No company—no matter how massive—can escape the consequences of bad pricing. The early 1990s saw the stumbles of giants like General Motors and IBM. In response, business management authority Peter Drucker published a diatribe in the WSJ on “the five deadly business sins—avoidable mistakes that will harm even the mightiest business.” Three out of Drucker's five deadly sins were related to pricing, meaning bad pricing is both treacherous and ubiquitous. One of Drucker's sins is the practice of cost-driven pricing. Instead, he proposes what he calls “price-based costing”: "The only sound way ..read more

A great subscription pricing strategy is built on the balance of revenue, retention, and growth. Shift focus too far into any category, and the others will suffer. So how do you make sure your prices strike this balance? By knowing how much your customers are willing to pay for your service. More goes into pulling this off than you might think. Creating a balanced strategy is dependent on a clear understanding of what affects willingness to pay and how to go about calculating it. What is willingness to pay? Willingness to pay (WTP) is the maximum amount a customer is willing to pay for your pr ..read more

The California DMV is outsmarting most subscription companies... ...at least when it comes to their annual renewal strategy. The DMV sends out reminders for car licensing renewals in August for licenses set to expire in December.    This simple preemptive churn prevention strategy gives drivers plenty of time to update their payment info and guarantees predictable cash flow for the state. It's not sophisticated, but it's leagues ahead of what most subscription companies are doing today. What the good folks at the DMV know is that long term revenue stability requir ..read more

The feeling of cash in hand after a successful sales period is as exciting as it is potentially ruinous for your company. Don't forget the difference between cash in hand and real revenue. Just because you possess revenue does not mean it has yet been “earned.” This discrepancy is particularly common to SaaS subscription companies, who receive payment from customers in advance of the delivery of a service. When a good or service is not fulfilled at the point of purchase, the money you've received for it is not real revenue, but “deferred revenue.” And understanding deferred revenue will pay di ..read more

How do you set your subscription pricing? You might look at your competitors' prices and set yours similarly. Perhaps you're working out your costs and adding a little margin. Maybe you're just going with your gut. All these approaches can work — but all of them leave money on the table. The most profitable pricing strategies put customer value front and center, are driven by data, and match your customers' purchasing and usage habits. And they're certainly not pulled out of thin air. So, let's find out how you can maximize monetization and retention for your recurring revenue business. We'll ..read more

Salesforce is the OG SaaS company. With an 18.1% CRM market share, it dominates the space, way ahead of massive companies like Microsoft, Oracle, and SAP. Its growing revenue, set at $8.39 billion in 2017, has allowed it to hoover up other companies such as Heroku (2010), RelateIQ (2014), Demandware (2016), and Quip (2016). Yet, its pricing page is terrible.       *****We will only be posting a few of these episodes on the blog, which means if you want to be a part of this series you must subscribe separately below**** In this episode of Pricing Page Teardo ..read more

Being strategic with your pricing is one of the surest ways to boost your company’s sales growth. Lowering your prices just the right amount gives you a better shot at market penetration and at being competitive in a tightly contested field. However, there is a point when such competitive pricing becomes problematic—when it becomes predatory pricing. It can be hard to distinguish fair, competitive pricing from illegal predatory pricing. Read on to find out where the boundaries lay and to ensure that your company is remaining legally competitive with its pricing. What is predatory pricing ..read more

When you’re running your SaaS business, dealing with a huge glossary of financial terms daily, it’s to be expected that you might occasionally get two terms with similar meanings mixed up. You might confuse your deferred revenue with your fulfilled revenue or with your backlog, for instance. They’re easy mistakes to make, but they can have serious unintended consequences for your business. The difference between revenue expenditures and capital expenditures is another example of two similar terms that are easily mixed up. Understanding how each should be tracked can mean big savings over tim ..read more

Bloomberg’s online subscription created quite the kerfuffle when it was released, sporting a much higher price point than the majority of the competition. As a titan in the financial media market, their digital-first mindset puts pressure on The Wall Street Journal to reevaluate their pricing strategy in order to keep up.   We’ve taken a look at the financial media space before, pitting The Wall Street Journal against The Financial Times, so now that Bloomberg has its hat in the game, we decided to dig in again. This episode focuses on how willingness to pay and re ..read more

The quilting and knitting industries are a lot bigger than you think, which is why we’re going to do something a little bit different in this episode and take a look at how someone might go about capitalizing on these industries. While services like Quilty Box and YarnYAY! exist already, there’s a huge opportunity for additional subscription box services, and we’ll show you why.   In this episode, Peter and I talk through willingness to pay data and feature preference, as well as some top-level stats that are sure to surprise you. It shows just how important it is ..read more