How to price your product today | Running your saas business

Michael:

Hello, I’m Michael. He’s Abdul or back running your sass business how to price your product today. Today is June 19 2020. Things have changed a little bit in the world and Karachi. They have just went back down on lockdown for Coronavirus. So just kind of give you the United States is slowly opening up. So that’s kind of what state of the world is at. But we’re going to today that talk about that we’re going to talk about how to price your product and well, we don’t really know yet. We’re still trying to figure it out. And that’s kind of the benefit of walking through this as we build our business. You get to see, hey, we don’t necessarily know what we’re doing, right? We know what we’re doing on the platform side. We don’t know how to necessarily price it to get that you get those customers to come flock into your product. Right? Exactly. Good. And we did see that. I mean a lot during Coronavirus, we had a huge huge influx of business so we know it’s a great product we’re now just getting the word of mouth out at a price that people will want to sign up for the service. So what do you want to add to that? Uh, do anything we’re trying to figure out in regards to pricing obviously we don’t know it

Abdul:

right. But I think that was the reason why I chose this topic is because like this is a copy I think pricing for us also, I think we have been discussing it for the last year like on and off like the products that we are we currently have and then eventually for bionic as well. And I think we both have vague kind of sometimes very different viewpoints on pricing, but I think we all always kind of come to a conclusion. Okay, how do we like it’s perceived value because that’s the thing like pricing is tricky because you want to you want it to keep it low, like one part of you wants to keep it low so you can get more customers. The other part of you wants to keep it high because you can get a good margin. So I think there’s a lot of banding information out there are a few agencies that I found out that just specialize in pricing I didn’t even know in like five Yeah, that is there is a market for that but there seems to be because they are really and they’re charging really a lot just to help you price your product kind of your service or whatever. But I think for us I that’s the reason I just had this media plan because something that maybe when we discuss it right now, we might come up with a few things because it’s something that is actively being like we have kind of talked about it for a while, like okay, how we are pricing bionic and we do have some numbers, but i don’t i think that i have a feeling that they will change as we reach a launch time but so that’s why just having this discussion, recording it just for the because that’s the thing like that’s, I think what we said, we want to make this content where you know, it’s not a it’s not polished, it’s not like you’re not kind of Some sort of gurus with all sorts of fancy videos going on. That’s the main idea here. I think

Michael:

they can tell. Yeah, I have a hoodie on. And you got a bunch of like computers behind you. So yeah, definitely not well formed video.But hopefully well formed content. Right. So I think you know, you mentioned something that’s perceived value in our current prices, we can talk a little bit about that, right are our current pricing right now we have is everything’s included, except for edits, right? Everything’s included. We’re at $45 for one site up to five sites. And once you get over five sites, it drops to 35, then to 25 and 25. And up, it goes to 30. Right, that’s our current bulk pricing that we have, we’ve actually seen that work out pretty well for us because it’s much easier for us to work with one person that has hundred sites and give that type of pricing where if somebody has one or two sites, and they’re asking just as many questions as the hundred site person, obviously you can see the issues with that in regard to pricing and supporting those people. So I think the pricing on How it is right now with everything in is pretty good. Right? I think it’s a decent number I think the way we’re looking at the product is we’re kind of flipping it on its head right we’re saying hey you just want this it just cost this you all you want the support as well cost this oh you want the speed as well cost this so you can add those things on instead of having to have everything at once is kind of what we’re what we’re looking at there. So you want to talk a little bit about why you why you think the sweet mental spot is $30 and maybe we’ll have our video guy do like a $30 on there right as we say that right? And so what why do you think and we I know you’ve done some studies around this or seen some studies around it. Why $30 is sweet spot

Abdul:

