Segment Customers to Create Effective Pricing Tiers

The foundation of a successful SaaS pricing strategy is customer segmentation. You cannot create effective pricing tiers until you understand the different types of customers you serve, the value they get from your product, and their willingness to pay.

The Goal of Segmentation:

The goal is to create a pricing structure where each customer segment pays a price that is aligned with the value they receive. This allows you to capture revenue effectively from all parts of the market, from small hobbyists to large enterprises.

How to Segment:

• Identify Customer Personas: Group your customers into distinct personas based on their needs, goals, and usage patterns. (e.g., for a podcasting tool: the Hobbyist, the Professional, the Network).
• Determine Price Sensitivity: Each persona will have a different willingness to pay. The Hobbyist might only pay $15/month, while the Network could justify paying $300/month or more for advanced features and higher usage limits.
• Find the Value Metric: Identify the core metric that aligns with the value customers get from your product. This is the axis along which your pricing should scale. Common value metrics include:
  • Number of users/seats
  • Number of contacts/subscribers
  • Amount of usage (e.g., API calls, videos hosted)
  • Number of features

Building the Tiers:

Once you have segmented your customers and identified a value metric, you can construct your pricing tiers. Each tier should be designed to appeal to a specific customer persona, offering a bundle of features and usage limits that matches their needs and willingness to pay.

This structure is the key to unlocking Expansion Revenue, as customers will naturally upgrade to higher tiers as their own needs and usage grow.

Tags: #SaaS #pricing #strategy #segmentation #value-metric #customer-persona