[Report] 2023 State of SaaS Pricing: How B2B Leaders Use Pricing to Come Out on Top
If you cast your mind back to a decade ago, most SaaS companies treated pricing and packaging as an afterthought when it came to their growth strategy. They would often focus their time and budget on customer acquisition first and then retention.
In 2023, that’s changed. In fact, over 94% of B2B SaaS pricing leaders update pricing and packaging at least once per year, with almost 40% updating as often as once per quarter. When it comes to monetization strategies, B2B SaaS leaders are getting smarter in a tougher market.
How those B2B SaaS businesses are thinking about their pricing and making decisions is exactly what Paddle’s State of SaaS Pricing in 2023 report dives into. We surveyed hundreds of B2B leaders to get a current view of the state of SaaS pricing and packaging in 2023. Keep reading for a preview of what we found, or click here for a full copy of the report.
1. B2B SaaS businesses are operating in a tough macroeconomic environment
Growth is slower and harder than the zero interest rate environment of a few years ago. Any new revenue now is being eroded more than in the past by excessive churn. This is not news, but it is important context when you think about how pricing leaders are making their decisions.
You can get more insights on the current state of SaaS in Paddle’s latest SaaS market report, which tracks underlying growth and retention trends.
2. SaaS leaders are leveraging pricing updates in 2023
Regular pricing and/or packaging changes are critical for increasing ARPU growth. Even in this tougher macroeconomic environment, businesses are leveraging pricing updates. Your monetization strategy can go beyond just changing prices; it can include various tactics such as refining value metrics and adjusting packaging.
We already know that 94% of B2B SaaS pricing leaders update pricing and packaging at least once per year.
Since September 2022, 98% of those surveyed have made updates to their pricing or packaging. Among them, 43.8% have made updates to both.
Even with macroeconomic challenges, it’s especially important to reevaluate your monetization strategy. Based on what we are seeing in the data today, if your monetization strategy is not a driving factor in your revenue growth in 2023, you risk falling behind.
3. Pricing strategies dominating the market (and what you should focus on)
But what’s the right approach? As with most things, it depends.
If you look at the most common pricing strategies by annual revenue, we see that more mature companies shift both to value-based pricing and product-led tactics. Large companies are most likely to employ value-based pricing, because they have the most resources to do the proper research to figure out their value.
But value-based pricing is powerful and shouldn’t be reserved for big business. Even companies as small as $1M ARR should be able to execute value-based pricing without having to resource a giant in-house team.
While it’s clear companies are becoming more sophisticated with their pricing strategies, not everyone is using best practices and it’s common for many companies to simply echo what their competitors are doing.
Spoiler alert: For scaling SaaS companies in a growth-stricken environment, value-based pricing is where your real opportunity is, without losing margins or throwing more money at marketing.
4. Free offerings are coming out on top
In 2023, the majority of B2B SaaS leaders make use of premium-tier free trials (44.2%), followed by freemium offers (18.7%). Letting the market test drive your product by offering a premium tier free trial is critical for a product-led growth strategy.
Premium-tier free trials are also most popular among hybrid sales-led and product-led companies as this approach provides a specific trigger for sales to get involved and adds a sense of urgency given the pre-set time limits of any trial.
Spoiler alert: It’s about knowing what your customers value and making sure they experience that value within that free offering.
5. Knowing and articulating your value is where the opportunity lies
One common theme throughout the report is value – knowing what customers will value in your offering and how to articulate that.
If your monetization strategy is not a driving factor for revenue growth in 2023, you risk falling behind. Your monetization strategy can and should go beyond just changing prices; it should include various tactics including refining value metrics and adjusting packaging.
Other areas might include:
- Assigning a designated leader or committee that owns pricing and packaging and drives action.
- Working to strategically differentiate yourself from competitors and clearly articulate that differentiation.
- Conducting robust market research with customers as well as the broader market to understand your product’s value.
- Using PLG and value-based pricing as strategic pillars to your overall approach to pricing.
While many SaaS B2B leaders are updating how they price and package their products, the most sophisticated ones are using comprehensive research and customer-focused value strategies to maximize their monetization efforts even further.
For more data and recommendations, get the full report straight to your inbox here.
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