SaaS Pricing Insights from John Kotowski
John Kotowski is an experienced product and pricing expert in the SaaS industry. His background includes:
- VP of Product at various companies, including Format and Tulip Retail
- Founder and CEO of Buyerson Inc., a consulting and software company focused on SaaS product monetization.
- Creator of PricingSaaS, a database tracking SaaS pricing pages
- Publisher of the PLG Monetized newsletter
With his experience in product management and pricing strategies for SaaS companies, John offers valuable insights into the complexities and best practices of SaaS pricing.
Key Pricing Challenges
1. Lack of ownership
- Many companies don't have a dedicated person or team-owning pricing.
- Often, pricing is left to salespeople, who are not incentivized to maximize revenue.
2. Difficulty in determining willingness to pay
- Challenges in accurately assessing how much customers are willing to pay.
- Need for careful research and experimentation.
3. Balancing price increases with customer retention
- Risk of increased churn and decreased conversion rates when raising prices.
- Importance of communication and value reinforcement during price increases.
When to Focus on Pricing
- Regularly, as part of product development and feature additions.
- When seeing signals such as:
- Low churn rates (indicating potential for price increases)
- Customer feedback suggests the product is underpriced
- Adding significant new features or value to the product
Implementation Strategies
- Build monetization models considering customer segments and pain points.
- Use various research methods:
- Look for signals in existing customer data.
- Conduct willingness-to-pay surveys (e.g., Van Westendorp, Gabor Granger).
- Run pricing experiments with new customers
- Consider grandfathering strategies for existing customers.
- Prepare customer success teams with playbooks for handling price increase objections.
Ownership of Pricing
- Ideally, it is owned by the product team or head of product.
- Product leaders understand the roadmap and can align pricing with delivered value.
Tips for Successful Pricing Projects
- Invest in building an internal research panel for ongoing customer feedback.
- Regularly update pricing and packaging to reflect added product value
- Carefully consider the impact of price changes on conversion and churn rates
- Ensure cross-functional coordination when implementing price changes.
- Communicate price increases effectively, reinforcing the value delivered to customers.
Current Trends in SaaS Pricing
- Surprisingly low frequency of pricing page updates (only 2.3% of companies in a 3-month period)
- Some companies moving away from product-led growth (PLG) models, removing freemium plans or self-serve options
