In a recent video titled "Your SaaS Pricing Strategy Must Evolve With Your Goals" from the Monetizely channel, pricing strategy experts discuss how SaaS monetization approaches must adapt throughout a product's lifecycle. The video breaks down how pricing objectives shift from early market entry to maturity and beyond, offering valuable insights for SaaS executives looking to optimize their pricing models at each stage.
The Early Stage: Prioritizing Traction Over Profit
When launching a new SaaS product, especially in a nascent category, the monetization strategy should focus primarily on market penetration rather than profitability. At this stage, simplicity is key.
"The goal is usually to get as much traction from the market as possible. Right, the number of users is much more important at that stage than profit margin," explains the speaker in the video.
A streamlined, single-SKU lineup is often sufficient for new products. This approach makes the offering easy to sell both online and through enterprise sales channels, removing friction from the purchasing decision.
Netflix provides an excellent case study for this approach:
"Netflix at the very beginning had just one option. It was $7.99 in the US and it was allowing you access to the full catalog of features," notes the presenter. "It's so cheap that basically nobody would say no to that. They were not profitable but that wasn't the goal, and they very quickly took over the world with their solution."
This strategy makes sense for early-stage SaaS products because:
- There aren't enough differentiating features to justify multiple packages
- The priority is user adoption rather than maximizing revenue per customer
- A single, affordable price point reduces barriers to entry
Growth Stage: Introducing Premium Differentiation
As your SaaS product gains traction and establishes a customer base, the pricing strategy naturally shifts. With rapid feature development comes opportunities for more sophisticated pricing structures.
"As we already have some customer base and we've kind of lifted the product off the ground, then a little bit more differentiation happens," the speaker explains. "New features being added at a very fast pace and that's when the product can afford to be a bit more premium."
During this phase, multi-tiered packaging becomes viable as you can segment features into different value categories:
- Table stakes features for entry-level plans
- Premium capabilities for higher-tier offerings
- Add-ons for specialized needs
This approach allows you to capture more value from customers willing to pay for advanced features while maintaining accessibility for the broader market.
Maturity Stage: Balancing Complexity and Competition
The maturity phase presents unique pricing challenges. Your product has likely developed a comprehensive feature set, but competition has also intensified as the category has grown.
"That is a very challenging time for monetization strategy or pricing strategy because the lineup is at risk of becoming too complex even for enterprise sales," warns the speaker. "There needs to be some conscious effort to simplify it."
At this stage, you need to balance several competing factors:
- Simplification: "All those bundling options and kind of maybe incorporating a few packages and merging them together are usually going to be the right idea."
- Competitive positioning: "Some competition fighting strategy needs to be designed which usually means introducing a low-cost option or a premium option to keep them at bay."
- Channel strategy: "We are selling the simple packages online, the more advanced offline. It's where it becomes difficult to make sure that it's flexible but also simple at the same time."
The pricing range typically expands at this point, with options spanning from basic, affordable packages to sophisticated enterprise offerings. This breadth allows you to address various market segments while defending against competitors attacking from both the low and high ends of the market.
Late Stage: Addressing Commoditization
The final phase the video addresses is what the speaker calls "shrinkage" – when core functionality becomes commoditized and adding new features no longer sustains revenue growth.
"The core functionality becomes commoditized where pumping new features might not really maintain the revenue growth," the speaker explains. "We might be selling or maintaining the same customer base and the same volume of subscriptions, but because the willingness to pay erodes slowly, then overall the revenue is not going to grow or even is going to go down."
The video cites DocuSign as an example of this challenge: "The fact of signing a document remotely was very premium, now the willingness to pay dwindled to zero even though it's still very valuable functionality… because of the very fierce competition."
The critical strategy shift at this stage is to:
- Develop adjacent products that can become new revenue centers
- Implement cross-selling strategies to move customers to these new offerings
- Use your established customer base as a pipeline for these new products
"The company needs to move the monetization focus to other adjacent products that are related and establish that cross-sell strategy," the speaker advises. "Cross-sell can be accomplished through a set of bundles or through marketing tools like feeding the new product funnel from the existing product."
Conclusion: Adaptive Pricing as a Competitive Advantage
The key takeaway from this insightful analysis is that SaaS pricing cannot remain static. As your product evolves through its lifecycle, your pricing strategy must adapt to changing market conditions, competitive landscapes, and business objectives.
An effective pricing approach that aligns with your current product stage can be a significant competitive advantage. By understanding where your product sits in its lifecycle and implementing the appropriate pricing strategy, you can maximize both customer acquisition and revenue potential throughout your SaaS journey.
For SaaS executives, regularly reassessing your pricing strategy should be a core business practice, ensuring it continues to serve your evolving goals from launch through maturity and beyond.