Marketing professor Mark Ritson says “sales are not the lifeblood of business, profit is.”
Black Friday and Cyber Monday is nothing if not a discount frenzy. Discounts, it turns out, gnaw away at profit margins and can leave companies worse off. Even with the huge revenue spike.
That’s true for a lot of industries. But maybe not so much for Saas.
Saas can cost a lot to build and launch, but additional customers usually don't cost much to serve. Healthy gross margins are in the 80% range, which leaves a lot of room for discounting.
Monthly recurring revenue and lifetime value can smooth out discounts. If you have strong net dollar retention and a long average customer tenure, any revenue hit you take from a discount can be offset.
Discounts can drive buying decisions. Discounting consumer goods can pull forward a sale that might have happened anyway. Worse, it could mean a lower price sale to someone who would have paid full price. Cannibal discounts ☠️. But in recurring revenue models, bringing a sale forward could mean greater LTV.
There are still risks. Discounts can send signals like a product isn’t that valuable or you’re not that confident in its value.
Discounted rates may bring the wrong customers into your business. Price sensitive buyers — especially those who wouldn’t buy at the regular price — for whatever reason tend to be lower revenue but higher PITA.
It's common for Saas to offer discounted rates on sign up and at the same time be clear that the price will go up. Buying laundry detergent on sale anchors that price and trains people to buy on sale. Buying Saas at a discount usually means it's temporary.
So are BFCM deals a good idea for saas? I think so. If it's a limited time offer and you get creative, it can be a win for everyone. And it doesn't have to be 40/50/80% off.
Hold prices steady, but offer additional features or usage
Add services or increased support attention
With the recurring revenue model and low marginal costs, BFCM can accelerate growth. It can increase market share. It can increase long-term profitability.
If it fits in with your brand and strategy, BFCM discounts or deals are worth testing.
Peter
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