SaaS | 6 MIN READ

Pricing Objectives: What Are They? Which One Is Right for Your SaaS Business?

Picking the right pricing objective and an associated strategy is vital for the SaaS business. Which is the best pricing module that you should consider for your business? Unlock the answer here.

Simran Mohanty
Jul 16, 2021

Pricing-Objectives

Pricing Objectives

Though every SaaS company has different offerings for each of their customer segments, one thing that does not stay so different is the perfect pricing. Missing out on the right pricing objective that suits your product range will not just be detrimental for your business but also uncalled for. Are you leaving behind huge revenues on the table? Could you have made more profit? Did you lose substantial customers because of high pricing? What went wrong?

While nailing the right pricing objectives and strategies is critical to every SaaS business, you must know which is ‘the one’ for you and which isn’t. If that is what you have been wondering off-late, this blog will add some solace to that racking brain. Without any further delay, let us get to the point straight.

What are Pricing Objectives?

Pricing objectives are the preliminary goals and underlying framework your business sets to guide how you ultimately price a product or service. Before you pin an ideal price point for your products, you must know what is the right price. Simply put, without a well-defined pricing objective, you throw out the price to the water and see what floats and what sinks. Doesn’t sound like a strategy, right?

Relying upon and analyzing a couple of external factors such as business goals, maturity of the firm, timing, market stance and rank, budget accommodation and niche will help you determine what is your right pricing objective. In fact, according to a report by Prisync, about 27% of the customers say that pricing is the first factor that determines their purchase decision. Here, we will talk about some of the most sensible pricing objectives that you can deploy for your SaaS business.

Factors driving purchase decisions
Source: Prisync

Why Should You Prioritize Pricing Objectives?

  • Planning is essential: Let’s put the question this way, why should you not prioritize pricing objectives? Especially when you have decided to put your toes in a business, you might as well wear the planning hat. Know what goals you are trying to get with your business before you pin your pricing strategy.
  • Guides your Decisions: Only certain pricing strategies tend to work in your favor when you have a specific pricing objective in place. Should your price your products above the average industry standards or should you slash it a bit? But, will slashing reduce your profit bar? Do the math.
  • Makes Pricing Strategies more in line: With an already prioritized pricing objective, you tend to streamline your processes and know what prices are right on spot and which ones are not making the cut. Researching and studying your competitor’s pricing is also something that you should keep a tab on.

Types of Pricing Objectives

1. Profits Related Objectives

The pivotal objective here is to draw in as much as money possible for your company. Generally, a business’s pricing objectives are aimed at the following:

  • Maximum Current Profit: As mentioned, a company wants to set its price in a way that calls for profit. Companies try to pin a price that attracts more current profits.
  • Maximum ROI: A business sets its pricing policies in a way that eventually gets you more ROI, or Return on Investment. Say, for instance, a business wants to earn 10% return on a given investment of 3 crore dollars. Hence, it should set the price in such a manner that it can earn 30 lakh dollars.

2. Sales Related Objectives

Sales-related pricing objectives have two main objectives – one is boosting the market share and the other is enhancing volume.

  • Sales Growth: The growth in Sales has a positive influence on the profits. Therefore, the pricing decisions should be put up where sales volume can be raised.
  • Market Share: Market Share is the specified volume of sales that is ascertained by the total sales in a given industry. A business strives to maintain or achieve a certain market share.

3. Competition Related Objectives

One of the biggest factors that affect the performance of a market is the competition. The following competition-related objectives should be prioritized in a business:

  • To face up to the competition: It is a given that the market today faceless vying competition. Many companies use price as a powerful means to react to level and intensity of competition.
  • To Keep Competitors Away: The best way to keep competitors away is by pinning a relatively low price on the products. This way, the chances of a customer landing on your product is higher.
  • To Remove Competitors from the Market: Yet another crucial factor is preventing the entry of competitions. Keeping a low price at the initial stages of your presence will help to do so.

4. Customer Related Objectives

Customers are the backbone of your business. With the right pricing, you win their confidence and trust and ensure that they do not get duped.

  • Market Penetration: Penetrating into the market is easiest when your prices are relatively lower. This will allow you to instantly gain market share, cut down on the unit costs and create barriers to entry too.
  • Survival: This is the most fundamental aspect here. Your company may use a survival-based pricing objective when it’s willing to accept short-term losses for the sake of long-term viability.

Parting Thoughts

Choosing the right pricing objective and a relative strategy is critical for your SaaS business and you know it. This demands constant analysis, research, and study of your current market stance, your competitor’s pricing, budget, and a lot of other factors to reach a streamlined decision. At the end of the day, you just want to position your business and your product for the ultimate success of your customer. This will eventually help in bringing you more customer retention, give the churn rates a backseat, and lead to higher customer satisfaction – which is your pivotal goal.

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Originally Published July 16th, 2021, Updated July 19th, 2021

Simran Mohanty

Simran hails from the content marketing backdrop with extensive knowledge in blogs, articles, and technical whitepapers in the non-fictional domain. She uses her 'gift of the gab' to explore new possibilities on her way and to make an exquisite impact on her readers. In her spare time, she likes to read journals on artificial intelligence or play with her cute kittens.

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