Choosing the perfect pricing strategy can be one of the hardest parts about selling your SaaS.
Sometimes, the only way to truly know is through trial and error. Fortunately, ServiceBot makes it a lot easier for you to experiment with different pricing models -- you won't have to write any new code because the software generates the pricing page embeds for you.
This is by no means an exhaustive list of pricing models; merely an outline of some of the more common strategies employed by SaaS companies to help you make an informed decision about which model might work the best for you.
Charging a single, flat subscription rate may be the simplest way to communicate your pricing to potential users, but the "one size fits all" sizing may not fit everyone. Charging all of your users $50 a month for the same service might work for a lot of people depending on what service it is, but there will be potential customers that would be willing to pay $100 based on how much they will use your service, as well as users that would only get $20 worth of usage out of your product each month.
- Simple, easy to communicate.
- Potential users won't be intimidated by complicated tier lists, and they won't feel they are getting an incomplete version of your product by having a lesser tier.
- Lack of flexibility and customization to tailor to the variety of user needs.
- No way to scale for "heavy" enterprise-level users that will be getting a lot more use out of your product, or "light" users that may not need all of the features and would prefer a lower rate.
The "pay as you go" pricing model charges based on a metric, such as per transaction or per user. For example, a billing service may charge a flat fee plus a percentage for each transaction, or a project management service might charge per active user. Another example is seen with cloud computing, where the metric is based on gigabytes transferred or API requests.
- Removes barriers for small startups or "light" users interest in your service.
- Users will not be over- or under-charged based on their usage of your service.
- Difficult to predict revenue as customer usage fluctuates.
- With no upfront charges, it may take longer for a new SaaS to begin making money.
Different from a free trial, freemium offers a bare-bones version of the software at no cost, with the ability to pay to upgrade to a better version, or pay for individual features. Freemium can be a dangerous game; although it is a great way to get your name out there and has been used successfully by software giants, smaller SaaS startups may not be able to afford it and their profits will be endangered.
- Great way to get your software's name out there and adopt a respectable user base.
- When many of the SaaS giants are offering freemium, it may be the only way to stay competitive.
- You can see it almost like an extended free trial. If a free user likes your service, you may be able to convert them into a paying user.
- Users may be less inclined to pay for a service they have always been able to get for free.
- Free users drain your team's resources which smaller businesses may not be able to afford.
Tiered pricing is one of the most common pricing strategies adopted by SaaS companies. Offering more features and better value for each level or tier of your product gives users more options to choose which tier fits their needs the best. The magic number of tiers for most companies is three, but some may have more or less depending on their software. The names of the tiers should make it clear that one level is better than the other. For example, Basic, Standard, Enterprise. Student, Professional, Corporation. Silver, Gold, Platinum.
Tiered pricing is often used in conjunction with one or more of the other pricing strategies discussed here. It's common for a freemium software to offer a "free" tier and then paid tiers of their product. It can even be combined with usage-based or metric pricing; for example, a communications platform may offer your team a version for $10 per user per month, and another tier with upgraded features for $20 per user per month.
- Easier to predict revenue.
- Offers users more options than a single flat price.
- Gives users the option to upgrade or downgrade to different tiers if their usage needs change.
- The more tiers you include, the more complicated your pricing page becomes. Offering too many options can confuse potential users, especially when they have to read through long lists of features.
- On the other side, offering too few options also runs you the risk of turning away potential customers or undercharging "heavy" users.
The most flexible and dynamic way to price your SaaS. Users can customize their package by picking and choosing which features they want, rather than paying for things they won't use. Purely feature-based pricing is not seen too often in the SaaS market; it is more often combined with another pricing model while offering extra features for additional purchase, "a la carte." However, this may also help make your SaaS stand out above its competitors by giving your customers the most freedom with their package. A caveat, however; not all users will see it as being able to pay for the features they want. Some may perceive it as having to pay extra for crucial features.
- Users like flexibility and customization in pricing and knowing they are getting exactly which features they want.
- You don't have to make the difficult decision of which features to bundle in what tiers.
- Separating features tends to cheapen the value of your product as a software made of completed parts.
- Users may end up cherry-picking the best value parts of your software and go to another service for the other components they need.
- Some people may perceive it as paying "extra" for vital components.