The Best 7 SaaS Pricing Models out there + Great Examples
The hottest pop-up on SaaS Pricing Page is, of course – a free trial! But a free trial for a week, two weeks, or a month still does not solve the problem.
Which SaaS pricing model to go with?
Once we have decided on a SaaS Pricing strategy (spoiler: combined pricing)
Let’s get started: here are the top 7 SaaS Pricing models
- Please-Commit Pricing 🙏
- Feature-Based Pricing
- Per-User Pricing
- Per-Your Client Pricing
- Flat-rate Pricing
- Basic is always free
- Usage-Based Pricing
The Pros and Cons of each model are below + examples from the best SaaS companies in the world.
SaaS Pricing Model 1: Please-Commit Pricing
Please-Commit Pricing is all about saving money. if you commit of course. Amazon’s Prime Service presents two prices to a regular customer. Price per month and Price per year (almost 25% off)
Pros Please-Commit Pricing
- Easy to implement. The discount is given when committing to a year or more.
- A commitment of a one-year or more can assist in estimating the company’s future profits and thus enables proper budget planning.
- Clients who commit for a one-year or more are loyal customers. Therefore it is possible to offer them additional products, services, or features for an extra charge.
- Potential Clients can easily understand the difference in price between the two options, so it is easy for them to decide on a one-year commitment.
- Little surprises. When Clients commit to a one-year, you can surprise them during the year with updates and improvements to the product/service (such activities increase customer loyalty)
Cons Please-Commit Pricing
- The commitment goes both ways. The company also promises to provide an excellent product/service throughout the year.
- A one-year or longer commitment focuses less on the value of the product/service for the customer and more on the price. Thus it is difficult to get the customer to spend more money on extras, like new features or various benefits.
SaaS Pricing Model 2: Feature-Based Pricing
Slack (a chat system for organizations and companies) offers a price for a basic package that contains a limited number of features. As more features are added, then the package price increases accordingly.
Pros Feature-Based Pricing
- No surprises. Clients know exactly what they are paying for.
- Encourage clients to upgrade. Clients can easily compare the packages offered, and if the additional features are relevant to them, they will upgrade.
- Feature-Based Pricing is one of the models based on a value-based pricing strategy. Clients can appreciate how much each feature is necessary for their business or not.
Cons Feature-Based Pricing
- Some SaaS companies (for example, Data Storage companies) offer packages with a long and cumbersome list of features. If comparing prices between packages is tedious and incomprehensible, clients can look for less detailed and easier-to-understand alternatives.
- Pricing is unclear to Clients . Why a, b, c cost more than d, e. When there is over-detailing, customers do not always understand the pricing, and this can hurt credibility.
SaaS Pricing Model 3: Per-User Pricing
The Per-User Pricing model is one of the most popular SaaS pricing models where the main clients are business clients and not private. Monday offers a project management SaaS product. At the pricing page entrance, customers are asked to indicate the size of their team.
Pricing changes according to the amount of “seats” you choose. The number of users determines the cost.
Pros Per-User Pricing
- Easy to understand. Customers understand that every user raises the price.
- As there are more users, some SaaS companies lower the cost per user and thus encourage usage.
- It is possible to know in advance the expected profit from each company.
- Encourages your salespeople to find big clients.
Cons Per-User Pricing
- The payment increases as more people use the product. Therefore the leading Value in Pricing refers to quantity and ignores additional important Values to the clients.
- Not necessarily encouraging use. Customers start calculating which employees “really” need the product. In short, they get stingy.
SaaS Pricing Model 4: Per-Your Client Pricing
Per-Your Client Pricing is the most common pricing in newsletters, text messaging companies, and other companies that serve businesses whose customer base is substantial (e.g., e-commerce sites). The well-known Mailchimp company offers a system for managing and sending newsletters. The first question asked on the pricing page is: How many contacts do you have. The price goes up as the mailing list grows.
Pros Per-Your client Pricing
- Easy to understand. Customers understand that they are paying for each of their customers, for each contact.
- As you have more customers and, as a result, more contacts, some SaaS companies lower the cost per contact and thus encourage product use
- Encourages your salespeople to locate companies with a large customer base.
