SaaS Pricing Models

Pricing your SaaS product is key to balancing growth and revenue.

Underprice and you leave a ton of money out there, impacting your revenue; Overprice and this impacts your customer acquisition and growth, key for any startup.

How do you get this balance right? As a founder working on a SaaS product, then do know that you are at the optimum.

Pricing is part art, part science. Here are some simple and popular pricing models in SaaS.

Flat: Offer your product, with all its features, at a flat price. Eg. Basecamp Business at $99/month flat. This isn't a per-user fee.

Pay As You Go: The customer is charged based on the actual usage. Popular in infrastructure and platform services (like Amazon Web Services), now being adapted in SaaS. Eg. Razorpay has a per transaction fee model with zero setup and maintenance charges.

Per User: Most popular among SaaS products, customers is charged on the numbers of users enrolled on the service. Eg. Bitbucket has a per-user fee.

Per Active User: Customer can enrol many users, but is charged only based the number of users actively using the service. Eg. Slack checks user activity everyday and stops charging for users who are inactive for a period of time.

Feature Based: Product is priced based on the functionality offered. Eg. Zoho Books offers tiered pricing where each upgrade gives additional functionality to customers.

The list doesn't cover some complex pricing models like the one offered by Hubspot, where the actual pricing is depended on number of users, functionality, features. Each tier is designed to appeal to specific customer profiles (eg. startup, enterprise etc.).

When exploring a new SaaS product for business needs, I quickly hit the pricing page on the website to understand if this would make sense for my business.

Getting the pricing right at each stage is critical for growth of a SaaS product. In early stages, a simple pricing model allows your customers to easily consider options and help drive product adoption.