When, if at all, SaaS companies should be transparent about the pricing?

If you go through different SaaS websites, you will notice that some companies are transparent with their pricing, and some are not. There's no other way around it - you're either open about how much you charge for what features or hide the costs.

For instance, we have analyzed how it looks on the Polish market. In general, among 253 of the companies surveyed, 75% of them disclose their pricing.

Interestingly, ~6% of them do something evil: they have a "Pricing" page button, and if you click on it, there is no price disclosed. If you're to remember one thing from this article: don't ever do it. It's a false promise, which turns people off.

While the pricing transparency trends change, from moving away from it in 2018 (study) to getting more open in 2021 (Salesforce!), the general rule remains the same:

The more complicated your product is and the bigger your average ticket is, the more reasons you have to hide your pricing. The easier and straightforward your software is, the bigger are the advantages of being open about the features and their costs.

At the same time, some companies manage to get the ideal hybrid between transparency and closed pricing.

In this article, you will learn:

• When and why it's good to disclose the pricing
• Why some companies hide it
• Examples of transparent and non-transparent Software as a Service companies
  

Reasons behind showing prices

As mentioned in the beginning, the easier your tool is, the more transparent you should be about it. We can put it in other words: the lesser problem your product solves, the less you should engage with the potential client in the buying process.

Imagine you go to the market, and there are no prices on the products. If you had to ask the clerk about the cost of each grocery, you'd give up. In the same way, you want to buy uncomplicated day-to-day software products without doing any extra steps.

Transparent pricing then will be a strategy for all simple B2C and B2B products: data scrapers, grammar checkers, electronic signature tools, ad blockers, keyword finders. In the products' cost/complexity matrix, they land in the bottom-left corner.

Via our colleagues from Casbeg: https://casbeg.com/pl/blog/cennik-na-stronie-internetowej/

The transparent Pricing Model is key to self-service products that can scale without sales reps. If you sell through inbound primarily, and your tool allows for complete self-checkout, go with a more "e-commerce-like" approach.

‍Risks of disclosing the price of your software

The benefit of transparency is clear and undoubtful, but every great advantage comes with risks. The major one, in this case, is being benchmarkable. If you're open with your prices, your competition can copy you and make use of the work you've done as their competitive advantage.

What's more, your potential customers can easily compare your prices to similar tools. If another's company type of pricing fits them better, they won't hesitate to purchase something else.

Finally, you can anchor prices in the wrong way. Say you're fully transparent, and you started drawing the attention of enterprises. Once they see your plans, they have a specific pricing point they can refer to. Flat and visible fees can ground your negotiation position.

I believe, however, these risks are worth taking. Being benchmarkable forces you to think of your unique value on the market. If others copy it, then they don't have a pricing strategy. And if some clients choose your competition over you, it doesn't have to be a bad thing as long as you serve two different types of customers.

Frankly speaking, as Valueships, we regularly use it to benchmark our clients' price vs the market. It's a piece of free information you can get very quickly. I understand why someone would prefer not to have it on their website.

Lowering your negotiating position doesn't have to be a thing either. Suppose you clearly define the value difference you provide to end-users and enterprises. In that case, you can be transparent about the pricing for the first segment and invite enterprise clients to talk to you directly.

Many enterprise-level SaaS companies use this approach with great success, as you will see below.

Why do businesses hide their price?

Hiding prices is not the best strategy when selling common goods, but there are cases when it's highly beneficial. Mainly if your software targets enterprises, solves many business purposes, and aligns deeply with the company's processes.

ERP's (Enterprise Resource Planning systems) are a great example. This kind of software integrates with companies on many levels and in many ways. It's not always possible to put the costs of it in simple plans. There is a very long customer discovery process here, which doesn't end with one sales demo call.

Enterprise customers don't want to rush such decisions either. To ensure that the tool will cover their needs, they need to exchange a certain amount of knowledge with the product's team.

On top of it, many big-fish sales need an established relationship, and in most cases, this requires a human touch.

Non-disclosed pricing will work great with every SaaS product that solves complicated problems or targets a particular niche on the market.

Risks of non-transparent pricing

Just like disclosing your prices forces you to be aware of your niche and your product's value, being non-transparent makes you invest in the sales process. The bigger your account value is, the more sales support you need to serve big-fish businesses.

It means that the Customer Acquisition Cost raises, and you need to spend time and money on maintaining your sales team. Policies over sales commissions and product discounts become a solid part of your company too.

Hiding the pricing increases customer friction, lowers the acquisition potential and makes you maintain a sales team. At the same time, you can capture clients of more significant volume.