5 Problems with Your Pricing Process Costing You Sales

Getting pricing right is a huge challenge. Yet, it’s the biggest optimization you can make in SaaS.

Pricing influences:

• Profitability
• Customer demand
• The perceived value of your product
• By extension, the success of your business

And when it comes to SaaS pricing, there are a number of challenges. When you run a test, it takes months to understand the impact, especially on the lifetime value of subscriptions.

And there are dozens of variables to consider — pricing tiers, monthly vs. annual subscription costs, per-user costs for additional seats, and usage-based pricing, to name a few.

If you nail every variable, you’ll have a profitable business with plenty of customers who want to buy from you. If you miss the mark, your margins or conversions (or both) will tank.

Most SaaS companies still optimize pricing the manual way. And it’s costing them dearly.

5 problems with outdated pricing processes:

We can define manual pricing as any pricing process that is not automated. This could be anything from using spreadsheets to monitor and adjust prices to manually invoicing customers based on usage data.

You might even test different price points and pricing structures without any sort of tracking mechanism in place, making it impossible to fully understand the impact of your changes.

While these methods were all that was available in the early days of SaaS, there are far better ways to handle price optimization in this day and age.

Problem 1: Lack of data-driven decisions

The main issue with manual pricing? It relies on human judgment, often based on limited or incomplete data.

Without using advanced analytics and machine learning tools to analyze customer behavior, competitor pricing, and market trends, it’s difficult to accurately determine the optimal price for your SaaS product.

Let’s say you’re following others’ lead and charging $99 per month. How do you know you couldn’t double your sales volume by reducing that price to $89 or $79? What if raising it to $119 per month would retain all your customers and maintain your sales volume, thereby increasing your CLV?

Implementing a pricing change based on a gut feeling might work. But, even if it nets you a positive result, you’re taking a gamble. And you’re leaving money on the table.

Problem 2: Inefficient and time-consuming processes

Using spreadsheets for sales projections, financial modeling, and pricing analysis is perhaps the biggest detractor from efficient pricing processes.

Spreadsheets cannot…

• Update themselves without human input
• Handle large and complex datasets
• Show real-time changes in demand, sales volume, and other metrics
• Account for complex subscription configurations and multiple pricing variables in forecasts
• Make prescriptive recommendations for pricing changes

Besides the fact that they need constant updates, spreadsheets and manual calculations also increase the risk of human error creeping into your calculations. 

As mentioned earlier, some tests can take months to fully evaluate, and all your time is wasted if the results are inconclusive or you make mistakes in your calculations.

If you do things manually, you aren’t getting the full picture of how pricing changes impact revenue.

Problem 3: Difficulty managing pricing data

Even if you could run tests and projections efficiently using spreadsheets, you won’t be able to track and manage the data without advanced pricing software.

You’ll need a tool that can manage sales metrics, real-time demand, customer lifetime value, and qualitative results from pricing surveys and tests.

Plus, when you have multiple subscription tiers with varying features and add-ons, it becomes even more challenging to track how each pricing change affects different customer segments.

Not to mention, the risk of mismanaging data increases as your business grows and scales. With every subscriber you add to your customer base, you’re creating more pricing data to track and analyze.

Problem 4: Missed opportunities without price intelligence

Invesp reports that 98% of SaaS businesses say they’ve gotten net-positive results by making core pricing changes. And roughly four in every five of them make a change to their pricing at least once every year.

So why do only 6% of those in an OpenView Partners study of 2,200 SaaS companies say they’ve done sophisticated pricing research to support their changes?

Price intelligence tools help you identify your competitors and acquire pricing data for their products, allowing you to adjust your pricing strategy more quickly.

Rather than researching competitors individually and manually updating your pricing, these tools provide a comprehensive view of the market in real time, which you can use to make informed pricing decisions.

Problem 5: Inflexibility for diverse needs

In today’s market, one-size-fits-all pricing models don’t work. Pricing is too big of a differentiation opportunity.

While you can program Excel to run basic calculations and models, it’s not an effective pricing tool. You’ll need to update and expand the model every time you add new metrics, change your pricing structure, or accommodate different customer segments.

