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I have startup company and we have SaaS application which we sell as subscription.

There is a lot of competition(which is good) and often first question I get from prospectives is "How much?"

With my limited experience(few customers) I know that our software better in many different ways but users know and appreaciate this post-factum. Useability, performance, features, long-run costs and savings.

I know that customers who see live demo get it. I also know that we need to do better job on our website to explain why we better. We work on website aspect.

Meanwhile, I get inquiries asking "how much". Well, I know that if I just give them number they will get lost or tell me that so and so 500% cheaper or free. OTOH people seem to be very hesitant about seeing no-obligation demo.

When I see inquiry (from website) coming in from a company(they list company, phone and email) then I try and explain what and how we do and how much it cost.

Once in a while I get inquiries from no-name entities. Just some name and gmail email address. This can be competitor(not that I care about disclosing price that much, they will know if they want) but I feel that if people don't want to disclose their info and see the demo - they not going to be a customer. Am I right?

Example from today:

I need proper fees for getting proper infrastructure right starting from 0 level and get the service done. Can u please provide me proper estimate for the fees. Thanks.

First of all I have no clue if they guy even in USA (we do USA only business) My answer:

Thank you for contacting us. Our fees will depend on what features you use. Please call us or provide us with your phone number to talk about your needs in more details.

Now I got 2 responses:

I want an estimate first

And

Gove me an estimate with complete features n it's benefits

Now I don't want to lose customer but I'm not sure I should waste my time. Your opinions? Let's say our service starts at ~$500/mo minimum

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Per user, per server, per report, per media item, per 1TB etc. Ask for these numbers and calculate the estimation. – Andrew Smith Jun 28 '12 at 16:21
I have seen rackspace do this well with their dedicated server plans. Maybe you can "try" getting their service / enquiring and see how it goes and whether you could use some pages from their book. – saurabhj Jul 2 '12 at 6:58

5 Answers

up vote 1 down vote accepted

I feel the best thing is actually not directly answer any pricing question at this stage.

Ideally, your pricing structure is tied to different benefits, and you will ask your clients a bunch of questions to get the customers to better understand these benefits, and then give the price only after they are sold on the benefits.

If they insist, then give them some thing like it could be in the range of x to y, but really depend on what your needs are, then redirect them to your series of questions.

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up vote 3 down vote

From my feeling I would say this customer is a waste of time. Nonetheless I can really understand you don't want to miss an opportunity. I can imagine to do something like that:

  • create some kind of standard estimation for US users. Create a very general basic setup of your service. So general, everyone could use it. But also so general, everyone would add some extra spice to it, which changes the cost. If you offer lets say cloud hosting, you might be able to create an estimate for a 2 or 3 machine setup, like Webserver, Databaseserver and Loadbalancer. It doesn't make much sense, as nobody needs a loadbalancer for just one webserver. But everybody would get an idea in which direction your prices go. Actually I am one of the persons who always want to get an idea on pricing even before I contact the company.

  • if your prices are a well-hidden secret, you may create some kind of questionaire. Lets imagine an excel sheet with 30 options for features. A possible customer needs to fill it out an revert back to you. If he doesn't have the time to fill a simple form, he may not have the time to order.

  • send an estimation via postal only. Ask the customer to reveil his address. Send him information on your company and a more or less generic estimation. That way you can see were he is located and if he is in US. Of course he still is able to hide if he is a competitor.

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Thing is - I just dumped "tiers" idea. I, as developer had idea of charging per use like Amazon does for their cloud services. Quickly I discovered that customers get frustrated first second they see something like this. They want to know "bottom line". I don't want to give or take features either, I'd rather just tell them "fine, don't use this and I will charge you less". But this need to happen during conversation. Last couple customers was given fixed price for "unlimited" use and it works good – katit Jun 28 '12 at 3:41
1  
I understand your customers. I am a dev too, but I really have constant trouble to calculate how much Amazon will charge me after my free tier is running out. – Christian Jun 28 '12 at 4:04
up vote 2 down vote

Option 1:

Calculate a simple average of account revenues. When a prospect asks for a "general" estimate, send them that number and the services that come with. If the number sounds too large, check standard deviations and reduce it accordingly to sound more realistic.

Option 2:

Crunch the numbers on your services to find out which ones are used by the majority of your current clients. Create a package based on those and price it. When a prospect asks for a "general" estimate, send them that list of services and the associated price.

Option 3 (aka customer-friendly solution):

Create a self-service quote builder so that prospects could go to a page, select their desired services, usage, and what not and receive an estimate (you can even give them a range). This way you'll reduce your own headaches and increase the ease of doing business with your company.

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up vote 0 down vote

Since we don't know what business niche your software is marketed towards, it's difficult to answer. You are going after businesses at a approx. 500/month price range, it sounds like you want to negotiate. If you're not getting any customers, you better do something; estimates may be the answer.

Are you sure you know how much you want to charge? Anonymous emails can be responded by asking for more information or setup a meeting. This will deter some of your competitors from sniffing around.

If this is an established market, you should know what you can charge.

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up vote 0 down vote

In development process often appears that something get underestimated. So

  1. No rush: Do not give your estimation in a hurry. Help your customer to understand that 'estimating' is a process.
  2. Spec: Get as much detailed specifications document as it is possible and read it carefully.
  3. Q&A: Ask questions. You must ask about details that are missing in spec. Do not leave something unclear. Also ask questions to make sure that you understand the spec correctly. Add missing details to the specification document.
  4. List: List all the things to be done. You may also acknowledge your customer with this 'todo' list. The estimate the time for each item in the list.
  5. Sum: Sum all the estimates in your list.
  6. Space: Add 20-25% to your complete ETA. Be sure there are details that you did not notice. you can make a good surprise for your customer if you get it done faster .
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