How we de-risked our SaaS pricing strategy | Front

The pain point that every single B2B company shares is pricing.

Countless philosophies flood the web on how to price your product (just see here, here, and here). More than 500 pricing products and services are offered in the tech space. All of this points to the fact that, when it comes to pricing, most people don’t know what they’re doing.

For a long time, neither did we.

Pricing is inherently risky because your revenue depends on getting it right. Yet there isn’t one de facto strategy that works. Mailchimp has had great success with their freemium pricing plan, which businesses can stay on forever. While CampaignMonitor—a functionally similar tool—has no free tier and scales their pricing according to email volume along with features.

We learned the hard way that there’s no silver bullet for pricing. More importantly, we found a way to constantly improve our pricing: here’s how we de-risked our pricing strategy.

Our secret weapon

It was after a chat with the team at Intercom about eight months ago that we realized the obvious: iterating on pricing more frequently would give us more data on what works and what doesn’t. So instead of changing prices once a year, we decided to get experimental.

We set aside three weeks for our developers to make some internal adjustments to make pricing changes easier. We needed our software to give us the flexibility to experiment quickly and often. Naturally it cost us resources up front, but the investment was well worth it.

We went from iterating once a year to once every three weeks. Now when we make changes, we compare the new cohort to the previous ones: if the cohorts behave similarly or the new one is even better, we stick with the new pricing plan. If not, we just roll back to a pricing structure that’s worked well previously.

The best part about the experimental approach is that it’s safe. Because we test on small cohorts, there are fewer repercussions for totally screwing up. So instead of making big, infrequent jumps in our pricing, we evolve our pricing little by little at a steady cadence.

With every iteration, we have a better sense of how our customers value our product. Our experiments are also what led us to discover that even enterprise clients want to see a number on our pricing page:

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How we de-risked our SaaS pricing strategy | Front.