Your SaaS pricing informs the story of how valuable you are, and it should do so in a way that makes consumers require you to buy from you. Every SaaS founder should worry about whether or not their prices are right. Your SaaS prices should reflect the value of your product while still being affordable.
Pricing is the most important thing to create or break your SaaS business. In this article, we’ll talk about the different pricing models for SaaS and their pros and cons, so you can make a decision that’s right for you.
Setting the Scene for SaaS Pricing
Before you get too confused by all the different ways you could price your SaaS product, make sure you do a thorough analysis according to these factors. That means getting in shape:
- How may you position yourself in the market? What type of clientele do you require to attract? How many customers do you desire to serve with your SaaS?
- How will various tiers of service help them?
- How long will your customers stay with you, whether you serve businesses, direct customers, or both?
Thinking about these things will assist you in deciding how much your SaaS is worth and offer you the best view of how to price it in tiers and bundles. Many businesses must return to these over time to modify their strategies to fit the market’s needs.
1. Per User Pricing
A common pricing model for SaaS is per-user pricing, in which you pay different amounts based on how many people use the service. It’s similar to how many companies license their physical software, but it’s not flawless.
It means that fewer people in a company will be able to learn and love your software. The model also limits the number of potential active users, which is bad for your SaaS company’s health. Pricing by a user can work sometimes, but most of the time, an approach based on value is better.
2. Tiered User Pricing
This is similar to the method known as tiered user pricing, in which the number of allowed users goes up in bands instead of single digits. For example, one SaaS company might have a single cost for up to 5 users, a different one for up to 10, and so on.
This faces some of the same problems as per-user pricing, and it’s not a good deal for people such as solopreneurs that may need more features but not more users. If you offer tiers, consider how many options you offer and how you show them, as this could affect how much cash you make.
3. Per Storage Pricing
Companies that offer cloud storage often charge different amounts of money for different amounts of storage. For example, Google gives you 15GB of storage space for your whole account. Companies like Dropbox give you a certain amount of free storage space, after which you have to pay. This lets people try out a service and get to know it, which may make them more likely to upgrade when they reach their limit.
4. Feature-Based Pricing
Another common way to set prices for SaaS is to charge different amounts for different services and upgrades. For instance, say you rush a business that sends out bills. Then, your customers will likely be interested in how many customers they can handle or how many invoices they can send. You can decide how to arrange your pricing tiers depending on what you think is most important.
5. Pay as You Go
Apprenda says that the pay-as-you-go pricing model for SaaS means that customers pay for the service based on how much they use it. As an example, look at the prices for Amazon Cloud Server. The problem for customers is that they can’t be sure how many resources they’ll use, making it hard to figure out their likely costs. But this can work exceptionally well for customers whose service needs change over time.
6. Roll Your Own
One way to make your service package more appealing to consumers is to let them personalize it. That’s one of the options Hiveage gives you, so you can choose the extras you want. This professional service costs money, but then you get your bundle. The company says this virtual “sushi train” greatly helps small businesses.
7. Freemium
Another way is to give away great features for free and then offer a variety of paid upgrades. For example, LinkedIn’s free version lets you do a lot, but you can pay to get more out of it. There are different upgrade packages for job seekers, recruiters, business owners, and salespeople, each meeting their specific needs.
This works nicely if your add-on services are useful to those you are targeting, but as Hubstaff found out, most people might not need or want to upgrade. They concluded up with many anonymous users who needed a lot of help and took up many of their resources. As a result, Hubstaff cut back on the services that the free plan could offer.
8. Flat Rate Pricing/Subscriptions
Certain businesses charge the same flat rate for each paid service when you go above and beyond what is free. This is what Buffer’s Awesome plan does. But the company also has tiered pricing for its Business and Agency plans. This is an easy option for customers, making it simple for SaaS companies to know how much money they’ll make.
9. Free, Ad-Supported
Another method to set your cost is to make your main product free but charge people to access it. Wave Accounting’s accounting software for small businesses is free, but the customer dashboard has ads for associated goods and deals in the sidebars.
If you use this in your SaaS, you might earn money and win your customers’ love. Wix is another company that has made a freemium ad-supported tier work well. When you sign up, you are spontaneously placed on the free plan. You can improve to a premium plan if you require removing ads and getting more characteristics.
10. Pay Per Active User
Slack has been causing waves in a pricing plan based on an organization’s active users. This solves some problems with the first SaaS pricing approach in this list. Slack has a free plan and a few paid plans with different features. One unusual characteristic is that companies commit to a plan, but Slack will give them money back if they have fewer members than they thought. It says that this new idea could change the prices of SaaS.
