Your B2B SaaS Pricing Strategy

in the times of Coronavirus

April 6, 2020

Audrey Melnik

Co-founder


In today’s turbulent business environment, it’s crucial to retain as many customers and as much revenue as possible to see you through this pandemic. Many of your customers will be reconsidering their SaaS spending and determining whether they can afford to keep your tool as part of their stack or whether they can live without your product for now.

Companies are going to be much more brutal on this front as they weigh up cutting staff salaries vs cutting services. While this represents a challenge for every SaaS business, this can also present an opportunity to revisit your pricing and experiment with new models. Pricing is often ignored in light of other initiatives as a way of achieving revenue growth, but it can actually be hugely impactful and deserves much more attention when it comes to the goal of increase and retaining revenue.

Here are some opportunities to consider in boosting or retaining revenue:

1. Is your product needed more in these times?

If you have a product that is ideal for companies working remotely or helps companies to reduce costs or another need that is heightened during this time, then now is the time to present a special time-sensitive offer to acquire new customers. This offer could be a limited free period, much like what our client, 15Five has offered, which is a free plan for use up until June 15th. While this may not have a direct impact on your revenue straight away, it allows you to be included on various COVID-19 lists of relevant offers, expanding your exposure, and then once these companies have signed up and tried out your product, a portion of them will see enough value in it to become paying customers.

2. Special offer to customers likely to churn

If your product doesn’t fall into the above category of being of heightened need during this time, you need to play a more defensive strategy. As companies will be reviewing their spending over the next few weeks and months, it’s your job to retain as much of your existing customer base as possible. Any customers that choose to cancel due to the expense of your tool, will be that much harder to get back after this is all over.

So your job here is to leverage a segmentation strategy to determine which of your customers are most likely to churn and present them with a reduction or free use of your product for the next few months. That way, when this pandemic is over, you can just end the special free period and they are returned to being paying customers. If you’re not sure which of your customers are likely to churn, start with understanding the usage profile of each customer. The customers that have dropped off their usage or haven’t use the product in a while are perfect candidates for this churn retention strategy.

3. Adjust your pricing tiers

Adjusting your pricing tiers should not be done lightly. This will of course depend on the current pricing structure that you have now. But here is an example of a pricing plan that will cause you revenue churn during this coronavirus period. This is from Front’s pricing page.

In regular circumstances, this can be a perfectly adequate pricing strategy. But these are not regular circumstances. Many people are being laid off, or at the very least they’re being “stood down”. So pricing based on users has the potential towards contraction of your MRR because the fewer active staff members your customers have, the less they will be paying. Of course it will depend on exactly how your system is configured. If when users are removed, you have it set up to automatically reduce the number of users that are charged, then you may be in trouble. You will be less in danger if the customer has to request to reduce the number of users on their plan, but you won’t be totally out of the woods. So what is an alternative to this?

By implementing user bands into your pricing strategy, where one plan is for 1-5 users and another plan is for 6-10 users and so on, you’re protecting your revenue from incremental variations and also as a customer would need to request a shift to another plan to change the MRR rather than it changing automatically. Additionally, if you incorporate the right feature access on certain plans, it may be that the customer can’t downgrade even with the lower number of users because they need access to the feature on the plan they are on. Some finesse would be required in managing the plan migration but there are definitely ways to do so in an appropriate way.

4. Offer a special annual plan upgrade

To help offset some of your MRR reductions by vulnerable customers, now could be a great time to present a very special offer for your monthly customers to upgrade to an annual plan. It would need to be significantly lower than the current annual plan on offer and be presented as a special COVID-19 offer, but could be a great way to boost revenue to get your company through this period. Another option is to present a lifetime access deal and promoting it on various platforms that present lifetime offers.

So there are a few ideas for how to safeguard your revenue in these crazy times! If you’d like some further advice on pricing strategies and how to implement them, please get in touch!