- Encourages start-up companies to experiment with the product initially because their customer base is small and the costs are low. And in the case of Mailchimp – for free.
Cons Per-Your Client Pricing
- The payment increases as the clients themselves have more customers. Therefore the leading Value in Pricing refers to quantity and ignores additional important Values to the clients.
- Start-up companies are moving to your competitors as the number of their clients increases to lower costs.
SaaS Pricing Model 5: Flat-Rate Pricing
A Flat-Rate Pricing is one of the easiest models for SaaS companies and for clients. A Flat-Rate Pricing is usually made in SaaS companies that serve more to private customers and less to business customers.
An example of a company that is using Flat-Rate Pricing is Skillshare. Skillshare is a SaaS company that offers online courses in a variety of fields.
Pros Flat-Rate Pricing
- Easy to understand, no information that customers supposedly missed.
- No surprises. There is a Flat-Rate Pricing, and there is no dependence on the way of use, the number of users, or the time of usage.
- The product is easy to market because there is no need to elaborate on its use, the number of users, or usage time.
- Encourages use. Customers are not afraid to try the product and are not worried about additional costs.
- When we use Flat-Rate Pricing, it can assist in estimating the company’s future profits and thus enables proper budget planning.
Cons Flat-Rate Pricing
- Price may be a barrier to entry. When we use Flat-Rate Pricing, if customers think it is too expensive, they will give up using the product in the first place because the price is Flat-Rate, and there is no way to influence the price.
- We leave money on the table. Some customers were willing to pay more for the product or for additional offers.
SaaS Pricing Model 6: Basic is always free Pricing
Basic is always free Pricing, basically allowing the use of the basic product for free. Each company defines the basic product differently and depending on the type of product. Zoom defines the basic product as a video call for up to 40 minutes per group or free of charge for two participants.
Pros Basic is always free Pricing
- It encourages use. If free, why not try it?
- It encourages use. Once the product is free and the customers are satisfied, then the frequency of use of the product will increase. Customers who use the product regularly are loyal customers. Therefore it is possible to offer them additional products, services, or features for an extra cost.
- Free advertising. Free products are passed on by word of mouth more easily. Customers are happy that it’s free and tend to recommend it to friends and colleagues.
Cons Basic is always free Pricing
- In a perfect world, customers will always be loyal. But we are not in a perfect world. There is no guarantee that they will remain loyal even though the product was offered for free. Customers will try to switch to another free competitor if they need to upgrade.
- We leave money on the table. Some customers were willing to pay for the base product.
- It’s hard to go back. If you want to start asking customers to pay for the base product, some customers will find a lot of resistance and will try to move on to competitors.
- It’s expensive for the SaaS company. The company pays for the customers. Well, it’s good that we have Venture capital funds no 🙂
SaaS Pricing Model 7: Usage-Based Pricing
Usage-Based Pricing, as it sounds. Customers only pay for the use, and the cost increases with the usage. Twilio offers a build-in system for contacting customers. For example, by text messages, emails, chats, WhatsApp, etc. Customers pay for using the API.
Pros Usage-Based Pricing
- Encourages to try the product because the payment is only on usage. And customers tend to be optimistic and less appreciative of their product usage.
- Easy to understand. The customers know precisely on what they are paying for.
- Easy to understand. Customers understand that usage changes the price.
- As there is more use of the product, some SaaS companies lower the add-on cost and thus encourage usage.
- In SaaS Usage-Based Pricing, there are no long-term commitments and contracts. The price varies depending on the usage.
Cons Usage-Based Pricing
- Excessive preoccupation with cost. Customers are surprised every month anew. Once the cost is constantly changing, it is difficult to keep track of costs.
- Therefore the leading Value in Pricing refers to usage and ignores additional important Values to the clients.
Models for SaaS Pricing is not an exact science. The models can fit together. For example, MailChimp offers a “Basic is always free” Pricing model combined with the “Per-Your Client” Pricing model. It is advisable to check and examine the pricing as a routine. Always A/B Testing Baby!
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