The Most Reliable Growth Hack for SaaS

Growing a business requires countless small-wins that add up to some very big victories.

But there is one change that REALLY moves that needle.

It doesn’t just move the needle, it crushes it.

And what might that one little change be?

Your price.

Double it.

That’s right, double your price.

You see, we have a nasty habit of undervaluing our services. This is especially true for first-time SaaS entrepreneurs. Most of us are down-right SCARED to price our product. Who am I to ask for so much? And if I ask for less, I’ll get more customers!

So you end up pricing your product at $10/month.

Wrong, wrong, wrong, so completely and utterly wrong.

If you haven’t tested different prices yet, the odds are incredibly high that you’ve under-priced your services. This isn’t just hurting you, it’s also hurting your customers.

You’re doing your customers a disservice if you don’t charge them enough. Yup, you’re hurting your customers. Why? Two reasons.

1) Reason Numero Uno

With lower margins, you’ll have less cash to invest back into the business. This means a worse product, worse service, and customers that don’t receive as many benefits from you as they could. There is absolutely nothing wrong with charging more especially if you pile that extra cash back into the business.

2) Reason Numero Dos

Different prices give you different customers. In general, the lower your price, the more demanding the customer.

Their are people out there that genuinely want to pay you what you’re worth. They have real problems and need real solutions. You want these customers, you love these customers. And they love you.

But you’ve also got a bunch of customers that will never appreciate what your product does for them. They complain, submit back-to-back support tickets all week long, and demoralize your team because they’ll never be happy. When you lower your price, you attract a LOT more of these customers. Which prevents your team from focusing on the customers that are actually a perfect fit for your business. This leaves everyone disappointed.

I know it’s scary. But here’s what you get when you double your price:

  • The single biggest increase in revenue you’ll ever see form one change.
  • Better customers.
  • More cash to invest in the business.

If these benefits don’t tickle your fancy, I don’t know what will.

Won’t you get fewer customers?

In most cases, your conversion rates won’t drop at all. And if they do, it’s by a marginal amount. The increase in revenue will more than make up for it.

What if it doesn’t go well and conversions plummet?

Then just reverse the change.

Don’t take my word for it though. Test the new price for a month and see how your signups and conversion rates change. It’s pretty easy to reverse the price change if things don’t turn out to be so rosy. Any customers you acquired that month would be more than happy to get moved to your old, cheaper plans.

When won’t this work?

If you’ve already raised your price a couple of times, you’ll want to be more careful. You’ll be much closer to your market sweet-spot and it won’t take much to push your prices too high.

This also depends on your company strategy. Your long-term vision might be to provide a great SaaS product for small businesses like Constant Contact and Intuit have. In this case, another jump might price yourself out of the market. So be careful.

But if you want to move up-market and go after bigger fish, raise your prices as high as you think your product can currently justify. Then raise them again when you improve your product. Race to the top my friend.

It’s also not a sure-win if you have lots of experience with pricing and/or your market. You’ll get a lot closer to the ideal price on day one.

Won’t people┬ánotice the new price and complain?

Nope. No one will notice.

As long as you grandfather all your old customers in and keep their subscription fees the same, not a single person will care. If someone does happen to notice, simply give them the lower price and call it a day.

Go double your price.

The potential rewards are huge and there’s very little risk. This is one of the few bets you can make that have a ton of upside with very little downside.

{ 4 comments… add one }

  • Cody March 26, 2014, 5:08 pm

    Or add a zero.

    I chatted with a consultant awhile back who said he could repeatedly grow the business of his clients by simply adding a zero to their prices. In a few cases, the conversion rates actually went up because the products were so badly underpriced. We often completely underestimate the value we’re creating for our customers.

    Reply
    • Lars Lofgren March 27, 2014, 3:45 pm

      Adding a zero works too. :)

      I’d raise it as high as you can while getting the rest of the team to support the test. Even if sales drop, you’ll have hard data on what the market won’t support.

      Reply
  • J.R. Sedivy April 7, 2014, 5:54 pm

    What you’re saying makes perfect sense and is consistent with my experience. Your lowest priced customers are often the largest pain points. Any experience if this same formula is applicable to other non-SaaS businesses such as physical consumer products?

    Reply
    • Lars Lofgren April 7, 2014, 7:31 pm

      The formula usually applies for anyone setting prices for thew first time regardless of industry. As long as you’re differentiating yourself effectively, you’ll have room to raise prices before the market pushes back.

      The main exceptions are when a certain market has been heavily anchored into a specific price range. Mobile apps for example have a really hard time going above $5 (even $2 can be a stretch).

      Reply

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