Santy again here. I'm learning a lot in this community and am thankful for that.
Today my question has to do on how do you pick a price point for a SaaS product?
One heuristic I came up with is how much would I pay for sth like what I'm building, but I'm not sure it's the best one.
I studied economics in college and remember we talked about demand curves and so on, and always wondered what would the optimal price be to maximize profits. It's a theoric exercise but it seems it's not how it's done in real life (though it definitely would be cool if we could do that).
Anyway, I appreciate any answers and thanks for the help.
Santy
Don't forget the vig that the app stores and payment processors take (anywhere from 2-5% depending on the whims and fancies of the companies involved as well as the credit card the consumer used, if you take credit cards).
Don't forget compliance costs, e.g. if your service has to access another service's data in the cloud they may demand SOC 2 certification or some other certification.
No, you're not going to be able to accurately identify each and every cent / yen / euro of cost but you need to identify as much as possible and then set your price as some multiple so that you can eat moderate fluctuations in costs or revenue or items you missed and hopefully have a decent profit.
I think too many SaaS's underestimate the basket of costs involved in providing their probably perfect useful, viable service and attract a decent customer set (or they use investor funds to subsidize the cost of service). Then when they actually have a sense of how much money they're losing per month or per transaction they radically change the cost structure with too short a timeframe for customers to adapt. The larger the customer, the longer it will take to absorb a change to expenses. Doesn’t matter whether they can afford it or not, what matters is how the increased usage fee intersects with the customers annual or biannual budgeting process.
Just my opinion, I mostly walk a dog now.