SaaS Pricing War: Lower Prices, Diminishing Returns, and the Competition Explosion

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Read time: 5 minutes.

Welcome to the 156th edition of The Growth Elements Newsletter. Every Monday and sometimes on Thursday, I write an essay on growth metrics & experiments and business case studies.

Today’s piece is for 8,000+ founders, operators, and leaders from businesses such as Shopify, Google, Hubspot, Zoho, Freshworks, Servcorp, Zomato, Razorpay and Zoom.

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Last month, a founder told me: "We're being undercut by 40% on every deal. How do we compete without going broke?"

This isn't isolated. SaaS is experiencing a brutal pricing squeeze and most founders are handling it wrong.

[1] Market Reality

The numbers are stark:

• SaaS pricing inflation at 8.7% YoY, while CAC has spiked 35% since 2022

• B2B SaaS growth has decelerated to 12.2% CAGR (down from 50% in early 2022)

• 55% of deals now collapse due to "budget concerns"

• Market saturation means every feature you build, competitors copy within months

What's happening:
Generic horizontal SaaS is getting crushed. Big players with deep pockets are racing to zero. Smaller players are chasing them down the pricing cliff.

[2] Why Traditional Playbooks Are Breaking

Growth investments show diminishing returns:

• CAC rising while LTV drops, the classic SaaS math doesn't work anymore

• 80% of SaaS features go unused, yet teams keep adding more to justify pricing

• Feature bloat without a clear value proposition = commoditization

The competition trap:

• Matching competitor pricing while maintaining margins = impossible math

• "Everything for everyone" positioning = death by a thousand cuts

• Horizontal expansion meets vertical specialists with 3x willingness to pay

[3] What Winners Are Doing Differently

Move from price wars to value wars:

• Focus on outcome-based pricing, not feature-based pricing

• Measure customer success metrics, not just usage metrics

• At Salesflow: We achieved 73% ARR growth by improving operational efficiency, not cutting prices

Specialisation over generalisation:

• Vertical SaaS targeting specific industries with higher pain tolerance

• Deep integration over broad functionality

• Niche expertise commands premium pricing

Retention and expansion over acquisition:

• Better ROI investing in existing customers than chasing new ones

• Customer success drives expansion revenue—cheaper than new acquisition

• Build genuine brand loyalty, not just utility

[4] Operator Framework for Survival

Audit your pricing foundation:

• What outcomes do customers actually pay for?

• Where do you deliver measurable ROI within 30 days?

• Which features drive retention vs which are just "nice to have"?

Build defensible positioning:

• Pick a lane: industry, use case, or integration depth

• Own a problem completely vs. solving many problems partially

• Create switching costs through data, workflows, or network effects

Focus on unit economics, not growth metrics:

• Optimise payback period before optimising conversion rates

• Track expansion revenue from existing customers

• Measure customer lifetime value by segment, not aggregate

Bottom Line:

SaaS pricing war isn't won by going lower, it's won by going deeper. Companies that survive will specialise, optimise operations, and create genuine value moats.

Stop competing on price. Start competing on outcomes.

The market has too many solutions chasing the same problems. Be the one solution that solves a specific problem better than anyone else.

That's it for today's article! I hope you found this essay insightful.

Wishing you a productive week ahead!

I always appreciate you reading.

Thanks,
Chintankumar Maisuria