Over at Less Meeting we’re constantly thinking about pricing. If you follow startup blogs or hackernews you’re intimately familiar with this topic already.
Nathan Barry recently wrote a guest post on Jason Cohen’s A Smart Bear blog about An eBook pricing model that resulted in $100,000 in sales that helped clear up some of the questions I’ve had lately.
Stop telling me to just “charge more”
It seems that the common theme in SaaS startup pricing is that 99% of the time you’re not charging enough. This seems easy to fix, right? Just hike up your prices like the Hill Climber on The Price is Right!
But simply charging more hasn’t been that easy a change for us. Lots to wrap our heads around before we test or implement anything.
- What’s that mean for our (currently) free mobile apps?
- Should we have a free version at all?
- Should we even offer a single user version?
- What’s the top tier we should be charging?
- What tiers should we even have?
- …and on and on
So while “charge more” is a nice catchy phrase, we’ve found there’s a lot more to it – and Nathan’s article helps to spell out some of the details.
What “charge more” means at Less Meeting
First, just to clarify, charging more isn’t about greed.
It’s about balancing what you charge with the value your B2B customers receive from your product. And it’s about making sure you’re getting the revenue you need to keep your business in business, while not excluding target markets.
So this is what we’ve learned at Less Meeting about charging the right amount (for us).
1. Charge > $0.00
Charge something, anything. The freemium model is an incredibly tough one to beat, and if you can’t find an audience that willingly pays for your product, then you haven’t found the right product/market fit.
We also learned early on that giving Less Meeting away actually resulted in significantly less adoption than paying users. The problem it turned out is that we were trying to force Less Meeting onto non-target demographic users by giving it to them for free. On the flip-side, customers who truly value Less Meeting will use it no matter what the cost.
(PS – Note that we do give our mobile apps for free, but this is an intentional marketing cost for us, taking advantage of the app marketplaces. It’s been successful too, as we had the same new user traffic in the 1st three months after launch as we did in the previous 12 months for our web version.)
2. Provide an Option for Everyone
First, “Everyone” = Everyone in your target market.
Even though we’re a B2B product, we have a number of individuals who use Less Meeting too. Most often we find that these users are paying for Less Meeting out of their own pocket too, not charging it in. Just this evening I was emailing with one of our Solo customers, asking why Less Meeting hadn’t spread to the rest of his team. His response:
I suspect it is merely that they have to pay. I love it enough to pay! It’s one of the best meeting apps I’ve tried – and I’ve tried tons!
We’ve often debated killing our Solo License package. Our LTV for Solo users is MUCH less than our team pack users but the support is typically about the same.
But if we did that we’d also be excluding people like this who understandably can’t justify spending $59/mo themselves. Are you kidding me?!? You absolutely want this guy as a customer.
Second, non-profits are a big part of our customer base – over 20%. Non-profits have the same meeting problems as everyone else, but with smaller budgets.
We see the exact same excitement and engagement from our non-profits as we do our standard customer base, so again it’s important that we provide an option for them as well.
Third, providing an option for everyone also means providing an upgrade path. Remember that not everyone is ready to buy a 100-person Less Meeting pack from day 1.
As a matter of fact we actively advise against this – every organization has their own unique meeting culture and without taking the time to find out how to fit Less Meeting into that culture, you’re setting up for failure.
We’ve continually seen that allowing users to start by themselves, even for free on the mobile app, then gradually spread Less Meeting to the rest of their team, results in a smooth, successful, adoption across the organization.
Provide an option for everyone so that individual champions can buy in and then upgrade the rest of their organization when ready.
3. Let your best customers maximize their value
Earlier I said that pricing is about balancing what you charge with the value your B2B customers receive from your product. If you cap the amount of value your customers get from your product, you’re also capping the revenue you can get too.
Admittedly this is one that we’re still tweaking at Less Meeting.
We’ve found that many of our customers who are on their iPads all day and don’t share their meeting notes with their team get all the value they need out of the free iPad app alone. What’s that mean? Cancelled licenses! Not because they don’t like Less Meeting, but because they had no need to pay for it anymore, even if they were willing to (if the value was there).
On the other end of the spectrum, how can you continually provide more value to your biggest champions? These customers will continue to pay you whatever you charge, as long as you keep giving the more value. At Less Meeting we haven’t yet found that next tier of value, but are actively looking for it.
It’s much clearer now
Thanks for the article Nathan. I’ve been hearing a lot of the same pricing sentiment for awhile now but yours is one of the first to help me truly understand it.