Pricing a product is tough. You need to maintain healthy margins, stay competitive, and make sure it’s appealing to customers, all at once. And if the product isn’t selling, the first instinct is often to think “the price is too high.” The truth is, the price itself is hardly ever a problem. The issue could be your pricing model and whether it aligns with the true value your product provides.
In this guide, we’ll walk you through today’s most popular SaaS pricing models and help you figure out which SaaS pricing strategy makes the most sense for your business.
Let’s look at the most popular SaaS pricing models:
- Tiered pricing model
- Flat-rate pricing model
- Usage-based pricing model
- Credit-based pricing model
- Per-user pricing model
- Feature-based pricing model
- Freemium pricing
- Hybrid pricing strategy
The most popular SaaS pricing models
1. Tiered pricing model
Сompanies that use tiered pricing offer multiple plans, with different feature sets, at different price points (e.g., Basic, Pro, Enterprise). This is the most popular pricing model among SaaS companies.
Other models on this list, like credit-based or per-user pricing, usually work within a tiered structure.
Pros of tiered pricing
- Flexible for different customer segments, who may have different usage needs.
- Enables upgrades and expansions as the customer’s needs grow. Offers predictable revenue with set tiers.
- Able to create distinct marketing and sales funnels for target customers of each plan and run granular targeting.
Cons of tiered pricing
- Relies on well-planned and up-to-date packaging of your features into plans, updating this as new features are released.
- Leads to edge cases where some customers feel limited if their needs are between plans or want some, not all, features from higher plans.
- Potential negativity from lower-tier customers who feel the need to upgrade to access essential features.
Best for: B2B SaaS products catering to a broad customer segment with different company sizes and/or use cases.
Example of tiered pricing
Perhaps every software in your tech stack follows tiered pricing. We at ChartMogul are no exception.
2. Flat-rate pricing
The flat-rate pricing model is the most simple to develop and manage. It involves setting a single price for a fixed set of features, regardless of user count or usage level. Everyone pays the same, no matter their size and use case.
Pros of flat-rate pricing
- Simple and predictable for customers, making it easier to sell.
- Easy to administer, without the need to track usage.
Cons of flat-rate pricing
- Limited scalability, as all customers pay the same regardless of usage or company size.
- Missing out on potential revenue from high-usage or larger customers
- Leaves no room for negotiation, except for custom discounts.
Best for: Simple B2C and B2B SaaS products where customers don’t need customization or scaling options. It usually works well with self-service sales.
Example of flat-rate pricing
Super.so, a website builder for Notion pages, uses tiered pricing (we’ll cover that next), with each plan following a flat-rate structure. The software doesn’t require additional resources to accommodate more users or higher usage, making flat-rate pricing a perfect fit in this case.
3. Usage-based pricing
With usage-based or “pay-as-you-go” pricing models, the final price is determined based on the customer’s usage of the product (e.g. data volume, number of API calls, or transactions).
“We’re in this period of high inflation and economic volatility, so an increasing number of SaaS businesses are shifting away from traditional, flat-rate subscription models to usage-based, or value-based, models. And I think that’s the reflection of the changing needs of SaaS users.”
Jenny Millar, Founder at Untapped Pricing
Learn more about the evolution of SaaS pricing in our discussion with three SaaS founders, Jenny Millar, Matt Lerner, and Lucas Bédout.
Pros of usage-based pricing
- Optimized for scalability, allowing revenue to grow with customer usage.
- Can be easier to market as customers only pay for what they use.
- Helps businesses get more value from large clients while keeping prices affordable for smaller customers.
- Gives customers a sense of control over what they pay.
- Aligns usage (customer impact) with value creation.
Cons of usage-based pricing
- Revenue is less predictable due to fluctuating usage.
- Difficult to estimate customers’ usage needs.
- Some customers may have unrealistic expectations and churn when they see the resulting costs are higher than what they were expecting.
- Requires usage drivers to be built into the product, and urgency when issues arise that reduce usage.
Best for: Services with fluctuating demand, like cloud storage or infrastructure, where pricing scales with customer needs.
