Five SaaS Pricing Models & Three Strategies
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There are various factors determining whether the products will sell. As a SaaS company, you can’t do without a user-friendly website. Loading speed and navigation are also essential to avoid high bounce rates.
Another trend of the 2020s is the predominance of mobile traffic. Many companies optimize their websites by converting them into progressive web apps (PWAs) or create native apps to ensure user comfort. Luckily, the more technologies advance, the more solutions emerge to streamline development. Examples include ready-made templates providing an easy way to develop a PWA.
Product price also plays a crucial role in a purchase decision. That’s why you need to determine your pricing model. In this article, we’re going to explain the two most essential components of competitive SaaS pricing:
- pricing models to strike a balance between value and revenue;
- pricing strategies to meet your growth objectives.
Five SaaS Pricing Models and Examples
There are five major SaaS pricing models, such as:
1. Flat-rate pricing
It’s perhaps the most straightforward approach to market a SaaS service. You offer a single product, a single set of features, and a single price. You typically get paid every month.
2. Usage-based pricing, or pay-as-you-go model
This pricing model revolves around product usage. The more you use, the more your bill increases. Instead, if you use less of the service, you pay less.
3. Tiered pricing
The essence of this approach is to provide a variety of “packages” with a different set of features and prices. You can have as many packages as you like, but the average number is three or four. The sections generally represent low, middle, and high price points. They meet different customer needs, so clients can pick what suits them best.
4. Per-user pricing or per-seat pricing
It’s when a company sells access to its products or services to individual users at a fixed price. If a customer needs two accounts, they pay for two; if they need 100, they pay for 100.
5. Freemium
This pricing model enables users to utilize the basic version of your product or service free of charge. They can proceed to the tiered offerings if they’re satisfied with the tool. A vivid example is a free demo by PayTabs. The company provides SaaS solutions for secure payment management. You can register for it to test the tools before switching to the full version.
Three SaaS Pricing Strategies
- Penetration pricing
When using this method, the company first sets prices very low to attract customers and increase demand, even at the firm’s expense. The company then raises prices, hoping to keep the same number of clients.
- Skimming pricing
If you choose a skimming pricing strategy, you deliberately overprice a new product. It helps to obtain super profit to pay off the investments spent on the development, production, and product launch. After that, you gradually reduce the price of the product.
- Value-based pricing
This approach means that the SaaS company should balance the price and the product’s value when setting the price.
To Sum Up
We’ve gone over five different SaaS pricing models and three strategies. But there is no ceiling on how you can develop your pricing plan. While you may know which model is best for a given product, there’s no need to choose one and stick with it.
Today’s data-driven world allows companies to test multiple patterns. Thus, you’ll see which one meets the requirements better and makes sense. Find even more insights by subscribing to blog alerts and receiving tips from one of the top payment processing providers, PayTabs.
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About the Author
Alex HusarAlex Husar, chief technology officer at Onilab. For over 8 years he’s been working on Magento migration and development projects as well as building progressive web apps (PWAs). Alex is an expert in full-stack development who shares his expertise and in-depth knowledge on modern technologies and Computer Software Engineering.
