Go-to-market strategy for embedded payments
This article was originally published at https://www.rainforestpay.com/blog/go-to-market-strategy-for-embedded-payments/
Embedded Payments Pricing Guide for Vertical SaaS Platforms (Part 6 of 6)
This post is part of a series on the optimal product, positioning, and pricing strategy for embedded payments.
SaaS companies can easily miss out on the full revenue potential of embedded payments because the payments implementation or go-to-market strategy is a little off.
This series will highlight the different factors in building a successful payments strategy and help you determine the best path to success for your particular platform.
Launching (or re-launching) embedded payments
Our team of vertical SaaS and consulting veterans has guided payments strategy for 100+ SaaS platforms.
These are their top go-to-market insights.
Start high and lower if needed
You can always decrease the price. It’s harder to increase it. Start higher and go from there. However, make sure your merchant contract gives you the flexibility to increase pricing, upon notice.
Use “test, measure, learn” processes
Promote an “early adopter” rate and see what questions you get. Use this information to adjust positioning, messaging, and, if needed, pricing. The “start higher” principle matters here.
Position payments as an obvious upgrade
If you’re launching or re-launching payments, you’re likely doing one of the following:
In all these situations, you are investing in your payments product to deliver a superior merchant experience for your customers. You’re providing in-context payment reports, easy reconciliation, and one-stop support – all to benefit the merchant. You are giving merchants a feature or improvement that they’ve been asking for, or at least secretly wanting.
This is your right-to-win. Of course merchants want to use the new embedded payments product! Infuse this energy into every piece of communication about the payments launch.
Behind the scenes
These details may not be front and center for your launch, but tackling them now prevents confusion later.
Merchant agreement terms
With fully embedded payments, you own the merchant relationship. Consider adding key contract terms to help manage the payment processing relationship.
Refunded payments
When a merchant refunds a credit card payment to an end customer, it might not make sense to apply the same pricing as when merchants get paid. Here are some recommendations:
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Presenting the payments pricing
Price isn't just a number. The way you present it can help or hinder adoption. Follow these best practices to make your payments price inviting.
Keep the pricing as simple as possible
Complexity sounds expensive. For example, 2.65% + $0.45 + 0.50% Amex surcharge + 0.40% for subscription billing, etc. sounds more expensive than 3.5%. Complex pricing also creates more complicated reporting, more difficult reconciliation, and more support requests related to billing. Simple pricing creates a better merchant experience.
List payments pricing with core software pricing
Payments should be listed with your software pricing. Don’t make it a separate discussion or decision. Any time the payments product is separate from the rest of the SaaS product, the value of payments is being decoupled from the value of the core SaaS product. Embedded is the value-add, and that means that payments and the core SaaS product are most valuable together.
Limit pricing reviews to large merchants who are serious about the solution
When handling merchants requesting a pricing review, use a tiered approach to avoid doing a true cost comparison for smaller merchants. This type of analysis is labor-intensive and can be confusing. Allow your front line folks to offer a small discount without the statement review, and require volume thresholds before considering a statement review. Gate the review behind managers, and ensure that merchants are confident in the solution before committing to a pricing review.
Maximizing revenue
It’s easy to overcomplicate an embedded payments launch (or re-launch). But it’s not necessary. Instead of overanalyzing, do these three things. In order.
1. Pick a price and run with it
Don’t overthink it. Pick a price and promote it to potential early adopters. Start high and make adjustments if needed. The feedback you receive will help fine-tune your positioning, messaging, and pricing.
2. Focus on adoption over margin
Volume beats margin all day, because volume is only limited by the total available market. Once you’ve found a reasonable price point, shift your focus to driving adoption. You can always come back and optimize costs and pricing later.
3. Optimize interchange
The best way to manage margin is interchange optimization because the majority of card processing cost is interchange passthrough. If you’re paying 2.0% interchange passthrough and 20 basis points (all in) to your payment provider, a 5% decrease in interchange passthrough gets you the same margin improvement as a 50% decrease in payment provider fees. Read more about interchange optimization here.
Next steps
If you’ve been following along, you now have:
Taken together, this tells you what price to advertise payments, as well as the range within which you can discount for high-volume or key customers.