list price.  That’s a greater dip in perceived value than the dips caused by free trials, promotions, and discounts.  Once a customer is used to getting a service for free, it’s difficult to convince them to pay for that same service even if it does come with additional benefits
  • Using freemium can distract from other business goals.  Freemium may help you increase the number of users you sign up, but that doesn’t necessarily mean you’re solving all of your customer’s needs, communicating value clearly, or properly pricing your product.
  • Freemium is more of a marketing strategy than a way to build revenue.  Freemium plans can work as part of a marketing strategy because they can drive word-of-mouth referrals and build brand loyalty.  But don’t think of it as more than that — just because freemium is technically a “pricing tier” doesn’t mean it’s a monetization strategy.  You can’t count on it to build revenue for B2B SaaS because 97% of freemium users will never convert to a paid plan.
  • The cost of Freemium can be high.  At Wishloop we put a lot of emphasis on support and on helping our users not only use the product but also to have broader success thanks to our product.  And because we want to convert as many free users to paying ones as possible, we extended this support to free users too.  Thus we’re giving away value and support time to people who aren’t paying us, and as the number of users on our free plan scaled much more quickly than those on the paid plans, this quickly got unsustainable.  To add to that, the kind of questions we were getting from free users were generally broader type issues and more time consuming than from our paid users.  Talk about a false economy!

Key Takeaway – Before considering freemium as a marketing strategy, focus on creating a strong monetization plan first and providing the value that your customers are willing to pay for.

So what are we changing?

Simple really.  We’re removing our free plan.

As suggested above, the costs of running it far exceeded the conversions we got from keeping it open.  And keeping it running as a way of marketing our services to a broader audience (free user campaigns carry Wishloop branding) never converted to paying users in the way we’d hoped.

Remember this?

Going forward, as soon as our users reach the end of the trial without upgrading we’ll simply switch off their campaigns.  This provides a hard stop to the trial and completely removes the weight of support on our customer success team from free users.

We’ll of course build out some new messaging and marketing automations to convert as many trialists to paid users as possible, as well as introduce new marketing campaigns to reactivate lapsed trial users after a certain period of time.  But we expect the impact of removing support to 1,000s of free users to be substantial.

Sounds so simple and obvious saying it now and for some companies Freemium works great.  But it’s not for us.  C’est la vie!

3. We’re expanding and relaunching our Agency Plan

We originally launched Wishloop agency back in November 2016 and took on a cohort of 100 agency users.

Since then we’ve refined and drastically improved the Wishloop platform from an agent perspective, fixed a number of bugs and unforeseen issues and more recently reworked the core agency offer.

The new Wishloop agency plans will launch in mid-late February and, by offering an extremely competitive and lucrative proposition for agencies of all sizes, as well as freelancers and business opportunists, we expect this to be a core part of our growth going forward.

If you’d like to sign up for prelaunch notifications for Wishloop agency, then you can do so here.

So let’s summarise…

Moving forward we’ll actually have 4 plans:

We have our two core Wishloop plans, Standard at $47/month and Pro at $77/month.  Each will also have an annual counterpart and the plans will be differentiated by the features they offer.

We’ll also rename our Enterprise plan to our Growth plan aimed at users generating over 50,000 interactions a month.  This will be tiered based on usage, with plans starting at $137/month and is built to scale up to millions of interactions/day.

And finally we’ll have the Agency offering.  More info on our updated Agency offering will be available in the next week or two (signup here for updates).

In summary, we’ve raised the price on our lowest priced plan and also on our highest published plan, while reducing the cost in the middle, where the majority of our current customer base are.  We think this gives us a better overall balance between support, infrastructure and acquisition costs, whilst also allowing customers to get a big return on their investment.

How will existing customers be affected?

Firstly nobody will be forced to change plans, we’ll continue to run the old plans for existing users. However some of our users will stand to gain from the new plans.

Likewise, many users currently on our lower tiers will be able to upgrade to a significantly higher usage plan, without the large price increases they would have faced in the past.

If you’d like to know how these changes will affect your Wishloop account then just drop us a message on our support desk.

When do these changes come into effect?

Our new pricing structure will launch on Monday 13th February.

Yes that’s only 5 days from the date of this post, but as no existing paying users will be affected by the changes unless they actually want to move for a better deal, we think its justifiable.

Plus we’re also just keen to get the changes live so that we can launch the new Wishloop Agency plan

Closing thoughts?

Will this be the last time we change our prices? Probably not.

As we continue to grow Wishloop, expand its feature base and improve our marketing we will likely need to revisit its pricing. This is just a natural part of growth.

Did you like this post? What are your thoughts about pricing? Have I convinced you to revisit your existing monetization model?

Would love to hear your thoughts in the comments below

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Stuart Frank

A co-founder of Wishloop, Stuart specialises in lead generation, conversion rate optimisation, customer growth and retention strategies. He has bought, grown and sold several software companies over the past 10 years.

Latest posts by Stuart Frank (see all)

Stuart Frank

A co-founder of Wishloop, Stuart specialises in lead generation, conversion rate optimisation, customer growth and retention strategies. He has bought, grown and sold several software companies over the past 10 years.

2 thoughts on “We’re Changing Our Pricing, Again! … And Why You Probably Should Too!

Kimberly - | Reply

all this time i thought the lowest plan was 67/mo. go figure. 🙂
really like your company; the webinars, informative emails and blog. it’s crazy how much you teach.

Redge Deg - | Reply

I took advantage of a previous special offer only because I wanted to have access to all the tools available…I’m happy your are grandfathering that membership as my business is not at a level to warrant the extra money…. If at some time in the future my business activity justifies the extra expense I will re-evaluate….

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