The Hidden Cost of Bad Pricing: How SaaS Companies Lose Customers and Revenue

If you haven't priced your SaaS product at the right price point, you're leaving money on the table and putting your future growth at risk.

Failing to continually assess your pricing strategy means that you're missing out on customer segments that might be willing to pay a percentage more for the same service.

Similarly, if you're not constantly assessing your product pricing against your competitors', you'll fail to react to customers who think they're being charged too much for what you offer. Some of them will churn to a competitor before you're able to do anything about it!

Too often, pricing strategy is left to gut-feel or an unscientific occasional look at the competitor set. But it doesn't have to be.

I believe that product price should be equally informed by strong quantitative and qualitative data points. To do this, I try to take comprehensive data from four key areas—customer sentiment, competitor offerings, commercial data, and product usage statistics—using this to inform a well-rounded pricing strategy that's flexible enough to deal with new competitors entering the market or existing ones changing their own approaches.

A smart product pricing strategy can quickly unlock:

1. Clearer Product Marketing Strategy & Tactics, Segmented By Cohort - giving sales and marketing teams the data needed to pinpoint which of your features are most valuable to certain customer segments and the tools to talk about them in the right way.
2. More Product-Led Growth - By confidently identifying the highest value features in your product set, split by cohort, you'll be able to confidently redesign the key parts of your digital products and services to deliver maximum value to your customers, reducing churn risks and increasing your customer lifetime value.
3. Greater Predictability Over Profit, Margin and Volume - by allowing you to model the impact of shifting pricing strategies (i.e., Freemium vs. Per-Seat Model vs. Per-Use) on the bottom line of your product revenues, you'll be well-placed to stay ahead of market shifts and not make knee-jerk reactions to unexpected profit dips.

So what questions should you be asking yourself if you want to level up your product pricing strategy?

It’s best to group these by the four key areas above (customer sentiment, competitor offerings, commercial data, and product usage statistics), and then find smart ways to generate both qualitative and quantitative data points to inform your answers to each of them.

As a starter for ten, start by sourcing the right data to help you answer these questions. 

Customer Sentiment:

What are my customers' perceived pain points or needs that might justify a price increase?

How does my pricing compare to the perceived value my customers place on my product?

Have I gathered enough customer feedback to understand how price-sensitive my segments are?

What are the common objections or concerns customers raise regarding my pricing?

Am I regularly surveying customers to understand how they feel about my current pricing model and the value they receive?

Competitor Offerings:

How do my competitors' pricing models compare to mine? Are they more or less expensive?

Are my competitors offering additional features or services that justify their pricing, and are there opportunities for me to adjust my pricing based on this?

What trends are emerging in the pricing strategies of my competitors? Are they moving towards more flexible models like usage-based pricing or tiered subscriptions?

Have I conducted a competitive pricing analysis recently, and do I understand how my product stacks up in terms of price vs. value?

What competitive pressures am I facing that could require me to reassess my pricing strategy?

Commercial Data:

What is my current customer acquisition cost (CAC), and how does this compare to the lifetime value (LTV) of a customer?

How does my pricing align with my target revenue and profit margins?

Have I assessed the impact of different pricing strategies (e.g., Freemium, Per-Seat, Pay-Per-Use) on my overall revenue goals?

What impact has my pricing had on conversion rates, churn rates, and customer retention?

Am I regularly reviewing pricing changes alongside my revenue goals and adjusting to ensure sustainable growth?

Product Usage Statistics:

What are the most-used features in my product, and should I be pricing them differently based on their demand and value?

Are there underused features that might be overvalued in my current pricing model?

How are different customer cohorts using my product, and can I optimize pricing based on their usage patterns?

Have I tracked how product usage correlates with customer retention and willingness to pay?

Do my product usage statistics support the value my product delivers at the current price point, or is there room for adjustments?

If you liked this article, sign up to our newsletter! And if you'd like help unlocking more growth with a smart pricing strategy feel free to drop me a line at robert.pisacane@theproductbridge.com. 

‍