If you go through different SaaS websites, you will notice that some companies are transparent with their pricing, and some are not. There's no other way around it - you're either open about how much you charge for what features or hide the costs.
For instance, we have analyzed how it looks on the Polish market. In general, among 253 of the companies surveyed, 75% of them disclose their pricing.
Interestingly, ~6% of them do something evil: they have a "Pricing" page button, and if you click on it, there is no price disclosed. If you're to remember one thing from this article: don't ever do it. It's a false promise, which turns people off.
While the pricing transparency trends change, from moving away from it in 2018 (study) to getting more open in 2021 (Salesforce!), the general rule remains the same:
The more complicated your product is and the bigger your average ticket is, the more reasons you have to hide your pricing. The easier and straightforward your software is, the bigger are the advantages of being open about the features and their costs.
At the same time, some companies manage to get the ideal hybrid between transparency and closed pricing.
In this article, you will learn:
As mentioned in the beginning, the easier your tool is, the more transparent you should be about it. We can put it in other words: the lesser problem your product solves, the less you should engage with the potential client in the buying process.
A clear saas pricing model is especially relevant for simple SaaS products, as it helps customers quickly understand what they are paying for and how much it will cost.
Imagine you go to the market, and there are no prices on the products. If you had to ask the clerk about the cost of each grocery, you’d give up. In the same way, you want to buy uncomplicated day-to-day software products without doing any extra steps.
Transparent pricing then will be a strategy for all simple B2C and B2B products: data scrapers, grammar checkers, electronic signature tools, ad blockers, keyword finders. In the products’ cost/complexity matrix, they land in the bottom-left corner. Transparent pricing is a common practice in the saas industry, making it easier for customers to compare and choose solutions.
Via our colleagues from Casbeg: https://casbeg.com/pl/blog/cennik-na-stronie-internetowej/
The transparent Pricing Model is key to self-service products that can scale without sales reps. If you sell through inbound primarily, and your tool allows for complete self-checkout, go with a more "e-commerce-like" approach.
The benefit of transparency is clear and undoubtful, but every great advantage comes with risks. The major one, in this case, is being benchmarkable. If you’re open with your prices, your competition can copy you and make use of the work you’ve done as their competitive advantage. This is especially relevant when considering competitors pricing, as customers may directly compare your offering to others and base their decisions on these comparisons.
What’s more, your potential customers can easily compare your prices to similar tools. If another’s company type of pricing fits them better, they won’t hesitate to purchase something else. Relying solely on a competitor based pricing strategy can make your product more attractive in the short term due to its simplicity and ease of implementation, but it also means you risk losing differentiation and may face challenges in the long run if your business fundamentals differ from your competitors.
Finally, you can anchor prices in the wrong way. Say you’re fully transparent, and you started drawing the attention of enterprises. Once they see your plans, they have a specific pricing point they can refer to. Flat and visible fees can ground your negotiation position.
I believe, however, these risks are worth taking. Being benchmarkable forces you to think of your unique value on the market. If others copy it, then they don’t have a pricing strategy. Instead of just following competitors, it’s important to develop your own pricing approach that reflects your unique value proposition and business goals. And if some clients choose your competition over you, it doesn’t have to be a bad thing as long as you serve two different types of customers.
Frankly speaking, as Valueships, we regularly use it to benchmark our clients’ price vs the market. It’s a piece of free information you can get very quickly. I understand why someone would prefer not to have it on their website.
Lowering your negotiating position doesn't have to be a thing either. Suppose you clearly define the value difference you provide to end-users and enterprises. In that case, you can be transparent about the pricing for the first segment and invite enterprise clients to talk to you directly.
Many enterprise-level SaaS companies use this approach with great success, as you will see below.
Hiding prices is not the best strategy when selling common goods, but there are cases when it’s highly beneficial. For certain SaaS products, hiding prices can be a strategic choice. Mainly if your software targets enterprises, solves many business purposes, and aligns deeply with the company’s processes.
ERP’s (Enterprise Resource Planning systems) are a great example. This kind of software integrates with companies on many levels and in many ways. When deciding on pricing transparency, it is important to understand your target market, including their needs and willingness to pay. It’s not always possible to put the costs of it in simple plans. There is a very long customer discovery process here, which doesn’t end with one sales demo call.
