To grow a business, one has to do both talk and act in accordance. To get started, you have to be effective in making guarantees. Persuasive promises made to the right people at the right time, and this will get you paying clients. This is the talking part.
But to act in accordance, some might say “walk the walk,” you have to master fulfilling your guarantees. And if there’s one metric that says more than any other with regards to your capacity to retain and continuously provide more value to customers, while reaping satisfactory rewards for the efforts – that metric is Average Revenue per user (ARPU).
Let’s have a look at three ways to augment it.
1. Develop a product with sufficient growth potential
Great SaaS providers are organized as ethical cycles. Whenever entry-level clients accomplish what they desire, their requirements increase. Providers have higher priced divisions set in place in order to meet those requirements. Clients are then inherently drawn towards them, making more earnings in the process.
One evident example is MailChimp. If consumers are prospering with email marketing, their lists will develop more, demanding an upgrade of account.
Exactly what is the success scenario of utilizing your SaaS product? Will it produce demand for more functions, resources, or features that are already presented with higher pricing plans? If not, go back to your product development plan.
If the answer was affirmative, but your ARPU is not growing as you’d wish, maybe your account divisions are not revolving around the right value metrics.
2. Invoice for the correct thing – regulate value metrics
It is crucial to assess which precise functions, features or resources are most pertinent to clients and base prices tiers on them. This your value metric.
The emphasis should land on selecting metrics that are:
- Simple to differentiate (with limited key numbers)
- Stable and foreseeable (will not be disposed to large ups or down making pricing unstable)
- Aligned with the customers’ interest (relevant to his needs)
For Example Mail chimp. Their pricing structure is linked with the number of subscribers. That’s highly relevant to the customer because a much larger list can be expected to create more income.
One could say that there’s possibly an even better correspondence between the total number of emails delivered and the probable revenue. Therefore, why not invoice for that? The answer is that it can be less expected as campaign agendas are not evenly distributed all year round.
If your product already makes your customers successful, and if they are likely to move through sequential pricing tiers because of it, you have quite a healthy business. Make sure to value it in the same manner.
3. Invoice the correct amount – change your pricing structure
If you performed the task of improving your product, the increased value should be mirrored in the purchase price. That being said, price surges can cause friction with existing clients. This can be avoided in numerous ways:
- Apply new prices to new clients only
- Leave existing tiers integral, but add costlier tiers with new features on top
- Eliminate lesser pricing tiers
- If possible, make micro price surges – customers won’t object it.