8 Effective B2B Pricing Strategies for Maximizing Revenue
The success of every business is tied to two factors—cash in versus cash out. The easiest way to maximize your cash in isn’t to pour more money into sales, marketing, or products. Instead, the best way to maximize revenue in your business is to pull the most effective growth lever you have available to you—an effective B2B pricing strategy tailored to your business.
Here’s exactly how you can find the right strategy for your organization, including different strategies you can try, how to build your own custom pricing, and what mistakes to avoid in the process.
8 different B2B pricing strategies
This is a list of eight different B2B pricing strategies, and we don’t mean eight basic pricing models you’ve already heard of. These are eight in-depth strategies you can use to capture the full value of your SaaS and implement according to the specific needs of your business.
Value-based pricing
Value-based pricing is a B2B pricing model that aligns the price of your service with the perceived value it delivers to your customers. But in order for this approach to work, you need to have a deep understanding of your customers, including what they value, their biggest pain points, and how your product addresses those needs.
There are plenty of different ways to gather this information depending on the size of your company. If you’re in the earlier stages of growth, we’d recommend conducting a willingness-to-pay (WTP) survey or a competitor price analysis. If you do plan to put out a WTP survey, Harvard Business School recommends taking the following fourteen factors into account.
Source:Online.hbs.edu
Otherwise, if you’ve already built out a sizable user base you can also consider conducting customer interviews or studying your existing pricing data. For example, with a tool like Togai’s revenue simulator, you can use real customer usage data to understand how a different pricing decision can affect your revenue and your customers’ costs.
Usage-based pricing
Similar to value-based pricing, in usage-based pricing (UBP), customers pay according to their actual consumption of a product. This dynamic pricing model is especially effective for B2B companies with variable demand, like Snowflake or AWS, where pricing is tied to measurable metrics such as storage or compute time.
Source: Togai
Not only does UBP lower the barrier of entry for new users, but it makes it easier to capture the full value of your SaaS without being limited by a price ceiling. That being said, it can be difficult to forecast revenue for UBP due to fluctuations in customer usage.
However, by creating usage tiers with a dedicated billing platform like Togai, you can establish predictable revenue bands while still offering flexibility to your customers. For instance, you might create tiers based on defined usage thresholds, such as storage or API calls that allow you to anticipate revenue ranges while enabling customers to scale up as their needs grow.
Hybrid pricing
The best B2B business pricing models are often a combination of a base subscription fee with usage-based add-ons—also known as a hybrid pricing model.
This pricing model works well for businesses with diverse customer needs. For example, Twilio offers a free trial alongside pay-as-you-go pricing for API calls, texts, and other communication services. By implementing these pricing structures alongside more flexible usage-based options, they can cater to all of their customer segments without being tied down to either a flat subscription rate or a pure usage-based model.
Source: Twilio
Tiered pricing with add-ons
Most experienced SaaS business leaders are familiar with tiered pricing—a model that gives customers multiple pricing options or plans. But by giving customers access to add-ons like additional storage or advanced security features on top of your establishing pricing tiers, you can create upsell opportunities without any additional effort on your part.
The best way to implement this strategy is to find clear differentiation between your pricing tiers to avoid any feature overlap between your tiers. Then, find any additional modules or features, like priority support, white labeling, or API access, and offer those as add-ons. For example, Freshbooks includes custom add-ons for each of their subscription tiers, including additional team members, payroll services, and advanced payments.
Source: Freshbooks
Freemium with premium upsells
There are countless benefits of freemium pricing. Mainly, by providing a low price entry point (free) using a tool like Togai’s entitlements feature, you can reduce barriers for adoption for your SaaS. However, the real way to make a freemium model successful is to know when and how to implement upsells and upgrade your users to premium pricing.
First, your users must see the benefits of upgrading from a free plan to a paid subscription. To do this, you can set specific activation points, such as when your users hit predefined storage limits. Most SaaS leaders will describe customers who have hit these activation points as product-qualified leads (PQLs). Alternatively, you can give users limited access to premium features early on so they know the real value of your SaaS and what they can expect beyond the paywall.
Combining product-led and sales-led go-to-market strategies
Your pricing model is a key part of your company’s go-to-market (GTM) strategy. And by offering multiple pricing models from sales-negotiated contracts to freemium offers, you can unlock the benefits of both of these GTM strategies.
Also Read: What is Volume Pricing? & How to Implement it [+Examples]
As a refresher, product-led (PLG) strategies focus on customer acquisition through self-service trials and intuitive onboarding, while enterprise accounts often require tailored support from a sales team as part of a sales-led (SLG) strategy. But by blending PLG with SLG, you can cater to users across your total addressable market, including early-stage freemium users and established enterprise accounts.
How do you bridge the gap between these go-to-market models exactly? While you’ll need to implement multiple pricing models, it really comes down to how you handle the sales handoff from freemium to paid users. Specifically, you can use your product usage data to guide your marketing and sales efforts. For example, if a team reaches the limit of their trial seats, it’s a clear sign they’re engaged and might be ready to buy. This will then prompt your sales team to follow up with a tailored offer.
Outcome-based pricing
Outcome-based pricing is a relatively newer model, but it’s designed so that customers only pay when specific outcomes are achieved. This is one of the most complicated strategies on this list, and Deloitte has covered it extensively.
Cost-plus pricing
This one comes with a pretty big disclaimer. While we don’t recommend cost-plus pricing as a viable strategy, it may be the best option for very early-stage bootstrapped companies.
This model calculates price by adding a markup to production costs and other operating costs a SaaS business incurs to stay in business. However, it often overlooks customer value and market dynamics, making it unsuitable for most established businesses.
