4 Steps To SaaS Competitive Pricing | theorytwenty7 tech marketing

Getting pricing right is important, but it's a science and an art. Here's our guide for SaaS start-ups who want a simple process to do just that. 

Running a competitive pricing analysis is a crucial step for SaaS start-ups. This is a key way to approach a pricing strategy, the presence of competitors has, and always will, impact the cost of your subscriptions. It makes sense to look at what the market is charging. 

Today, we’re helping you to analyze your competitors’ prices and find the best long-term strategy for your pricing. Read on for four ways to run your very own competitive pricing analysis.

What Is A Competitive Pricing Analysis? 

A competitive pricing analysis is where your team, typically a product marketer, investigates the pricing models and packaging of products in your tech category.

This is one of several areas of competitive intelligence that your marketing team should look after. It's crucial to say upfront that your competitors are not the sole dictator of your pricing strategy.

Using the analysis to create a competitive pricing strategy is about more than the cost of subscriptions. It’s looking at: 

• The clarity of how pricing pages are presented
• The visibility of prices
• How features, benefits, and value are packaged into subscriptions and a cost,
• Discounting and personalization to industries and geographies

The goal of the analysis is to get a land of the competitive landscape. understand pricing trends, find gaps in the market, and see where you can stand out. 

Why Is Competitive Pricing Important?

A competitive pricing analysis is important for two reasons: 

1. It helps the start-up set prices that are attractive to customers but still creates revenue
2. It identifies areas where you can offer more value or new features to charge a higher price, personalize for customer segments, or develop your product to serve more value. 

With the results in hand, you’ve got one piece of the overall pricing strategy.  

From here you can factor your competitors’ prices into experiments around messaging, packaging, pricing, and product development. Doing this analysis helps a start-up make smart decisions about changing prices, planning marketing strategies, and improving products.  

Run your analysis regularly and you’ll keep your finger on the pulse of what (and not) to do! 

Competition-Based Pricing Challenges

As you look to your competition for insights into how to price and position your software, keep in mind it's not as easy as it looks, even with this guide.

Here are some challenges you're going to come up against:

• You cannot simply match competitor price​
• Finding your competitor's pricing could be hard​
• You should not assume your competitors’ pricing is working​
• You must put your customer first ahead of what the market is charging

And that's to say nothing about whether your competition has done their pricing research too...

Traditional Pricing Factors

You and your customers will arrive at a pricing strategy through the classic list of considerations. Keep these in mind as you look at your target market: 

• Production costs: The most common pricing method is cost plus a percentage mark-up.
• Economic value: The value to the customer over the course of their subscription with you
• Competitors’ pricing: Higher than, price matching, and less than – you base pricing on competitors
• Competitive positioning: How do you want to be perceived by customers (as a prestige brand [higher], value-based [lower], “cool” etc.)
• Business goals: Do you want to amass a high number of customers or fight churn?
• Elasticity and demand: If pricing impacts demand, you have an elastic product, but if pricing makes little difference to demand, you have an inelastic product.

But, out of all these factors, it’s important to base your pricing on value. Every customer is price-sensitive (even if they don’t outright say it, the van Westendorp Price Sensitivity Meter proves this).

Your target audience should care about your product, your customer service, and the impact you have on their work. If you can’t provide value in that way, the price you charge will become front and center. 

Perhaps the reason price is all your customers care about is because you haven’t given them anything else to care about
Seth Godin

The Role Of Value In Pricing 

Before running your pricing analysis, it’s important to talk about value. 

When you look through how your competitors are pricing their subscriptions, stop and think about the value being delivered to customers.   

Value isn’t about the number of users. Value can be the number of API connectors. The value can be about the number of projects you can connect to. Value is no longer about licenses. 

HubSpot’s change to pricing in 2024 – switching on free logins, for instance, is an example of how more SaaS providers are changing: 

Value-based pricing is becoming the norm. It’s more than the cost of producing your product and the cost of selling it.  

That value is gained by splitting customers into segments, interviewing them on the value they place on the outcomes of products, and consistently measuring this.  

Extensive work has been put into explaining how to approach a value-based pricing model that focuses on value.  

How Do You Run A Competitive Pricing Analysis? 

To conduct a competitive pricing analysis, use this step-by-step approach: 

1. Map Out Your Competitive Landscape And Hypothesis 

Start by identifying your direct and indirect competitors. 