Enterprise customers don’t want to rush such decisions either. To ensure that the tool will cover their needs, they need to exchange a certain amount of knowledge with the product’s team.
On top of it, many big-fish sales need an established relationship, and in most cases, this requires a human touch.
Non-disclosed pricing will work great with every SaaS product that solves complicated problems or targets a particular niche on the market. For these complex or niche SaaS offerings, it is crucial to select a suitable pricing strategy that aligns with customer value and business goals.
Just like disclosing your prices forces you to be aware of your niche and your product’s value, being non-transparent makes you invest in the sales process. The bigger your account value is, the more sales support you need to serve big-fish businesses.
It means that the Customer Acquisition Cost raises, and you need to spend time and money on maintaining your sales team. Implementing a recurring revenue model can help offset these costs by providing predictable income streams. Policies over sales commissions and product discounts become a solid part of your company too.
Hiding the pricing increases customer friction, lowers the acquisition potential and makes you maintain a sales team. When making pricing changes, it is important to consider the impact on existing customers to avoid churn and maintain loyalty. At the same time, you can capture clients of more significant volume.
To achieve the right balance between acquisition potential and customer retention, it is essential to continuously optimize pricing through testing and data-driven adjustments.
Pricing transparency comes down to a couple of questions that every SaaS company should ask themselves.
To answer these questions, you need to do good ol' research. Ask your customers what they use your tool for. Run a survey, conduct several dozens of calls, run a Clearbit through your customer base. Enrich the sales data you already have and see who your customers are.
And before you do this, get inspired by a couple of SaaS companies with disclosed and undisclosed pricing models. Selecting the right pricing model based on thorough research and customer insights can give your business a significant competitive advantage.
Servicenow is a workflow system for enterprises. They communicate whom their tool is made for on different landing pages.
NetSuite is a multi-industry corporate ERP. Landing pages present the tool’s value and invite visitors to talk to sales representatives. For complex solutions like NetSuite, a feature based pricing model could be used, allowing customers to pay based on the specific modules or features they need.
SimilarWeb is an analytical tool that targets many different business verticals such as identifying which terms drive traffic for competitive sites. Currently, they have a "pricing page" without the actual price, which I once again highly recommend not doing. However, in this case, they had a legacy sub-page with a lot of traffic and good SEO, so it stayed as a phantom. It’s a legacy thing as not so long ago, they had published the pricing for different personas.
In summary, hidden pricing strategies can involve cost-based calculations, feature based pricing models, and value-driven approaches. The selling price is ultimately determined by a combination of value, features, and negotiation.
DocuSign is an online signature platform with visible pricing. Like similar mass-scale tools, they have both disclosed prices for freelancers/SMB’s and hidden for the enterprise. DocuSign uses a per user pricing model, where customers are charged based on the number of users, making costs predictable and scalable for different business sizes.
Slack is a communication tool for companies of all sizes. They describe feature differences very precisely for every plan, allowing for feature pricing and customization according to user needs. Slack combines disclosed and undisclosed models, and uses per user pricing and the per user pricing model, charging a fixed monthly price per user. Some plans only bill for active users, ensuring fair and accurate billing. The per user model benefits teams of all sizes by allowing them to scale up or down as needed.
Jira is a project management tool. Notice how precisely they described target groups for every plan. Jira uses a user based pricing model, which is advantageous for teams that need flexibility as they grow or change. Their pricing structure also supports the per user model, making it easy for organizations to manage costs as team sizes fluctuate.
Here are the key takeaways in the “to disclose or not do disclose” discussion:
Expert in B2B pricing, monetization and value-based selling strategies. Over the past year, he has completed over 40 consulting projects in Europe. Prior to founding Valueships, he worked at McKinsey & Company, mainly in the TelCo, software, and banking industries. He completed his doctorate in pricing in SaaS start-ups at the University of Economics in Wrocław, where he also lectures.
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Expert in B2B pricing, monetization and value-based selling strategies. Over the past year, he has completed over 40 consulting projects in Europe. Prior to founding Valueships, he worked at McKinsey & Company, mainly in the TelCo, software, and banking industries. He completed his doctorate in pricing in SaaS start-ups at the University of Economics in Wrocław, where he also lectures.
