SaaS Pricing Tactics for a High-Inflation Environment: How the Internet Transformed Money and Investing


Hatched by Glasp

Sep 19, 2023

4 min read


SaaS Pricing Tactics for a High-Inflation Environment: How the Internet Transformed Money and Investing

Inflation is a pressing concern in today's economy, with levels at their highest in 40 years. This has created a different environment for technology businesses, impacting their valuations, margins, and cost of capital. Inflation also has a significant influence on software and SaaS prices, which historically have lagged behind the Consumer Price Index (CPI). While consumer goods have experienced inflation, software prices have remained stagnant, leading to a decrease in software contract values.

Moreover, tech stocks have historically performed poorly during times of elevated inflation. Software companies, in particular, face increased costs in hardware, infrastructure, and labor. This puts pressure on margins and cash flow unless proactive measures are taken to keep pricing current with the times. Properly setting prices presents an untapped opportunity for SaaS providers to extract more value from their offerings. Companies often possess pricing power through market growth and product improvement that they haven't fully monetized yet.

To make the most of this pricing opportunity, ScaleUps can explore various paths. They can consider changing their price metrics, packaging, or overall pricing structure. The work of determining pricing is an ongoing process, and it becomes even more critical in today's high-inflation environment. One actionable step is to add price escalation terms to contracts, ensuring that prices can keep pace with costs and product investments typical of most ScaleUps.

Another action to take is to review pricing carefully, considering how market reception may be affected by price changes. While this can be an effective measure, it's crucial to strike a balance between maintaining profitability and maintaining customer satisfaction. Additionally, for companies selling a portfolio of products, focusing on premium options can improve margins and cash flow. Premium products often offer higher margins and generate higher average contract values.

In addition to SaaS pricing tactics, the internet has had a profound impact on the traditional banking system, effectively turning "money" into a hobby for many individuals. Just as Instagram turned everyone into a photographer and Twitter turned everyone into a writer, the internet has sparked a transformation that is turning us all into finance enthusiasts. The widespread accessibility to investing platforms and easy access to information has made it possible for anyone to dabble in finance.

The ease of investing in stocks, cryptocurrencies, and sports betting has created a new wave of investors who are motivated by the desire to secure their financial future. This is particularly true for individuals who may not have grown up with substantial wealth and have a strong inclination to save and invest responsibly. Traditional investment vehicles like 401ks, Roth IRAs, and index funds were once the go-to options for long-term financial planning. However, the low barrier of entry into the world of investing has shifted the approach for many.

The allure of quick profits and the opportunity to achieve the American Dream through investing has captivated this new generation of finance bros. With the uncertainty surrounding Social Security and pensions, young investors believe that the only way to secure their financial future is by actively investing. The newfound accessibility to markets and the potential for exponential growth has fueled this motivation.

Despite the excitement and potential for substantial profits, some investors still question the wisdom of certain investment trends. Take the rise of non-fungible tokens (NFTs), for example. While individuals like Jeff have made significant profits in a short period, they find themselves questioning the true value and sustainability of such investments. The more they delve into the subject, the more doubts arise, leading to a sense that these investments may be nothing more than a passing fad.

In conclusion, managing pricing effectively is crucial for SaaS providers in a high-inflation environment. By reviewing pricing strategies, considering price escalation terms, and focusing on premium products, ScaleUps can optimize their pricing power and improve margins. Simultaneously, the internet has democratized finance, turning investing into a popular hobby for many. While the accessibility and potential gains are enticing, investors must approach these opportunities with caution and skepticism, ensuring they make informed decisions rather than following trends blindly.

Actionable Advice:

  • 1. Regularly review and adjust pricing strategies to keep pace with inflation and market dynamics.
  • 2. Consider incorporating price escalation terms into contracts to maintain profitability amid rising costs.
  • 3. Approach investment opportunities with careful consideration, ensuring a thorough understanding of the underlying value and long-term viability.

Remember, while the internet has opened up new possibilities, it's essential to approach finance and investing with prudence and a long-term perspective.

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