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For many SaaS platforms, entering the international market is the holy grail and a reason to be proud: hooray! Now we are known not only where we cut our service, but, perhaps, even overseas.
But is it always worth striving to become a participant in the international market? What problems can you face when pricing your services? How important is it for a SaaS platform geared towards affiliate marketing to become an international player? In today’s article, we will share our own view of what is happening.
Eat the elephant piece by piece
Although we live in a world of universal globalization, the elephant is still worth eating in parts. What is an “international market”?
For example, you conduct affiliate marketing in USA, Europe and several other EU countries. Can we say that this is an international market?
Strictly speaking, yes. Because there are several countries, each with its own legislation and features of doing business. And at the same time, if your online service works in this limited area, which does not affect European countries, the USA, Australia, New Zealand, we have a local market. Is it logical?
Even so, in a designated area, you will need to price a SaaS platform for each specific segment of your small “international market”.
A simple illustrative example.
Affiliate marketing is conducted by one company in USA, the other in Europe. Representatives of both companies are busy choosing a SaaS platform that can provide them with high-quality tools for doing business. Is it possible to offer them the same price for the services of an online service?
Purely theoretically yes, but only two companies are still in different economic conditions. The USA affiliate programs market has a large capacity due to the number of potential buyers. Plus, it’s highly competitive. And this means that the same SaaS platforms, when setting the price for their services, are forced to fight hard for each client. Sometimes arranging outright dumping.
In Europe, the population is smaller, the market capacity is also smaller, but the purchasing power of the client is lower. As a result, we have plus or minus the same prices for services, but caused by completely different reasons.
Another example from the “large” international market, not associated with affiliate programs.
For example, Americans are used to receiving turnkey services. The conditional online service of assistance in preparing applicants for universities takes a separate fee for filling out the necessary questionnaires, processing other documents necessary for admission. US residents will be happy to use such a service, even if the service costs $100-150 more for a similar option.
Germany and residents of the EU have a completely different mentality (and financial situation, by the way, too!). They are unlikely to pay an extra hundred dollars for convenience. It is easier for them to fill out all the necessary documents on their own in order to save money.
Is it necessary to take into account the mentality of representatives of different segments of the international market when pricing services? The question is rhetorical.
International SaaS Pricing Methodology
The most important thing. The price of a product should primarily be determined by its value, and not by the return on investment, the cost of attracting one client, or the profit of developers.
Don’t get us wrong. All this, of course, should be present, but if you focus on this, get ready to lose the competition without really entering into it.
SaaS platform Alanbase, for example, has a flexible statistics system that can be easily configured for any product. This is one of our competitive advantages, this is what we focus on, this is the value for customers who have chosen to cooperate with our platform. Of course, we will take this value into account when setting the price for using the platform. But we will also keep in mind all the other parameters.
Now let’s briefly go through the pricing models that have historically developed in SaaS companies.
Let’s talk right away. There is no answer to the question which of the listed models is the most optimal. The right question to ask yourself when pricing your services is: what pricing model will be optimal for our company in this particular market, taking into account all its features? And it doesn’t matter if you have global plans to enter the international market, or you are just exploring the local market.
Fixed price
One product with one set of features and one price. Finding such a fix is quite difficult. Even in this scenario, there can be at least two prices – for a month of using the service or immediately for a year. But the logic itself is very clear: the client knows exactly how much he pays monthly, how much he can save with an annual subscription, and the SaaS company can easily calculate its income, which will be tightly tied to the number of customers, regular and new.
The advantages of this model are that a single price is understandable to most customers, and the disadvantages are that when the functionality expands, it is difficult to explain to loyal regular customers why you suddenly decided to raise prices. Another disadvantage is that everyone gets a single product, regardless of the needs of a particular client (someone needs more functions and features, someone needs less).
Tariff line
As a rule, no more than three. Different functionality or time of using the service – different price. The most convenient option, which has become a real classic. Most likely, it is worth using it when you form prices for your services.
Pros: customers with different needs can choose the most suitable tariffs for them. If the client grows, he can always be offered to switch to a higher tariff with advanced functionality.
Cons: too wide a choice of tariffs and functions (which is why the number three is the most optimal!) can become an insurmountable problem, which will eventually lead to a refusal to purchase.
Payment upon consumption
The more services a customer uses, the more they pay.
Pros: the price increases only due to the increase in the consumption of services. This model seems fair and allows even small companies to start using the service, because they understand that they will only pay more when their consumption of services increases.
Cons: It’s hard to predict revenue because you have no control over how customers use your services.
Summary
Now, when setting prices in SaaS companies, you can find combined approaches from the three listed and other pricing options.
Which of the options will work best when entering the international market depends on how much the laws and regulations of the local region or individual countries apply in your international market.