and just add one point before going to that lead when I think when we discussed about pricing The first thing that we price it at $45 I was it very convinced at that time I think I also said that I thought it was too high because some kind of market I was coming from, like, the kind of the company that I was in before and the kind of market that I was coming from. Okay, this is like a lot this is like because in my mind, we had to constrain all these big players at like 30 ish level. And we were kind of going in at 45. But time proved me wrong, like, okay, we get to sell this product. And just one more thing on the point of like support. In my experience so far. And now that we have around 890 sites on our platform. I’ve seen one thing that people with like one or two sites, they take up more support time, then people add 200 websites now. It’s very competitive. I might be like, Okay, if one guy is taking one hour, the 200 sites guy might be taking five hours, but that time didn’t expand by one hour it switch he is taking more time in an absolute values, but not in ratios because and that’s I think that’s why bulk pricing always makes sense for businesses because the end If any of that if someone has 200 websites or even hundred websites for us, they have a team, right, they can get sort of one man show running the whole business, they have a team. So a lot of those issues that for a smaller agency, which has five sites, or 10 sites come to us, normally their teams solve that issues in house. So those that they cannot solve only come to us. So kind of there’s a very big difference in the ratio of support time at the peak. And that’s how, like for bulk pricing can make sense. And I think when you when they ask you about, like the $30, I have read a few studies about it, I’ve now maybe those studies are not very scientific, because like this is a very basic is not a very scientific kind of a thing, right, right now, not a lot of studies done on that. But I have, I think in my personal opinion Also, I’ve seen any file you have that you don’t use as many tools as I do. But still if if you had to count the tools that you use, I can assure you that any tools that that like $5 or $10 is either there like a Netflix kind of a tool that’s there for you. Entertainment, or something that you don’t need, right? Because, or it, there’s a tool that’s 100 or $200 a month. Now that tool, you really, you’re really using it because it’s really giving you value, right you, but I think the $30 point is where, okay, it’s not fun anymore. But it’s not something that you know, okay, it needs to give me a huge ROI on it. It’s a tool where you know, okay, I use this, I have, I’m paying $30 a month for it supports something, so I have to use it as well. Right? I cannot be wasting 30 I can have a tool sitting there for $5 a month. I don’t care if I’m you, I use it once a month. But if there’s something I’ve been $30 a month for, it’s something that I don’t want to use, it must be giving me some value that I want to pay for it. So one of the main things if you want to charge $3 your product should be good, right? It shouldn’t be bad. If your product is bad, then you will just have a lot of churn. But if you have if you’re charging somewhere around $30 and you have turned it center, 5% or 8% that So productors really giving value and customer stick to those products. Because whenever I’ve done a kind of, you know, like the number of tools that I subscribe to every now and then I go through like, Okay, I need to look reevaluate if I’m using the right tools, and the tools that are like hundred ish dollars, those are the first ones to go with, I even feel that I’m not getting some value, or the ones that are low, which are like entertainment tools that I don’t even think I need. I rarely look at the tools that I have this $30 price point, right, because they are giving me some value to still be there. Right, like superhuman, like one tool that I use is at $30 that’s just an email client, but because it gives me so much value, I still have it and I haven’t thought about it yet. Okay, do I need it? Do I don’t need it. Like what tools are like $10 $15 either. They’re this stuff that is like, like, I recently got a gaming keyboard and a gaming PC. So I’m caught into a few subscriptions, which I have not played for yet, right. So I know that they will be going away. Anytime, but if it if because those subscription of like $10 $8 I took them and and get get rid of them as well, if they were $30 a month, or $25 a month or $35 a month, I would have put more thought into the whole process 20 to really get it. And once you put more thought into it, you do have some reason to get. And even if you think about like what type of tools you use, I think you might see that pattern.

Michael:

Yeah, I think that’s true. And I think there’s also a huge part of it is devalue as well. Yeah. I mean, the value you’re getting from the tool, like we talked about one tool that we’ve used grid pain, and the value of that one, it’s $30. Right, that’s a great value, right? You can load up as many sites as you want on their platform for $30. That’s pretty amazing. Right? I won’t be surprised if they change their pricing model. So there you go. So it’s a you know, it is it is a it’s you know, it’s the value versus money equation all the time that people We will talk about So speaking of cost and pricing, right. So obviously you have your pricing, which is going to drive your top line revenue. And then you have your costs which is going to affect your bottom line revenue. Right? So the thing was, there’s different types of costs, right? There’s obviously hard costs. There’s things like servers or office space, or whatever it might be that you write using tools. Correct? Yep. And then there’s soft costs, which are people, mostly people and then like other accounting, like maybe people that help you do work, legal people. I mean, usually people are falling into the soft costs of, of development and, and as you grow, I think my eyes really opened up as we built a chart that showed, hey, this is our revenue. This is our expenses. Unfortunately, our expenses are above our revenue right now. And as they finally cross, you know, but the problem is is right revenues, or expenses don’t just stay flat with with the way we’re building our platform, we’re growing, we’re growing our revenue, but then expenses are growing with them. Because of the soft costs, we’re having to add more support people. And as we look out, you know, five or six months from now, right? we kind of talked about that earlier today. And being those moves in what its gonna look like in a duel sad experience where support kind of blew up in his face, right? So we want to try to be in front of that, and finding the support people and hiring those people, but not too early, but not too late. Right? You got to hire them in the right time. So soft costs, why don’t you spend a little time

Abdul:

