Designed to Sell: Part 6/8

Common Pitfalls and How to Avoid Them

Refining your B2B SaaS pricing strategy means not only knowing what to do but also avoiding common missteps. While we’ve touched on some of these in earlier sections, let’s consolidate the most frequent pricing pitfalls that SaaS founders face. These include overcomplicating pricing tiers, relying too heavily on discounts, and failing to align pricing with market positioning. Understanding these challenges can sidestep expensive mistakes and keep your pricing strategy on track.

Overcomplicating Pricing Tiers

The Problem:

A convoluted pricing structure with multiple tiers, add-ons, and rules can confuse both your customers and your team. In an effort to address every possible use case, you might end up with a sprawling lineup—Basic, Standard, Pro, Plus, Premium, Enterprise, Ultra, etc.—each with slight variations. Or, your pricing may depend on multiple variables like users, features, and support levels that interact in overly complex ways. This leaves customers overwhelmed by choices (decision fatigue), while your sales team spends more time explaining pricing than selling the product.

How to Avoid It:

Simplify your pricing. Stick to three main tiers that address your core customer segments. For example:

• One for small teams or entry-level users

• One for mid-sized businesses or value-focused customers

• One for large organizations or feature-heavy use cases

If you feel tempted to add more tiers, pause to evaluate whether your existing options can be refined to cover those scenarios. Add-ons or à la carte features should be clearly distinct from the core tiers and limited to a few items, such as additional storage or advanced analytics. Customers should be able to understand your pricing without needing a manual.

Periodically review your tiers to ensure relevance. For instance, if most of your customers gravitate toward a single tier, it may indicate that the other tiers aren’t well-designed. Is your lowest tier too restrictive, essentially forcing customers into the middle one? If so, either adjust the tiers or eliminate the underperforming option. Each tier should serve a meaningful audience, not just exist to fill space.

Another way to maintain simplicity while offering flexibility is to introduce scalable pricing within tiers. For example, let customers select the number of users or seats they need and charge accordingly. This prevents you from creating endless variations like “Small Team Basic” or “Large Team Basic.” Instead, you can have one Basic plan with a straightforward per-user price.

From the customer’s perspective, the goal is clarity. Can they quickly identify the best option for their needs or at least narrow it down to two choices? If not, your pricing may be too complicated. A common symptom of overcomplication is when customers choose the wrong tier, leading to dissatisfaction, either paying for unused features or falling short on critical ones. This indicates that your tier definitions or distinctions need work.

Finally, don’t overlook internal complexity. If your sales or support teams struggle to explain pricing or create quotes, it’s a red flag. A straightforward and streamlined pricing model should empower your team to close deals and serve customers efficiently, not confuse them.

In short, align your pricing tiers with key customer segments, and resist the urge to overcomplicate. Simplicity benefits both your customers and your internal operations. Remember: simplicity scales, complexity doesn’t.

The Risks of Aggressive Discounting

The Problem:

To close deals quickly, you might resort to heavy discounting—30%, 40%, even 50% off your list price, or special “one-time” offers. While this may win short-term business, it creates long-term problems. Over-discounting devalues your product, making customers question whether your list price is even legitimate. Buyers may delay purchases, waiting for the next discount, or refuse to pay full price again. Worse, discounts can become a crutch for your sales team, who focus on lowering the price instead of selling on value.

Frequent discounts also risk alienating existing customers. A loyal customer paying full price might feel cheated if they discover a new customer received a significant discount. This creates inequity, leading to demands for matching deals—or worse, churn. Routine discounts can also anchor your perceived value at a lower level, making it harder to raise prices later.

How to Avoid It:

Establish a clear discount policy with limits. For example, set a maximum discount that requires approval and tie discounts to specific conditions, like multi-year contracts or strategic customer logos. Encourage your team to see discounts as a last resort, not the go-to solution. Instead, focus on adding value to the deal. For instance, rather than cutting the price by 20%, consider including a free add-on or an extra service. This approach preserves your price integrity while still providing customers with a sense of value.

When discounts are necessary, make them part of a mutual trade-off. For example, offer a reduced rate in exchange for a longer-term commitment, higher volume purchase, or a case study agreement. This creates a perception of fairness and ensures discounts are earned, not just given.

Be cautious with time-sensitive promotions in B2B. Unlike B2C, B2B buyers talk to each other and remember past deals. A fire-sale discount to hit quarterly targets can backfire, as customers may delay purchasing in anticipation of future sales—or feel penalized for buying just before the discount. If you must run promotions, keep them rare and reasonable.

For renewals, ensure pricing expectations are clear upfront. If a discount is for the first year only, state this explicitly so customers aren’t surprised at renewal. Better yet, avoid large one-time discounts that make future price increases difficult to justify.

Finally, monitor your discounting trends. If a significant portion of your deals involves discounts, or if discounts consistently skew large, it’s worth investigating. This could indicate that your list price is too high or that your sales team needs better training on conveying value. In some cases, adjusting your pricing model—such as adopting an “everyday low price” approach—might simplify negotiations and maintain transparency.

Healthy pricing power means customers are willing to pay near your asking price because they see the value. If they aren’t, focus on improving your value proposition or rethinking your pricing structure—not simply slashing prices. Use discounts sparingly and thoughtfully to preserve your product’s perceived worth.

Ignoring Market Positioning

The Problem:

Pricing decisions that ignore your product’s market position and branding can lead to mismatches. This can happen in two ways:

1. Pricing inconsistently with your product’s positioning (e.g., pricing a premium solution too low or a lightweight solution too high).

2. Failing to intentionally position your product in the market, resulting in generic pricing that doesn’t differentiate you from competitors.

For example, customers may doubt its quality if you’ve built a premium enterprise-grade solution but price it cheaply. Conversely, if you’re a newcomer with a simple solution but priced at the top of the market, buyers will compare you to established players and likely find you lacking.

Pricing sends a powerful signal about your product. If your pricing is misaligned with your positioning, it can confuse potential customers and undermine your sales efforts.

How to Avoid It:

Align your pricing with your value proposition and target audience. Be clear about who your product is for and what value it delivers, and ensure your pricing reflects that. For instance:

• Don't hesitate to charge premium prices if you’re positioning as a premium solution. Higher prices can reinforce the perception of quality, but only if you deliver on that promise through exceptional service and product experience.

• If your strategy is to disrupt the market from the bottom, you might price competitively low. In this case, your messaging should highlight simplicity, cost-effectiveness, or accessibility.

Research your market and competitors. While you don’t need to match competitors’ pricing, understanding their strategies can provide valuable context. For example, if competitors charge $100 per user and you’re priced at $10, make sure customers understand why—perhaps you’re targeting a different segment or have a leaner feature set.

Consistency across your product suite is also crucial. If one product is priced at $50 per user and another at $500 without a clear rationale, customers using both may feel confused. Rationalize pricing differences based on each product's relative value and use cases.

Finally, consider how your pricing aligns with your sales model. If you’re positioning as a no-hassle, self-service tool, avoid complex pricing negotiations. If you’re targeting enterprises, anticipate the need for higher pricing and room for negotiation. Misalignment here creates friction and erodes trust.

In summary, pricing should reinforce your product’s story and position in the market. Whether you’re the affordable disruptor, the premium choice, or the balanced option, your pricing must consistently communicate that message to customers.

By avoiding these pitfalls and crafting a thoughtful pricing strategy, you can better serve your customers, strengthen your market position, and achieve sustainable growth.



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P.S. Got a burning sales question or a negotiation nightmare keeping you up at night? Submit it HERE and we’ll tackle it in a future edition.