How Interest Rates Affect SaaS Pricing – and How to Communicate Changes to Clients
Interest rates continue to rise, which can pose challenges for SaaS companies, forcing vendors to raise prices in order to stay profitable. In today’s market environment, with many customers working within tight budgets, it’s essential to communicate pricing changes clearly and offer customers solutions that make them feel respected, heard, and able to work with higher rates.
The impact of rising interest rates on SaaS pricing
Higher interest rates can impact every part of a SaaS company’s finances due to the increased cost of capital. This can affect marketing and advertising, subsequently raising customer acquisition costs and lengthening payback periods. Higher-cost capital can also increase operational costs, product development expenses, and impact a company’s ability to invest in growth initiatives. As interest rises, SaaS companies may be compelled to reassess their pricing models in order to remain profitable, competitive, and equipped for growth. At the same time, vendors must find ways to maintain positive client relationships.
Adjusting your SaaS pricing strategy in response to rising interest rates
A B2B SaaS company’s potential is shaped by its pricing strategy – the ideal pricing strategy should be competitive and reflect excellent value. To build a strong pricing strategy:
- Understand your costs and margins
- Research the market
- Know your customer
- Consider value-based pricing
Communicating SaaS pricing changes to customers
Talking about flat rate pricing increases
While flat rate pricing is straightforward, increases to a flat rate in response to rising interest rates can be alarming to customers. If the price increase is significant, it could cause customers to cancel their contracts and look for another vendor. In the case of a flat rate increase to B2B payments, it’s essential to communicate the reason for your increase clearly, and to explain to your customer exactly how the rate increase reflects the current market.
Discussing tiered rate increases with customers
When increasing SaaS prices within a tiered model, vendors should anticipate that some customers will move to a lower tier of service in response. In order to make the transition smooth, vendors should provide hands-on customer support that can help customers make the strongest choice for their future – stay at their current tier for more money, or move to a lower tier to stay within budget?
Handling usage-based price increases with customers
Usage-based price increases may result in less usage by your customers. If your customers reduce their usage of your platform, they may quickly move away from using it altogether, which can pose a risk for vendors. When increasing product price within a usage-based pricing model, vendors should stress the value of your product and address key pain points for customers.
Understanding what SaaS price increases mean to customers
With interest rates rising, customers and vendors alike are working within tighter budgets. When a SaaS vendor increases their prices, customers may struggle to be able to make subscription payments, and may choose to terminate service.
The solution is not for SaaS vendors to shoulder the additional expense, but at the risk of losing customers, it can be difficult to find the right solution.
Helping B2B SaaS customers manage price increases
Although SaaS vendors have no choice but to raise prices in many cases, vendors also have the opportunity to make it easier for their customers to manage price increases.
Offering flexible payment terms allows vendors to meet customers where they’re at with custom payment schedules.
When a 12-month contract is too much to pay for upfront, B2B BNPL (buy-now-pay-later) platforms streamline B2B payments and make it easy for customers to choose a payment schedule that works for them.
Capchase Pay seamlessly integrates into the checkout process, allowing customers to select monthly, quarterly, or custom payment options, making a more expensive contract affordable when payment for a full year’s subscription is too costly.
Customers for whom upfront payment isn’t an issue can also benefit from the use of a B2B BNPL platform. Some customers may wish to remain liquid in the present in order to fund growth, or may need cash on hand to purchase hardware, cover operational costs, and more.
Boosting ARR with Capchase, even with rising interest rates
Capchase Pay helps B2B SaaS vendors boost ARR and navigate the challenges of interest-based price increases by:
- Reducing the need to rely on discounts
- Pushing stalled deals through the finish line
- Giving customers options that work for them
Working seamlessly with your CRM, Capchase Pay allows vendors to track B2B payments from an intuitive dashboard, while the Capchase Pay team manages billing and collections behind the scenes on the vendor’s behalf.
Most importantly, Capchase pays vendors full ACV upfront, allowing vendors to immediately invest in growth.
Conclusion
While rising interest rates may force SaaS vendors to raise prices, B2B payments can still be seamless with a B2B BNPL platform.
Capchase Pay can reduce the risk of customer cancellation upon the introduction of price increases, improve customer loyalty, and allow both vendors and customers to power growth with cash on hand.
Ready to get started with Capchase Pay? Talk to our team and find more here!
