In the world of enterprise B2B SaaS, pricing is not just about assigning a number to your product. It's a strategic dance that involves understanding and balancing customer needs, market dynamics, product-market fit, product value, and your own long-term business goals. A strong pricing strategy can help you better target prospects, close faster and at higher annual contract value, and make your company more attractive to potential investors, strategic partners, and customers.
In this blog post, we'll delve into all the intricacies of enterprise B2B SaaS pricing in 2024 and explore how to develop effective pricing strategies that can set your company up for sustainable success and a stronger future.
Understanding enterprise B2B SaaS pricing
Enterprise B2B SaaS pricing is often complex, due to the diverse needs and sizes of enterprise customers. Unlike consumer SaaS products, which may have more straightforward pricing tiers, enterprise pricing typically involves customizing plans to meet unique customer needs and requirements.
For small SaaS startups that have not yet reached profitability, a pricing strategy may hinge on whatever will bring cash to the table. Cash on hand allows companies to focus on growth and product product development while also pursuing alternative or supplemental forms of funding, such as VC, venture debt, equity funding, or scalable lending solutions based on ARR.
For B2B SaaS companies operating on an enterprise scale, pricing strategy can look very different. At the enterprise level, operational and product development costs are typically larger, but more stable than earlier-stage companies. At the same time, customer needs and requirements can encompass a wider range, requiring more time at closing to develop a custom deal.
In today’s competitive market environment, a solid pricing strategy is key. Below, we’ll break down a few of the most common and effective enterprise SaaS pricing strategies to help you learn more about the pricing strategy that could work best for you and your company.
Value-based pricing
This approach ties pricing to the value your software delivers to the customer. It involves understanding the specific pain points your software solves for each enterprise customer and pricing accordingly. If you’ve developed a strong product-market fit, value-based pricing is a solid choice, as your target customer and your product should be a nearly inevitable pair. Value-based pricing is best suited for B2B SaaS companies that feel rock-solid about their target customer and sales sequence.
Usage-based pricing
Some enterprise SaaS products charge based on usage metrics, such as the number of users, transactions, or data volume. This model aligns pricing with actual usage, providing flexibility to customers. This option can be attractive to buyers who are looking to pay only for what they use, and allows for flexibility if your customer doesn’t need or want the full range of features that your product can provide. This option could help you capture customers that aren’t the ideal target customer on paper.
Tiered pricing
Offering different pricing tiers with varying features and capabilities allows enterprises to choose a plan that aligns with their needs and budget. This approach caters to more diverse customer segments, and gives you the potential to grow alongside your customers as their companies scale. With this model, it can be tricky to determine what to include in each pricing tier, as you want to offer legitimate value at every pricing tier while also keeping key features limited to higher tiers as an incentive to upgrade.
Pricing based on contract length
Long-term deals are often pushed through with the assistance of discounts or the inclusion of additional benefits, encouraging customer loyalty and providing more revenue predictability for the seller. The downside to this pricing strategy is that discounts pile up: the average SaaS discount last year was 17%, which makes a major impact on the bottom line over time. Additionally, relying on discounts can cause your customers to under-value your product in the long-term, leading to customer acquisition costs and sales cycle length that are difficult to financially justify.
Pilot programs
A less common strategy is to offer pilot programs or trials to enterprise customers, allowing them to experience the value of your software firsthand before committing to a long-term contract. You can use this opportunity to gather feedback and adjust pricing accordingly.
Transparent pricing
Another strategy element that can be applied across enterprise SaaS pricing structures is to be transparent about your pricing structure. Especially if customers are uncertain about whether or not your product provides enough value to them, transparency can help give customers peace of mind and more clarity around what makes your product cost the amount that it does. Transparent pricing should be clear, straightforward, and avoid hidden fees or unnecessarily complex pricing structures that can deter potential customers and bog down the closing process.
Dynamic pricing
Suitable for some industries, but not all, dynamic pricing changes based on demand, competition, and customer behavior over time. A dynamic pricing model works well for industries that also tend to change dynamically in relatively short periods of time, ensuring that your product and your customers are aligned as the industry shifts. Dynamic pricing does, however, require a team that’s constantly monitoring trends and other key industry metrics to ensure that your pricing model is always in alignment with market trends and buyer needs.
Buy-now-pay-later pricing
Offering your customers the option to pay for an annual contract in installments can reduce your need to rely on SaaS discounts when closing a deal. Buy-now-pay-later solutions like Capchase Pay allow you to level the playing field between buyer and seller by meeting buyers where they’re at, regardless of budget constraints. Too often, potential customers have a need and see the value in your product, but simply can’t spare the cash to pay for a 12-month (or longer!) contract upfront. Capchase Pay allows you to offer flexible payment terms to your customers so they can pay at a more manageable rate.
To ensure that you also have the cash you need, Capchase pays you the full contract value upfront, so you have the funds you need to cover operational costs, product development, and marketing. On the back end, Capchase manages collections from your customer on your behalf, freeing up time for your team to focus on more important tasks.
Invest in Customer Success
We believe that the future of enterprise B2B SaaS sales lies in a strong Customer Success and Sales partnership. Previously, Sales managed prospecting, pitching, and closing, with Customer Success coming on the scene to maintain the customer relationship once the ink was dry.
In today’s increasingly-competitive and saturated market, we’re seeing longer sales cycles, lower customer lifetime value, and higher churn. With that in mind, it’s essential to have a strong Customer Success presence throughout the customer journey, which doesn’t begin at signing – it begins long before that.
We’re seeing successful B2B SaaS companies put resources behind empowering their Customer Success teams to build personal relationships that make customers feel heard, valued, and supported from their first product demo to their first contract renewal and beyond. In an increasingly-automated world, customers look for personal connection and a bespoke touch that goes farther than an integrated e-signature. We love and champion automation and cross-platform integrations, but we also know that personal connections are key when it comes to pushing deals through, establishing a trusting relationship with the customer, and encouraging customers to renew, upsell, and refer in the future.
A small investment in Customer Success could lead to major returns, and is an under-appreciated, out-of-the-box B2B SaaS pricing strategy that can make a world of difference.
Conclusion
Enterprise B2B SaaS pricing is a strategic endeavor that requires a deep understanding of customer needs, market dynamics, and pricing models. The enterprise SaaS pricing strategies we’ve outlined today work for the majority of companies when applied in different combinations. Pricing strategy also heavily depends on your industry niche and long-term goals. The bottom line is that your enterprise SaaS pricing strategy must align with your product-market fit, target customer persona, and your operational and product development costs. It’s a delicate balance that, when found, will help propel your company into the future, attract potential strategic partners and investors, and secure a more sustainable path ahead.
At Capchase, we analyze data from hundreds of companies that we work with as part of our Capchase Grow underwriting process, and our takeaways from that data show that now, more than ever, B2B SaaS companies need cash on hand to power growth. It’s why we created Capchase Pay – so you can meet your customers where they are. Capchase Pay empowers you to close faster and higher by offering your customers flexible payment terms that don’t require your company to sacrifice its own financial health: we’ll pay you full ACV upfront so you can focus on what you do best: building the future of your B2B SaaS product.
