Dear SaaStr: Is it a good idea to give the first customers of a new SaaS startup a discount to get them on board?

First, it is a good idea to give the first customers a fair price so that price isn’t an issue.

So you close them, get the reference account, get the learnings, and get off to the races. Time kills deals. Drama kills deals. Friction kills deals. In the early days especially, leads are so precious, the last thing you want to do is kill a deal.  This usually either means “identical” pricing, i.e. pricing your app the same as the rest, to remove friction — if it’s earned it.  Or pricing a smidge lower than the others, to respect the fact you may still be feature-poor compared to them, nothwithstanding your 10x Feature.  More here:

The 3 Types of Day 1 Pricing: Low End of Normal. Identical. And Anchor High.

Second, if your early customers want a discount, just give it to them.

If that means you underpriced your early customers a bit, so what.  It may seem like a big deal, but it isn’t.  It won’t matter in the long run when you have 100, 1000, then 100,000 customers.  Just raise prices on the next ones. It won’t matter if customers 1–3 pay less. It’s just the start of a journey to $100m+ in ARR and beyond.

Most importantly, customers need context when they are buying new apps.

If they are paying $200 per seat for Salesforce, and your product is about as important and valuable, $200 may be fine. If they are paying $15 a month per seat for Zoom, and your product is about as valuable, $15 per seat may also be fine.

In the early days, though, you don’t quite have the brand Zoom and Salesforce do. So oftentimes, in the earlier days, starting at about 80% of what your comparables cost helps prospects and customers with context. It says yes, you are as valuable as your famous comparable app. But we are pricing a bit lower because we are a new entrant.

Similarly, anchoring high in the enterprise can work. You can say if Salesforce is worth $100 a seat, we are worth $200. But if you anchor higher, you really have to deliver.

How to Price Your Product in the Early Days (Hint: It’s Actually Easy)


Related Posts

Pin It on Pinterest

Share This