Details like how much more revenue a product can bring by charging 99cents instead of $1 fascinate me,and I'm curious to see how that translates to the SaaS world. Thanks!
I didn't believe it, so I tweaked it and ran the test again. Exactly the same result. So those paragraphs stay, with the same unordered order, goofy typography and everything else. Nobody touch anything! It's perfectly balanced at its local maxima.
Nice and concise answer! Just wondering if you can give some reasoning behind this?
e.g. if approval is usually needed for purchases over $500, wouldn't they have to ask for approval if they're making a purchase that's essentially going to cost $4,788 out of the annual budget (if it's a $399/mo SaaS web app)?
No, it's 500$ "at the time" approval. (Companies are simple-minded.) If I am a manager and my credit card gets charged 399$ each month, that registers as 12 separate purchases in pretty much everyone's rulebook.
The way it works is this: as a larger company, you want your people to be able to get their work done, that includes making purchases. You also want to set some rules around larger purchases (multiple 1000s of dollars), else people will end up throwing money away. So you set a fairly arbitrary rule that says "a manager of level X can spend up to level Y without approvals".
That's how you keep your business running but are fiscally responsible.
As a SaaS selling to businesses, you create TRUE business value (let's say you make my operation better someway, or save us time), and I pay you.
As a manager, the difference between 50$ and 500$ is invisible to me. With just 10 people reporting to me, I am likely spending 200, 300K/month (salaries, overhead, business costs, ...). The only thing I care about is not having to deal with the purchasing department or legal, because I know that will suddenly turn this quick and easy purchase of business value into a month-long process and it will cost me more time than I get value out of it. (aka it's no longer worth it).
And finally, now that you are charging $79 or $399, you can spend a significant amount of money (let's say 3 times monthly cost) on customer acquisition and create a proper business.
In the B2B space, it really bothers me when pricing is listed for a service where the expectation is to be a long-term customer, but pricing is listed per month. It's doubly aggravating when the price isn't rounded to the nearest $10 (e.g. don't price the iPhone SE as $399 b/c that's $400). Cloudflare, while far from the only perpetrator, is the my most recent experience with this crap. If I'm evaluating CDNs, it's not like I want to switch such a service monthly.
I have to believe we are all trying to please the bean-counters w/in our own orgs, but it is almost insulting.
Prices ending in 9 are mostly a psychological play on buyers. Coupled with the fact that most of us read from left to right, we're more likely to believe $399 to be much less than $400. Something like a Jedi mind trick if you will.
As for monthly pricing, I'd say it's more to make buyers perceive affordability and deemphasize the much larger annual price even if annual contracts are available. Whether it works better, I'm not too sure.
>Prices ending in 9 are mostly a psychological play on buyers.
Right, always thought so. Find it a bit irritating, in fact.
Though, to be fair, I don't think that all of the people/companies who sell products, and use prices ending in 9, do it for that reason.
Pretty sure many of them just use it out of habit / conditioning, due to seeing that kind of pricing everywhere they look. E.g. Recently saw, on a blog I read often, another regular reader commenting that they would buy some product or service if it was available for $99.
Did a double take for a minute - why would anyone deliberately say 99 when 100 (a round figure) is the more obvious choice? Then realized it must be for the reason I surmised above.
9 comments
[ 4.5 ms ] story [ 13.0 ms ] threadFor example, this terrible wall-of-text absolutely destroyed a pretty 37 Signals-esque 3-column pricing chart in A/B testing:
https://www.s3stat.com/Pricing.aspx
I didn't believe it, so I tweaked it and ran the test again. Exactly the same result. So those paragraphs stay, with the same unordered order, goofy typography and everything else. Nobody touch anything! It's perfectly balanced at its local maxima.
- 79$ (solve a business problem and its worth it. There's no difference between 29 or 39 or 79 for a business user with a credit card.)
- $399 (basically max to buy without approval if you're a manager, anything below 500$.)
- enterprise (aka call us, you'll need approval for this internally.) You could add a 799 plan here, or a 1999 plan, etc.
You want to stay away from 9$ and such unless you're selling to consumers, not businesses, in very high quantities (eg. you're netflix).
e.g. if approval is usually needed for purchases over $500, wouldn't they have to ask for approval if they're making a purchase that's essentially going to cost $4,788 out of the annual budget (if it's a $399/mo SaaS web app)?
The way it works is this: as a larger company, you want your people to be able to get their work done, that includes making purchases. You also want to set some rules around larger purchases (multiple 1000s of dollars), else people will end up throwing money away. So you set a fairly arbitrary rule that says "a manager of level X can spend up to level Y without approvals".
That's how you keep your business running but are fiscally responsible.
As a SaaS selling to businesses, you create TRUE business value (let's say you make my operation better someway, or save us time), and I pay you.
As a manager, the difference between 50$ and 500$ is invisible to me. With just 10 people reporting to me, I am likely spending 200, 300K/month (salaries, overhead, business costs, ...). The only thing I care about is not having to deal with the purchasing department or legal, because I know that will suddenly turn this quick and easy purchase of business value into a month-long process and it will cost me more time than I get value out of it. (aka it's no longer worth it).
And finally, now that you are charging $79 or $399, you can spend a significant amount of money (let's say 3 times monthly cost) on customer acquisition and create a proper business.
I have to believe we are all trying to please the bean-counters w/in our own orgs, but it is almost insulting.
As for monthly pricing, I'd say it's more to make buyers perceive affordability and deemphasize the much larger annual price even if annual contracts are available. Whether it works better, I'm not too sure.
Right, always thought so. Find it a bit irritating, in fact.
Though, to be fair, I don't think that all of the people/companies who sell products, and use prices ending in 9, do it for that reason.
Pretty sure many of them just use it out of habit / conditioning, due to seeing that kind of pricing everywhere they look. E.g. Recently saw, on a blog I read often, another regular reader commenting that they would buy some product or service if it was available for $99.
Did a double take for a minute - why would anyone deliberately say 99 when 100 (a round figure) is the more obvious choice? Then realized it must be for the reason I surmised above.