Pricing Models for SaaS: Which One is Right for Your Business?

You’ve developed an amazing SaaS product ready to disrupt the market. But now comes the million-dollar question: How do you price it?

Getting your pricing model right isn’t just about crunching numbers—it’s about aligning your product’s value with your customers’ willingness to pay. In this guide, we’ll examine ten popular SaaS pricing models, breaking down the pros and cons of each to help you find the perfect fit for your business.

1. Pricing at a Flat Rate

Provide a single product with a fixed price and a set of features. Think of it as the pricing model equivalent to an “all-you-can-eat buffet.” For example, Basecamp, a project management tool we love and use at crowdspring, charges a flat $99 monthly for unlimited projects and users. It is simple to communicate and predict revenue due to this simplicity. However, it might make it harder for you to meet the various requirements of your customers and cut down on opportunities for upselling.

2. Tiered Pricing

Offer a variety of packages, each with its own set of features and prices. It’s like choosing between economy, business, and first class on a flight. HubSpot employs this model to cater to a range of customers—from startups to large enterprises. Tiered pricing is excellent for targeting different customer segments and offers clear upgrade paths. Just be cautious not to overwhelm potential customers with too many options.

3. Pricing Based on Usage Charge customers based on how much they use the product

This model, also known as “pay as you go,” is similar to utility bills in that you only pay for what you use. Users at Twilio, for example, are charged per text message or call minute. This approach lowers the barrier to entry and scales with customer usage, but it can result in unpredictable revenue and heavy reliance on customer growth.

4. Per-User Pricing

Charge according to how many people use the product. This simple and straightforward model is popular among SaaS companies. As more members of a team sign up, Asana charges more per user. While this facilitates revenue projections, rising costs may discourage businesses from adding additional users.

5. Pricing per Active User

Like per-user pricing, it charges only for users who actively use the product.
Slack is a prime example here, billing organizations only for active team members each month. This model is attractive to larger businesses with fluctuating user activity but may not be as beneficial for smaller teams.

6. Per Feature Pricing

Price varies based on the features and functionalities a customer chooses.
It’s similar to making your own sandwich, except that you pay more for more toppings. QuickBooks offers different pricing tiers based on available features. This model encourages customers to upgrade for advanced functionalities but requires a delicate balance to avoid alienating those who feel essential features are locked behind higher-priced tiers.

7. Freemium

Offer a free basic version of your product, with the option to upgrade to a paid version for advanced features. Consider implementing a recurring billing system to streamline the upgrade process and enhance the user experience.

MailChimp gives users the free ability to send emails to a limited number of subscribers. Freemium models are excellent for attracting a large user base and generating leads but can lead to high support costs and challenges in converting free users to paying customers.

8. Volume Discounts As more items are purchased

The price per unit goes down. It’s the Costco model—the more you buy, the less you pay per item. For up to 10 users, a SaaS company might charge $10 per user, but for 11-50 users, they might only charge $8 per user. This encourages more substantial purchases and may increase overall revenue.

9. Feature Bundle Pricing

At a discount, bundle multiple services or features together. Adobe Creative Cloud offers access to a suite of creative apps at a combined price lower than purchasing each app individually. This model encourages customers to use your products in more ways, but careful packaging is needed to make sure they see real value.

10. Role-Based Pricing

Charge different prices based on the user’s role within an organization.
Administrator accounts may cost more than standard employee accounts on an HR software platform. This aligns pricing with the value different users receive, but if not communicated clearly, it can complicate billing and confuse customers.
Choosing the right pricing model isn’t just a financial decision—it’s a strategic one that affects how customers perceive and interact with your product.
By understanding the nuances of each pricing strategy, you can tailor a model that resonates with your target audience and supports your business goals. Remember, it’s okay to experiment and adjust your pricing as you learn more about your customers’ needs and behaviors.