If you want more granular data, such as optimizing prices by customer segment or creating custom pricing packages for enterprise clients, you’ll need a more flexible and advanced tool.

Price optimization software uses algorithms and machine learning to adjust for all sorts of metrics, including customer segment pricing, usage-based pricing, and recurring billing models.

Once it has your data, you can even test different pricing structures with a few clicks.

Pricing software with CPQ integration is the solution.

Pricing software is a specialized tool that is designed to help SaaS companies automate their pricing processes and make data-driven decisions. It integrates with your CPQ (configure, price, quote) system — though some CPQs have one of their own — to streamline your entire pricing workflow.

With a CPQ-integrated pricing tool, you can:

Gather all your pricing data in one place

Pricing tools gather data from your CPQ, CRM, ERP, and other business systems to provide a comprehensive view of your pricing performance.

They can also integrate with third-party data providers and customer data platforms (CDPs) to give you insights into competitor pricing and market trends.

Analyze large datasets quickly

Advanced analytics tools within the software handle complex calculations and scenarios in seconds, providing instant recommendations for changes that could improve your pricing strategy.

Since pricing software and CPQ both have visualization capabilities, you can also communicate the data with your sales/finance teams, executive leadership, and investors without struggling to explain the results.

Test multiple scenarios simultaneously

If you use tiered pricing and sell to a few distinct customer segments, you can test multiple changes at once by making updates to your pricing rules in CPQ. From there, you can separately track the impact of each change on its respective customer segment and visualize the results as they happen.

Create customized pricing models and automate calculations

For businesses using custom pricing (e.g., for enterprise customers), the ability to make calculations on the fly saves a remarkable amount of time during quoting and negotiation.

In CPQ, admins can set guardrails for minimum prices to protect margins, create approval workflows for large deals, and set up guided selling to drive configuration behavior.

On the backend, the pricing software can calculate the optimal price for the customer based on historical data, market trends, margins, costs of delivery, and specific pricing strategy rules.

When working with a customer, the software does all the heavy lifting. It stores and calculates the data behind the scenes, then presents the final price to your sales reps for quoting.

See competitor price intelligence in real time

Pricing software with CPQ integration automates competitor price monitoring. With the two tools, you’ll always have updated information on your competitors’ pricing strategies.

This gives you a leg up in sales conversations — especially with customers who are considering multiple vendors. It also helps you avoid price wars by adjusting your prices more strategically.

When you know what your competitors are doing at the moment, you can also use it as a comparison when making pricing changes. For example, after changing your pricing structure, it could help you understand whether customers prefer your new pricing or theirs.

Handle other revenue tasks

According to the SaaS CFO’s 2024 Finance and Ops Survey, 39% of companies say they still use spreadsheets for revenue recognition processes. That means they’re using spreadsheets to report financial results, calculate deferred revenue, and handle ASC 606 compliance.

You can use a CPQ for SaaS companies like DealHub to automate the revenue recognition process, so your team doesn’t need to lift a finger.

Additionally, a CPQ integrates with your CRM and automates subscription billing to provide end-to-end automation for managing revenue streams. That means you’ll have accurate financial reporting, real-time insights into your revenue performance, and increased efficiency across all areas of your company.

Automate and optimize with modern pricing solutions

Modern, agile CPQ is powering the future of recurring revenue. With pricing software and CPQ, you can automate pricing calculations and tasks while nailing your pricing strategy with sales data, predictive analytics, and competitor intelligence.

The potential ROI of a CPQ-integrated pricing solution is impressive.

• Streamline your entire pricing workflow, saving time for finance and sales teams
• Better sales and margins by identifying underpriced products or customer segments
• Test different pricing strategies, gather feedback from sales reps, and get instant recommendations for changes that drive revenue growth
• Greater financial reporting accuracy with automated calculations

Every step of the way, you’re saving money or making more of it.

And since both tools are designed to integrate with your entire tech stack, you can leverage data from multiple sources to make the most informed pricing decisions for your SaaS business.

Ready to say goodbye to spreadsheets and manual calculations? Read the reviews for our favorite CPQ platforms for SaaS businesses.