Dan Balcauski's Linkedin Analytics

B2B SaaS Pricing is having a moment. It seems like every day another article is published on Freemium or another pricing model “flavor of the month.” Many CEOs face the temptation to adopt a Freemium pricing model. This was the case during my business school internship over a decade ago. The CEO asked me to research if it was a good strategy. I explored the ins and outs of this pricing model and looked for characteristics of when it worked and when it didn’t. The truth? It turns out that it works far less often than the hype would lead you to believe. In fact, it’s almost always a bad idea, and most often, the better answer is to offer new users a 14-30 day free trial instead of a Freemium model. With a Freemium model, there’s a real chance that you’re going to impose a significant hidden tax on your development team for every new feature you develop, slowing you down. It also creates a perpetual illusion of free users who will never convert. How many more times do you want to have the conversation, “Just maybe one more ‘play’ into that group will make the difference.” It also prevents you from doing the actual work of driving prospects through a well-designed funnel and understanding if you’re creating real, sustainable value for your users. Finally, people who push the “Freemium rules” narrative will claim that it helps reduce your CAC. In reality, you are often just playing shell games with your Income Statement. The good news is that there’s a golden opportunity that every B2B SaaS company has right now to build a pricing model that their customers (and your investors) will love that won’t distract you with a mirage of “free growth.” Here are some things you can do TODAY to improve your pricing model: *Segment your market by the value your product provides. Focusing on the outcomes different customer segments are trying to achieve can give you the best chance to create packaging that reduces your CAC, decreases your sales cycle, and dominate your market. *Leverage pricing metrics that align with the value you provide to customers that help them grow with you. Net Revenue Retention growth, anyone? *Create, understand and communicate the differentiated value you provide to your customers over their next best alternative. Differentiated value and value communication are where the value-based pricing game is won. I’m passionate about helping businesses by optimizing their pricing models. Reach out anytime if you’re interested in discussing pricing models related to your business.