How to price software/Saas

[Sam Ng]

Does anyone have any valuable insights into how to price software? I've done a bit of reading around but at the end of the day it still seems more guess work than science.

Love to hear any insights, personal experiences etc.

For us in particular, we have three software complimentary products as part of a single platform targeting user interface designers so it's about setting more than just "one price". But there are obvious questions such as:

- What type of "free" do you offer? Fremium, free for 30 days, free loss leading product...
- How do you do bundling?
- What type of a "message" are you sending with your price levels?
- If your customer is not using their own money (but needs to get permission to buy the software), how does that change the price? (ie, if you're asking for $50, you might as well as for $100 because it's the same hassle for them)
- Do you look to the market to price (external input) or do you primarily look internally (we think it's worth xyz and adds $x value therefore..)?

[Eileen McSherry]

All of the suggestions on setting pricing are good ones. I also think about cost--of supporting your SaaS offering (not just monthly support but costs associated with implementation, those first two months of ironing out the wrinkles, spread out across the length of the contract). Are there any ongoing platform and other infrastructure costs related to your offering (e.g., storage, telco)? Once you get a sense for your monthly cost, you can evaluate your target pricing in light of it (along with competitive constraints and customer ROI).

[Peter McSherry]

What if my monthly costs are seasonal?

[Jim Geisman]

You're headed in the right direction... All the right questions.

I wouldn't say that pricing is "more guesswork than science" but I would say it is a matter of experience. (The more experience you have with pricing the closer you stand to the dartboard...)

As for the issue of costs and seasonality, first you need to make sure the value is there to your customers. If so, then the issue is how do you price/package/license the offer so the economics work out.

We did a presentation at SaaS University in Chicago a while back that might be useful. The presentation talked about leaving money on the table -- something we see people doing a lot of -- especially in the SaaS world...

You can see it here.

Hope this helps...

Jim Geisman ([e-mail])

[Daniel Kuperman]

Neil Davidson's "Don't Just Roll The Dice" is a nice compilation of ideas on pricing software. It's a FREE eBook and I highly recommend it. Easy read, and it may give you additional insights.

You can download it here:
http://www.neildavidson.com/dontjustrollthedice.html

[Jim Geisman]

I can support that! It is a good piece and we expect to offer it on www.softwarepricing.com in the near future...