Learn the best pricing strategies for digital products

Gonza Pastorino30 November

It is very common to see development and marketing teams working tirelessly to generate growth in active users of a digital product. Strategies tend to focus on where to put the advertising investment, SEO efforts and product development itself.

In this maelstrom of actions, we tend to lose sight of a fundamental factor that we have to get quality users: Pricing strategy.

In this article I want to tell you:

1. Common practices in the digital products industry
2. Why pricing is important
3. Main pricing strategies and trials
4. Which one should you be using to grow your customer base?
5. General comments

Common practices in the digital products industry

When we are in the process of developing a new SaaS Platform type digital product, the initial stages require a lot of testing mainly in two areas:

• General communication about what the product is, who it is aimed at and what need it satisfies. This part is solved in the entire communication ecosystem of the company, from its advertising strategy, mailing, automations, and even its Web and Blog.
• Experimentation with the product itself. UI/UX and functionalities. We define the product as the system that interacts with the user once the user decides to start the registration process or use of the product.

In this second part of the model, pricing plays a fundamental role in attracting and retaining good quality customers.

Why pricing is important

It is no news that the price we put on a product speaks of the product itself.

Through our pricing strategy we can push our potential customers in different directions. These directions should not be chosen at random, but according to each business and market.

The use of factors such as time, degree of involvement for registration, availability of features, discounts and demos can easily lead to success or failure.

In general, pricing strategies are designed with an increasing cost structure and associated functions. This allows users to experiment with some of the features without risk, or simply grow into the plan they choose as they wish, giving flexibility and viability to the agreement between the parties.

Something that is very important to clarify is that each new user “lands” in the company’s communication ecosystem with a need. At each point of contact with that ecosystem you will try to understand if the product is what you need, if it appears to be reliable, and if it is worth the cost. From the moment the person makes the decision to register, a whole new story begins, in which now the experience from registration to product testing will be decisive for the permanence of that person as a customer.

We will now comment on the main strategies used in the market and how to apply them in different situations.

Main pricing strategies and trials

The pricing strategy is one of the many elements of a product growth hack plan. Before defining it, we must be very clear about our objective.

For this analysis we will consider that the objective is to increase the paid subscription base (the most frequent in these cases). Then we will be using the pricing strategy to get users to end up buying our product.

We will divide the pricing models into 2 main groups, and we will clarify in each case, which conditions must be met in each case to choose one or the other option.

• Free trial / Demo
• Temporary discount on actual cost
• No limit to the number of functions but with a limited time limit
• Limited functionalities (With and without time limit)
• Credit card required.
• No credit card required

Which one should you be using to grow your customer base?

Free trial / Demo

• This type of strategy devalues the product, but allows the user to experiment with the product before taking risks. I recommend it in cases where the product is already positioned in the market, its functions are simple to understand for its target audience.
• It is also an interesting option to generate customer databases that can then be enriched in later stages.
• It is advisable to use this type of strategies in conjunction with others that we will see in the following points.

Temporary discount on actual cost

• In this case, a price is placed on the product, including its most economical option, which enhances the value of the product in the eyes of its audience.
• Recommended for products already positioned in the market and in growth stage, looking for quality customers.
• Recommended for products that require training for their correct use and valorization by customers.

No limit to the number of functions but with a limited time limit

• Recommended for products with excellent UI/UX.
• Recommended for products with a low degree of complexity.
• Systems with excellent customer service (real time).
• I recommend this type of plan for mature products, where the perceived quality increases when the product is used (in relation to what is perceived only in the Landing Page and the communication ecosystem prior to registration).

Limited functionalities (With and without time limit)

• Complex products, where a couple of outstanding features can represent significant value and a cross-section of customer business impact.
• Products under development, with low stability and in the testing stage.
• Complex and not yet optimized UI/UX.
• Products without a customer service team with high availability.

Credit card required

• Recommended for products with excellent pre-registration/Onboarding communication, good branding, clear value.
• Recommended for complex products that require extra effort on the part of the users to learn how to use them.
• Recommended for new technologies.
• Marketing strategies and mature products. (A lower volume of users will be attracted, but of higher quality).

No credit card required

• Higher volume of users and lower quality. It is useful for products that require end-user testing, surveys, feature validation and in the growth stage of your potential customer database.
• Simple to use products.
• More commoditized technologies.
• Products with a not so good level of communication and branding.

General comments

We have seen just some of the variables we can play with to look for exponential growth in paid subscriptions of a digital product. There are multiple variants and other creative dynamics that will not be discussed in this article.

The important thing is to understand that the pricing structure and the flexibility we give to our website visitors has a radical impact on business results, and that we must understand very well what audience we are talking to, what their options are in the market and how I can highlight the virtues of my product so that it is valued by each new user.