Value: the Foundation of Ideal Prices

 

Pricing is a tricky topic, particularly for young SaaS companies: price too high and adoption will lag. Price too low, and you leave money on the table, creating a challenge to raise prices later. And of course, unlike hardware-centric solutions, what exactly to charge for is wide open. While this freedom is ultimately powerful, it makes it hard for most companies to know where to start as they package their solutions and design the price architecture.

Where to begin? From my experience working with over B2B startup and scale-ups, I recommend a simple step-by-step, “land and expand” approach.

 

1. Define an “ideal customer”

These should be companies where you have the best chance to win because you provide a clearly better solution than their other options. You can define this quite narrowly to start with: What problem are they facing that you address? How large are they? Where are they located? What’s the company culture? What other solutions do they operate?

2. Define an “ideal offer”

What solution are you going to sell them? In addition to the software, what services will they buy? You don’t need to get this exactly right, but being concrete helps to drive the process along.

 
3. Identify the customer’s “Next Best Alternative (NBA)”

For innovative solutions it’s often easiest to start with the “As-Is” situation, but a competing solution may be appropriate, or often-times it’s adapting some other element of the solution.

 
4. Brainstorm on the value you create versus the customer’s NBA

What’s value? We’ll cover that in the next blog in a few days.

 

Being super targeted on which customers will receive value from your solution in the early phase helps with defining the value, and eliminated the endless “what about” discussions that can otherwise slow decision-making. And once you have one segment covered, it gets easier to extend this to other customers and solutions.

Interested to learn more? Join the RocketX pricing webinar on the 25th of October. You can sign up here.

Dr. Ian Tidswell | Ideal Price x RocketX

Dr. Ian Tidswell is the founder of Ideal Price, a company focused on helping innovators “Find their Ideal Price” efficiently. Ian is a B2B pricing expert with over 20 years of experience working with startups to global companies across all aspects of the pricing challenges.

 

Previously he worked as a consultant at McKinsey & Co, and was the head of pricing at Syngenta. For the last 4 years he has been a special coach for pricing with Innosuisse, the Swiss government’s startup coaching program. Based in Basel, Switzerland, Ian holds a BSc. in Physic from Imperial College London, and a PhD in Physics from Harvard University.

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