"What's With Your Pricing?"

The common practice for pricing a SaaS is usually 3 tiers, often referred to as “good, better, best.”

Start with a low priced offer (or freemium), then a mid tier price, followed by a premium price. Virtually every competitor has this in place:

Free trial/freemium plan
$9-$29 plan
$49-99 plan

I decided to do something different and only offer two plans: free and paid.

The free plan is free forever, with no limitations on number of forms or submissions.

The paid plan is a flat $99 a month which includes everything in the free plan, plus some extra capabilities and features.

Why only two plans? And isn’t $99 too high?

Let me address both questions.

I’ll start with why only two plans:

Less confusion. Adding more options for prospects to contemplate and calculate doesn’t help them make a decision, and makes my job harder when I have to deal with upgrade questions and concerns later on; not to mention answering questions about what plan is “best” for them at whatever stage they are at.
Less guessing. I don’t really know what features are being used the most, nor can I anticipate what users really value in the paid plans. So there’s no point in trying to guess what feature makes it is worth upgrading for. Until I have that data, I’m shooting in the dark with an extra pricing tier that is not likely to increase revenue or adoption.

With regards to the $99 price tag:

Perceived value. Something being offered for $99 is seen to be much more valuable than a similar product at $29, even if they look (or are) identical. We can observe this with apparel brands such as Nike and New Balance who offer similar quality products for vastly different prices. And yet, Nike is perceived as the higher quality item and thus it will be purchased more often.

Higher quality customers. Users who are looking for a deal are often a headache to deal with. They demand refunds, open more support tickets, and haggle every step of the way during the buying cycle. It’s not a pleasant experience and is in stark contrast to the users who are willing to pay a larger amount and never complain. They are a higher quality of customer, and the only kind I want to deal with.

Sustainability. Let's be realistic: 99% of users are going to only ever use the free plan and never upgrade. That’s a huge strain on the server and database costs. It needs to be subsidized somehow, and charging $19 just isn’t going to cut it.

Stronger affiliates. Most SaaS organizations offer an affiliate program, but they often don’t make the offer as attractive as it can be. They (typically) only offer 30% commissions, which is standard, but not ideal. Compare that against our affiliate offer of $90 per sign up. We can offer $90 because our plan is $99, whereas the competition can’t come close to that number. If we do the math (30% of their $29/month plan) they only pay affiliates $9 per signup. In other words, we offer 10x the payout of everyone else. Who are all the affiliates going to promote more aggressively: A product with a $9 payout, or one with a $90 payout? It will also make us the “winner” in every roundup or comparison table by default. If every SaaS paid the exact same commission, perhaps the affiliate will mix up the results...but when there is such a large divide in compensation, it’s obvious who’s coming out on top every single time.

Risk minimization. If it turns out the $99 price tag was a mistake, it's no big deal. I can just lower it. But, if I made a mistake in the other direction (I priced it way too low) I can't just increase the price on consumers in the same way. There will be outrage, cancellations, bad reviews and overall a negative sentiment toward the brand for a very long time to come. In one sentence: It's a lot easier to decrease prices than to increase them. If that's true, then I want to err on the right side.

Pricing optimization. This may be surprising to some, but businesses don't really care about the difference between paying $69 or $99. That extra $30 for a solo entrepreneur with variable costs, however, could be the difference between staying alive or going under. That doesn't mean going crazy and charging $500/month for your app, rather, pricing it as high as possible without a shift in perception. Also, many companies have a "threshold" where if a business expense exceeds a certain amount, it would require written approval of some sort. Sometimes that number is anything above $100. Keeping it at $99 ensures organizations can upgrade immediately without further authorization. Pricing it this way without triggering any checks is just common sense, in my opinion.

So, that’s my reasoning. I could be wrong. And I could change my mind in the future. But for now, I think I’ve made the right choice and have the logic behind me to prove it.

We’ll see how the market responds.

— Sebastian