"Humans rarely choose things in absolute terms. We don't have an internal value meter that tells us how much things are worth. Rather, we focus on the relative advantage of one thing over another, and estimate value accordingly." Dan Ariely, Predictably Irrational
Many SaaS startups have one core product. One customer problem, one solution.
Logically then, you have one product to sell. You may have a couple of payment options, monthly vs yearly, but it's the same product. But humans aren't logical.
As Dan Ariely says, we crave comparison when considering a purchase. Your customer doesn't know whether your product is worth the price unless they have something to compare it to. Often, they want three comparisons.
If you don't provide three options, they'll look for comparisons elsewhere. Either they'll search for competitors to compare your product with or compare your price with their current solution to get the job done. For most SaaS businesses, the prospect is paying $0 to get the job done (think Excel), so you don't want that comparison.
You need to give them three options and provide them with the comparison they need to make their purchase and value assessment.
What can you throw in with an offer or take away to create a new product? Unless you're really early stage and merely have the bones of an MVP, you could strip out some features.
Even better, you could use the decoy effect, which looks something like this:
You sell a project management product. It comes with a calendar, to-do list, and team communication channel. You plan to sell this for $20 per month.
You could strip this out to its bare essentials, starting with a team to-do list. You price that at $15.
Next, for the decoy, you either price it slightly below the core product, or have them both the same price (maybe a promotion to create urgency). So, you take away the team communication channel.
From one product, you've now created three:
- Product A: $15 - Team to-do list
- Product B: $20 - Team calendar and to-do list
- Product C: $20 - Team communication channel, Calendar, and to-do list - Discounted price when you order before Sunday
Now the prospect has the three options they need to make a value comparison. Plus, you've incentivised them to buy now, and you've positioned your product to look like a good deal.
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