10 effective SaaS pricing models for maximum product success
6 min 
Pricing models for SaaS can be a tricky topic to navigate. With so many options available, it can be difficult to know which model is best for your business. Whether you’re just starting out or looking to make a change, it’s important to understand the pros and cons of each model before making a decision. The best model for your business will depend on factors such as the type of product you offer, your target market, and your business goals. In this blog series, we’ll take a closer look at the most popular pricing models for SaaS, including subscription-based, freemium, usage-based, and more.
IN THIS ARTICLE
- Subscription-based pricing
- Tiered pricing
- Pay-per-use pricing
- Usage-based pricing
- Freemium pricing
- Active-user-based pricing
- Flat-fee pricing
- Per-seat pricing
- Modules or Per feature pricing
- Total employee pricing
Subscription-based pricing
This is a popular pricing model for SaaS products, where customers pay a recurring fee on a regular basis (e.g. monthly, annually) to access the service. In 2022, SaaS companies have been increasingly turning to subscription-based pricing models. It is appealing to customers because it can offer them a lower, predictable price. In contrast, traditional pricing models can be less transparent and more expensive. Subscription-based pricing can provide a steadier stream of revenue where traditional pricing models can be more volatile, with larger up-front payments followed by long periods of inactivity.
For example, Adobe Creative Cloud is a subscription-based SaaS product that allows users to access a suite of creative tools, such as Photoshop and Illustrator, for a monthly fee.
Tiered pricing
This pricing model offers different pricing options or “tiers” based on the features or level of service a customer wants. Different tiers, with different prices, allow companies to target various types of potential companies, allowing you to tailor the package to certain buyer personas, potentially generating more revenue. A potential customer with a limited budget might be spooked off by a single price package of € 500,-, but would be willing to pay € 250,- for fewer features.
For example, Dropbox offers a tiered pricing model, with different plans for individuals, businesses, and enterprise customers that offer varying amounts of storage and features.
Note; there is a potential risk of a decrease in the margin/ revenue if top-tier customers regularly exceed the allocated service usage.
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Freemium pricing
A freemium pricing model for a SaaS product is a model where the product is offered for free, but there are premium features that can be accessed for a fee. This type of model is often used by companies that want to increase the adoption of their product by making it free to use. Once a user is familiar with (or dependent on) the product and its features, they may be more likely to upgrade to a paid version that includes additional features, users or capacity.
For example, Spotify offers a free version of its music streaming service, but users can upgrade to a paid subscription for additional features such as offline listening and ad-free listening.
Usage-based pricing
Similar to pay-per-use pricing, this model charges customers based on their usage of the services. This can be done by charging for the number of features used, or the amount of data used. The usage-based pricing model is best for customers who want to pay for only what they use. Just like subscription-based pricing, the pricing model is transparent and costs are predictable.
For example, a cloud-based computing service might charge customers based on the number of computing hours they use.
Pay-per-use pricing
This model charges customers based on their usage of the service. This can be a good option for SaaS products that have a high level of variability in usage, or for businesses that only need to use the service occasionally.
For example, a cloud-based storage service might offer pay-per-use pricing, where customers only pay for the storage they use.
Flat-fee pricing
This pricing model charges a single, upfront fee for access to the service. This can be a good option for SaaS products that have a high upfront cost to develop but low ongoing costs to maintain. For example, a project management tool might charge a flat fee for a lifetime licence to use the product.
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Modules or Per feature pricing
In this model, features are the value metric, it separates different tiers according to the feature(s) available in each tier. A higher number of features usually comes at a higher price. The benefit of this pricing model is that users can opt for a more expensive tier because a feature they need is only available in a certain tier. Choosing what features to add in a certain tier requires a strong knowledge of the (potential) customers. Causing retention to drop if users are paying for a lot of features they do not use.
Per-seat pricing
This pricing model charges customers based on the number of users or “seats” that will be using the service. Unlike the active-user-based pricing, the customer pays for all seats, including the ones that are not used. This can be a good option for SaaS products that are designed for teams or organisations, such as collaboration tools. It might not be an interesting pricing model for fast-growing businesses, those companies would be more interested in active-user-based pricing, they can extend the number of users and not worry about purchasing enough seats every time.
For example, Slack charges per-seat pricing for its team communication and collaboration platform.
Active-user-based pricing
Many SaaS companies (particularly those targeting the enterprise) encourage yearly billing cycles. For a customer, this could mean that they pay for all their employees, up-front – while they don’t know if all of their employees are going to use the software. Per active-user-based pricing is a solution for this; companies can sign-up as many users as they want, knowing that they will only pay for the active users.
Total employee pricing
This pricing model is based on a customer’s total number of employees. Customers with more employees will be charged a higher price. This is because businesses with more employees tend to use more of the product and need more support. This pricing model is simple and easy to understand and encourages customers to use the product more efficiently.
Ultimately, the best pricing model for your SaaS product will depend on your target market, your business goals, and the unique features and value of your product. It may be helpful to experiment with different pricing models to see which one works best for your business. Need any advice? We’re here to help!
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