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How do I market-test subscription pricing?

I’m getting user feedback that our product subscription price is too high. How do I market-test a reduction without giving away the farm?

  • I would ask those customers what they think is a fair price. Then see if there are any patterns. You can also try a/b testing the sign up screen. Then you can try a couple price points and see the results.

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  • Instead of testing lower prices, you can test discounts. I’ve heard that’s the standard technique for testing different price points w/o committing yourself to a low price permanently.

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  • This’ a tricky issue. I’m trying to pull the link and will put it back here if I find it, but most SaaS people say customers almost always complain about SaaS pricing and you shouldn’t budge for that (if you really think your price is fair). Amy Hoy also has great advice about pricing strategies, PlanScope’s founder also.

    I run two SaaS startups and we have such feedback from time to time, but they all still use our product even when at the start we were 4x more than our competitors with only 10% their features.

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    • Since I feel I’m forced by a certain vendor of Graphics editing software(Axxxx), to buy over-priced subscriptions for several of my machines, my response might be slightly jaded. No price is ever going to make all customers happy, but I expect there is a point where many would be happy. And charging more for a service than they might have paid over several years in License once pay for upgrades mode will also guarantee very unhappy customers. The third point of course is what do you need to make a reasonable profit. Somewhere in the middle of that triangle is your price.

      While I expect that in the end you’ll pick a nice sounding, round number – it always helps me to define the boundaries before picking a number, which includes some serious customer feedback. I would caution using the fourth point – “whatever the market will bear”. That is of course unless you don’t care what you customers think. I for example, continue to pay high prices for a subscription to software that consists of a bunch of bundled programs and services – of which I only need about %15 but the vendor only offers the service this way – all the while telling me what a great bunch of services for the price. The end result is I get counted under “still use our product”, but I’m pissed every month when I see the bill and every couple of months, I review my alternative solutions. And I’m quite vocal about it.

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  • There’s going to be a mix of market research – researching and asking marketplace – but also a bunch of trial. You should test different pricing and then test different discounting, but not together. Now, is the part of the program where I say you should not compete on price. You should compete on value. What does your solution offer that your competitors don’t provide? Make the product of value people want. Do more product research and make the product better. Take price out of the equation.

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  • Start with pricing it annually and then work backwards to work out monthly pricing. With your annual pricing think of it as a one off purchase for users which can help work out a “fair” price. I would avoid discounting as it can upset existing subscribers who could be incentivized to cancel their subscription and re-sign on the discounted price.

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