Top 6 SaaS Pricing Models and How to Choose the Right One
Getting your pricing right is a vital step to make your SaaS business truly lucrative. So how to build a SaaS business in such a way?
Pricing is the first thing any business owner should think about — even before starting a SaaS business. The basic idea behind a SaaS pricing model is to set a specific cost for a specific product or service. It is vital to remember that the pricing model is not only about income but also about the value of your software.
Let’s consider six of the most effective SaaS pricing strategies:
- Freemium: the platform can be used for free, but with fewer features.
- Feature-based pricing: the platform includes packages that contain distinct features.
- Flat-rate pricing: users pay a fixed price for using your software, e.g. a fee can be charged monthly or once a year.
- Per active user pricing: allows companies to purchase software for widespread use by only paying for active users.
- Tiered pricing model: allows users with varying requirements and budgets to decide the most suitable set of services for them.
- Per-storage pricing model: users pay for the space they need.
Sometimes, it might be hard for a SaaS company owner to decide on the proper pricing approach. Here are the most efficient practices you can follow to find a pricing model that aligns with your business goals:
- Conduct market research.
- Find a balance between the value your customers get from using your software and the revenue you’re going to earn.
- Knowing your LTV/CAC ratio allows you to understand whether your business is ready for sustainable growth.
- A simple and clear SaaS model is a good chance to increase purchases.
- It is possible to mix different SaaS billing models according to your audience and see what works for your business.
- Measure your results.
- You should always analyze your target audience, do enough research, choose the most appropriate pricing model for SaaS, and test what works for you.
Sometimes, SaaS cost can be a determining factor in buying your services. Thus, a well-thought-out and affordable price can help you beat the competition.
You can learn more about various pricing SaaS models in one of our recent articles Top 6 SaaS Pricing Models and How to Choose the Right One, which also contains the comparison of the most popular pricing strategies and tips to choose the right pricing.