4 steps to create your own B2B pricing strategy
The best B2B pricing strategy is the one that’s tailored to your business. Here are four steps you can take to create a pricing strategy that meets the needs of both your business and your customers.
1. Understand your target market and customer segments
Creating an effective B2B pricing strategy starts with getting to know your different customer segments through market research. For example, a software company selling to healthcare providers could separate customers into clinics, doctors’ offices, and hospitals. In your own research, you can try segmenting customers based on factors like industry, company size, purchasing power, and desired outcomes.
Then, by surveying and interviewing these segments, you can build customer personas that will inform how you begin setting prices. Using our previous example of healthcare providers, a clinic persona may focus on tight budgets and staffing limits. Meanwhile, a hospital persona may prioritize improved patient experiences and advanced reporting.
Once you have this data available to you, you can begin making decisions on what optimal pricing looks like for each of your individual customer segments.
2. Define and quantify your value metric
What makes your SaaS worth paying for? The answer to this question is likely going to be your company’s value metric—a measure unit that ties your pricing directly to your customers’ product usage or outcomes.
For example, if your SaaS is a cloud storage provider then your value metric is likely going to be storage volume. By choosing the correct metric, you can ensure you’re charging the right price for your SaaS in proportion to the value your users are getting out of your service and their overall customer experience.
3. Conduct a competitive analysis to benchmark pricing
Conducting a competitive pricing analysis is pretty standard for any company that claims to be data-driven. First, you’ll need to analyze competitor pricing and understand how similar solutions in your industry are setting prices.
Fortunately, you can leverage tools like OpenView’s SaaS benchmarks or explore public pricing pages to gather data on the price points and value propositions of your competitors. This competitive pricing research provides insights into market standards and customer expectations.
However, benchmarking isn’t just about copying your competitors. Instead, look for gaps in their strategies, such as underserved customer segments or missing pricing tiers, and use these insights to differentiate your own approach. For example, if competitors rely on flat-rate pricing, you may consider adopting a usage-based or hybrid model to appeal to a broader audience.
4. Select and design your pricing model
Leverage insights from steps 1–3 to choose a pricing model that aligns with the needs of your customer base, your GTM strategy, and market demand. From here, you can focus on the more difficult task, which is designing your overall pricing strategy.
When designing your pricing structures, you want to create tiers or packages tailored to different customer needs. For instance, consider offering add-ons like premium support or advanced analytics. This allows for price elasticity and additional upsell opportunities without overwhelming your customers.
You can also use a dedicated SaaS billing tool like Togai which lets you configure 100+ pricing strategies without having to write a single line of code. The platform even lets you make scheduled pricing changes and support multiple GTM motions so you can build a pricing strategy that easily adapts to changing market conditions and market trends.
Want to quickly design and launch your ideal pricing strategy? Sign up for free to get started with Togai.
Source: Docs.togai
3 major mistakes to avoid when building your B2B pricing strategy
When you’re so focused on designing the perfect pricing approach, you can easily make three pricing mistakes that can have devastating consequences for your bottom line. Be sure to keep these mistakes in mind as you put together your offer.
1. Failing to align your pricing with customer value
Finding the direct correlation between the price of your offering and your customers’ return on investment (ROI) is the foundation of any successful pricing strategy. And failing to align your pricing to customer value—by overcharging or underdelivering—can erode your customers’ trust, reduce retention, and damage your brand.
For example, a company that fails to account for price sensitivity in a competitive market might alienate budget-conscious customers. Not only will this have a long-term impact on the company’s profit margin, but the company will be missing out on an entire customer segment that could potentially grow with them overtime.
To avoid this, integrate regular pricing processes like value audits and customer feedback loops. These tools will give you a better understanding of your customer behavior so you can adjust to a higher price or lower price accordingly.
2. Ignoring pricing psychology
It can be tempting to get so caught up in your competitive pricing analysis and pricing insight tools that you ignore basic pricing psychology altogether. But this would be a huge mistake.
Overlooking pricing psychology can result in a missed opportunity to maximize your revenue and total market share. Proven tactics like price anchoring (using a high-priced option to make other tiers appear more attractive), decoy pricing (offering a deliberately less appealing option to guide decisions), and charm pricing (using prices like $9.99 instead of $10.00) significantly influence the way potential customers perceive the value of your SaaS.
For example, strategically timed price changes—paired with value-driven messaging—can capitalize on psychological pricing effects. All you need to do is leverage a tool like Togai to make scheduled pricing changes or adjustments based on the rules you set up.
Want more control over your pricing strategy? Sign up for free to get started with Togai.
3. Overcomplicating pricing models
Finally, with all of these pricing strategies available to you, it’s important to remember that overly complex pricing models can confuse customers, hinder decision-making, and ultimately lead to higher churn. While advanced algorithms and machine learning tools may allow you to make real-time pricing adjustments, making too many pricing changes could backfire and prompt your customers to switch to a competitor SaaS company instead.
FAQs
What are the popular B2B discount pricing strategies?
Popular B2B discount pricing strategies include volume discounts (where customers pay less per unit when buying in bulk) and loyalty discounts (which reward repeat customers). Other strategies include early payment discounts to encourage faster payments and seasonal promotions to drive demand during specific periods.
What is a tiered pricing model in B2B?
A tiered pricing model in B2B divides products or services into multiple pricing levels, such as basic, professional, and enterprise tiers. Each tier offers a distinct set of features and capabilities, allowing businesses to cater to different customer segments while encouraging upgrades as customer needs grow.