Then move into the pricing hypothesis. Set an exam question you want to answer, for example: 

“ACEMTech and SaaSCorp are our two main competitors. We have lost 75% of our site traffic to them. Our demos are down, and we are closing 40% less of our deals. Is our lack of pricing information turning away the interest that we capture?” 

Create a list of 5-10 direct competitors. Visit their website, G2, and other online sources to gather information about their pricing.  

Note down similarities and differences in pricing models, such as whether they offer discounts or promotions, bundle products, or have different pricing tiers. 

By starting here, you’ll then turn to answer these questions: 

• Are there areas where your product is significantly cheaper or more expensive
• Are there features or benefits that you offer that justify a higher price point?  
• Do your competitors work with partners to bundle solutions and services?
• Do partners and review sites publicize pricing?
• Do your competitors include pricing in their messaging? 
  

2. Generate Experiments 

Even with this information, you shouldn’t change all your pricing in a rush.  

Put to practice A/B testing and create customer cohorts to understand how your pricing adjustments could be seen. Run pricing interviews to gauge: 

• The attractiveness of pricing
• Where customers see value
• What more you could offer, and
• How the pricing affects their view of your brand  
  

These interviews should include the Van Westendrop Willingness to Pay questions, designed to get to what a customer will pay without even directly asking that:

1. At what price would this product be so expensive that you would not consider buying it?
2. At what price would it be just getting expensive, but you would still consider buying?
3. At what price would it be a bargain and a great deal for the price?
4. At what price would it be so cheap that you would be worried about the quality?

From there, look to adjust pricing based on these results and run controlled tests.

You can do that via email marketing, direct mail, sales pitches, and events.

Anywhere you can trial the new pricing with the customer segments you care for, do so. 

The biggest risk you take is not getting market validation. Run pricing experiments.

3. Create A Pricing Plan 

With the initial research done, you need to keep momentum. 

Momentum comes from thoroughness. Thoroughness comes from a plan. 

Have regular review sessions of your competitors’ pricing as part of a competitive intelligence strategy. 

Keep interviewing customers, create more hypotheses, attend events, and be consistent and persistent in nailing your pricing.  

Things to ask yourself, your customers, and of your competitors: 

• Has new technology changed our landscape and the value we offer?
• Are customers increasingly valuing certain features or benefits
• Has a competitor offered a similar product for free (loss leader)?
  It's important to get that balance between offering competitive prices and maintaining profitability. 
  

4. Monitor Pricing Over Time 

Consider pricing intelligence tools. These use algorithms and data analysis to identify pricing patterns, discounts, and promotional offers, which can guide your own pricing decisions. 

There are several pricing intelligence tools available, ranging from free options to more comprehensive paid services. Some tools allow you to track your competitors' prices in real time, while others provide historical pricing data and market trends.  

Choose a tool that suits your needs and budget and leverage its features to gather insights about your competitors' pricing strategies. 

Consistently monitor and keep the next four things in mind. 

Pricing Intelligence Tips

When conducting a competitive pricing analysis, start-ups should consider several key factors to ensure a comprehensive analysis. Here are some important factors to consider: 

1. Pricing Intelligence Tools: Leveraging SaaS pricing intelligence tools like PricingSaaS gives great insight into competitors' pricing strategies. These help identify pricing patterns, discounts, and promotional offers that can guide your start-ups' pricing decisions.
    
2. Pricing Surveys: Running frequent price surveys and comparing them to competitors' prices helps shape an understanding market dynamics. Gather data on pricing trends and customer preferences using SurveyMonkey to make stronger decisions about adjustments. 
   
   
3. Customer Feedback and Win/Loss Sales Data: Regularly monitoring and analyzing customer feedback and sales data is crucial. The data you get from win/loss interviews, or even from using a call recording and analysis tool like Gong, provides insights into how customers feel about pricing and what your competition is doing. 
    
4. Get A Mystery Shopper (But Don’t Be That Person): A mystery shopper is a process where you gain information on pricing, pitches, and discounts by having a prospect go through a sales cycle with a competitor. To avoid anti-trust laws, make sure that you have someone outside your business to do this. 

By using these tips, you’ll stay on top of competitive pricing to give you that little edge in the market. 

Getting Started With Pricing Analysis 

This competitive pricing process is designed for one thing – to get you started.

Head here to learn more about how you can improve your product marketing.

Stay tuned for more advice in our SaaS marketing for leader’s series of guides. And if you need help, you can talk to me anytime, here.