to give me your thoughts on that as well? No, I think that’s very important. And I just give us like one example that we had to face like, if you remember Michael Lang when we were talking about this, I think in February, somewhere on February bionic, make the budgets that we want to put in the people that we want to put in. We were putting in salaries, but we weren’t accounting for the office costs, the insurance, the legal kind of the taxation that would come with it. So like When when we kind of made that it just like pushed our costs from like I think it added 20 or 35% script to a cost okay we are planning for this but it will pay 45% extra just to accommodate all the other kind of things that would come in so I think these are the things that like you have to be careful for because they just add up and like with our platform as well like you said like costs keep increasing because Apple add more people or servers increase local hard costs increasing soft costs water increasing, but the problem with hard costs are that you can calculate them like that’s a good thing with hard costs. Okay, you can okay you can predict them with soft costs there are so many things that come in okay like a like in office if you are in an office, things like computers like you like you know the diva thing that when you when you’re thinking about a business you don’t think about them that much. You just say okay, I need to like work if I need servers. I need these tools. I need people. Okay, but people need a dark place to sit and people need computers to work on people need insurance people need those government mandated taxation and eat snacks. Yeah, they need tea they need. So all those things you’re not thinking of when you’re thinking of the like at the start, but as you get into it, you get it. Okay, there are these things that have to come in as well. So there. So that’s the thing, like, and I think that again, because that also jumps into the $30 kind of a thing that if you have a decent product, which doesn’t have a lot of like, it’s not an enterprise level product or something that has a huge kind of costlier around it. But if it’s a normal, like an individual or a b2b, small b2b, SMB business, the $30 price point is enough to kind of, I think, give you a decent margin to kind of, I think, because that’s why you see that pricing point used a lot by SAS companies, the $30 price tag, it’s 25 and 35 3035. Because that gives you a little bit of, you know, enough margin to kind of cover all these costs and still make a decent margin on that.

Michael:

Yeah. Well, we’ll figure that out. And we’ll talk about that. I’m not sure what we’re talking about our margins at the end of the day, but well, you know, It’s part of all the things you have to think about when you’re building a company to your point, it’s, hey, you can have an idea of, hey, this, I need some, I need some pewters. I need some people, but you have to really dive in to get those real costs. And that’s what we’re seeing now is more expensive than we originally thought of our goal of expenses was roughly 10 to 12 grand. And it’s now significantly more than that, which we’ll probably have to review. I think that I think that was more of a 

Abdul:

kind of comedic kind of how we understood it, because we’ll talk about that, but I think it was, like we both were talking about different kinds of things when we talked about that. But yeah, I was talking about the real budget. You were talking about not the real budget. I was talking about kind of the amount that we have to put in kind of a thing, right. So that but that’s the thing, like we both didn’t know, Megan, once we start like kind of getting into it. The okay this is also something we have to do. This is also something we have to do okay. We have to Take care of this as well. And I’m sure that as we grow, the things will just keep going, we’ll just like because the bigger the company gets, the more people you get, the bigger some legal expenses get,

Michael:

right, the bigger the infrastructure in general, right? You have to have a full time HR team, you have to do all these different things as a kind of gross. But the last thing we’ll talk about is competition. Right? And, you know, there’s a lot of times at least in the SEO world, in the agency world, I feel like there is a race to the bottom of the pricing, right. And now it’s kind of bounced back a little bit off of that. People are like, no, this is our price. This is what you get. This is why it’s better than the $99 a month person, right? And I think that’s similar here with hosting, right? Everyone thinks Oh, hosting $2 $2 and 95 cents from Bluehost or 292 95, from whomever else right, and you gotta make sure what you’re offering is the cliche apples to apples, right? We’re not comparing apples to oranges. We have apples to apples.compare us against a similar product. And then even inside of that look at see if those features are the same or are they not? Right? You know, perfect examples can sta and the PHP workers, right and, and things like that, right? Like they only give so many versus somebody that costs maybe a little bit more that’ll give you more to get that work done. Or it’s in the details that you have to go and look at those things. So, you know, the race to the bottom, just got to be careful with that. And obviously got to maintain your margins, right, you got to, as you see these costs increase, you have to make sure your margins are still there as you build the product. And that’s something we’ll constantly after review, right as we add more engineers or as we add more support people or salespeople or whatever, not revenue producing people, right, like we have to look at what that looks like.

Abdul:

So anything you want to add, I think it’s a continuous kind of something you have to monitor right, because they I think we have already discussed with the way early stages of the company, but we’ve already discussed the modules that we have to look at the per site costs that we have to Because these are like as important are your acquisition numbers of how many customers you’re getting? These numbers are as important, right or even more important if you want to have a sustainable business, right, where you have to make sure where your costs are, where your margins, the ratios are, how these things are changing, depending on your pricing or your customers. Because every, especially for a small company, even like a one customer, big customer that comes in can change the whole scenario of your pricing that it changes, a lot of ratios in there are things you have to monitor. And I think they should be KPIs. Not many people monitor them. But I think this should be like in the board, wherever you monitoring your kind of KPIs of acquisition, these numbers should be there and should be monitored of how these costs are going, how these issues are going.

Michael:

And that’s what we look at. I look at it every day, right? What’s the sales that we’ve made from the day before, dual upstate updates the expensive side of things and we’ve kind of see where that lays out how comes together. So a lot to digest, you know how to price your product. It’s a great, great topic. I think. You know, love to hear people’s feedback comments below. We’ll definitely try to jump in and add our comments to your comments. Right. And, yeah, just how to price your product from your sass business. That’s what we covered today. He’s a dual. I’m Michael. Have a great day.

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