So recently we had a SaaS buying experience that led to a No that is very common but many don’t realize is there, or at least is there that much:
A SaaS Pricing Gap
We went to buy Riverside, a podcasting tool, after years of being on Zoom. We wanted to move to Riverside, it’s the gold standard, but we needed to gain confidence it would work for us 100%. Plus, we already paid for Zoom. So there was no incremental cost for using it for our podcast.
We started off on the Paid single seat version at $15, and quickly upgraded to Pro at $24. So far, so good.
Then we wanted to have 2 accounts, and that’s where it went off the rails. At least for us.
2 seats is $500/month.
Now you can see what happened. Of course, we could just buy 2 individual seats for $24/month each. It to have them linked we needed to go to a Business plan at $500/month, prepaid, so $6000 up front.
We passed. (At least for a while, until later we found out a way to use just 2 seats linked).
But we certainly would have bought multiple seats at a price in-between $29 and $500 a month. Does it matter to them they lost the account, at least at first? It might not have mattered to the sales team. But did they know they lost the customer due to this pricing gap?
I bet they never knew.
Now the reason for a “Pricing Gap” is almost always the pricing where you “Contact Sales”.
$5,000 a year is about the minimum most sales teams want to engage. In fact, your sales team may inadvertently create your “pricing gap” by pushing you to focus your “Business” edition on one they can profitably sell. I get it and have lived it.
But is the gap worth it? The lost sales in between self-serve and Contact Me / Sales?
Maybe. Just be aware of it. This is especially common in developer-focused products. The basic versions are often Free, and then the limited usage is often dirt cheap. But then as you scale, many APIs start to get a lot more expensive. Not always in per API call used, but in the aggregate. So many developer-focused apps have a Pricing Gap, and figured out how to close it as a big deal.
I remember back in the day I was the first U.S. investor in Algolia, a search API at $200m+ ARR. The basic versions was incredibly cheap, and then there was as real pricing gap between the Enterprise version and the basic usage. When they finally closed it with an edition in between, revenue went up about 15%. At least for a while.
Just understand if you have a Pricing Gap, and do a little investigation. What if you filled it? Even a 5% revenue boost could be a big deal.
