While attending Social Dev Camp last month, I sat in on Rishi Shah’s talk about pricing for Software as a Service (SaaS). Rishi is the CEO of Flying Cart, a service that helps people set up and host their own online stores, and a company that he founded in Chicago before moving it out to San Francisco. In his session, Rishi discussed what's worked best for him, as well as what he's learned by studying several SaaS companies like Chicago-based 37signals, which has been the leader in SaaS pricing using a tiered subscription model. Having made the jump to becoming a fulltime entrepreneur (and also as the voice behind the appropriately titled business blog GettingMoreAwesome.com), Rishi is a great role model for anyone looking to start an online business. He was gracious enough to answer some of my questions after the conference.
Who is a good target client for Flying Cart, and why would they use your service?
Flying Cart is the easiest way to create an online store. Our target client is someone on Etsy or eBay who wants to branch out and start their own brand. The customers that do the best have products ready to sell and are vocal about it on the blogosphere.
Personally, my favorite customers are the super niche stores. They really dominate because e-tailers like Amazon aren't selling their products, and they show up #1 on Google right after they start a store—sometimes in minutes!
I wrote a blog post about how to win with an online store here.
On the topic of SaaS pricing, what insights have you learned from testing? Has testing and iteration been an important part of your success?
I wouldn't consider myself a success at this point. We are still a very small team. Unfortunately we do very little testing, not because we don't want to, but we just don't have the bandwidth right now. Currently all the testing we do goes to helping customers sell more products.
Here are a few things we have learned about our own pricing model:
- Launch with a free model. This way you can iterate on your current product.
- If you don't have a free plan, offer a 30-day free trial.
- A $12 package will work better than a $14.99 package.
- An $11.99 package will work better than a $12 package.
- A $9.99 package will work better than an $11.99 package.
- Put your highest package on the left so the customer sees it first. By comparison your cheapest package will look even cheaper.