Example of usage-based pricing
Zapier charges users based on the number of tasks an automated workflow successfully completes. This model works well for the company because of the diversity of their customer’s needs. This way, they can keep costs low for customers with simple use cases while generating more revenue from power accounts with higher demands.
4. Credit-based pricing
In the credit-based pricing model, customers purchase a set number of credits upfront, which they can then use for specific features or actions within the product.
This model is different from pay-as-you-go because customers commit to a bulk purchase of credits rather than paying per unit of usage in real time. Often, companies that offer pay-as-you-go pricing also include a credit-based option, allowing users to choose between accumulating pay-as-you-go charges or purchasing credits in bulk upfront.
Pros of credit-based pricing
- Predictable revenue for the business, as credit packages are purchased in bulk and in advance.
- Flexible for customers who choose how and when to spend their credits.
Cons of credit-based pricing
- Potentially confusing for new customers who may not immediately understand credit allocation and usage.
- Difficult to calculate the right credit amounts and pricing to set profitable credit tiers.
- Tiered discounting is typically expected in credit-based pricing, and enterprise customers may want to negotiate a maximum cost-per-credit before usage begins. This limits your future pricing.
- Can corrode customer perception of your product as being a simple commodity, rather than the evolving SaaS product it truly is.
- Defining the service period of a credit can be challenging (i.e. how long does customer have to use credits) to track, especially when a customer purchases more than they need and request credits to roll-over or be valid indefinitely. This can make calculating recurring revenue very tricky.
Best for: Products where users have fluctuating needs which are able to be planned and committed to in advance. It works well in combination with tiered pricing models.
Example of credit-based pricing
Brevo, an email marketing platform, incorporates credit-based pricing within its tiered plans. Customers specify the number of emails they plan to send each month and pay for the corresponding volume. Users can also choose the pay-as-you-go option and only purchase credits, without committing to any of the plans.
This model works well for email marketing platforms, as businesses can usually estimate their monthly email needs.
5. Per-user pricing
The per-user pricing model is where a company charges customers based on the number of users (sometimes known as seats) accessing the software. Each user is billed at a set rate, which can vary based on the chosen tier or feature package (e.g., Standard, Premium). One common variation is the per- active- user pricing model, where companies only pay only for users actively using the software.
“I predict that half of the SaaS industry will continue to have seat-based pricing. They have been doing that for 25 years, and there’s no sign of change. They’re going to have add-ons and more complex and customizable prices, but they will keep the user-based pricing.”
Lucas Bédout, Founder at Hyperline
Pros of per-user pricing
- Easy for customers to understand and budget for.
- Revenue grows as the customer’s user base expands (in other words, you grow as your customer’s employee count grows).
- Functions well with the land-and-expand go-to-market strategy.
Cons of per-user pricing
- It may discourage wider adoption of your product within the customer’s company if customers worry about the cost per user.
- Potential high churn risk caused by poor adoption or changing workforces.
- Risk of users sharing logins, leading to lost revenue as companies find ways to avoid paying for additional users.
Best for: Products designed for team collaboration or where each user directly benefits from having individual access, such as project management, CRM, and communication tools.
Example of per-user pricing
Asana, like many project management tools, uses a per-user pricing model to offer flexible options for teams of all sizes.
6. Feature-based pricing
Feature-based pricing, or add-on pricing, is a subset of tiered pricing that allows customers to only pay for the features they need. Instead of bundling all functionalities into a single package, companies offer core features at a base price and let users decide whether they want to access more specialized features as add-ons.
Pros of feature-based pricing
- Highly customizable for each customer, allowing them to build a plan that fits their specific requirements.
- Strong value alignment, as customers only pay for features they actively use.
- Scales with customer needs and creates upsell opportunities for the business.
- Provides clear product feedback around which features are worth paying for.
Pros of feature-based pricing
- Risk of overwhelming customers with too many add-ons, which may complicate the purchasing decision.
- Requires customers to have a deep understanding of your product and features.
- May lose users to competitors that offer all-in-one, simplified plans.
Best for: SaaS products with a wide range of features that cater to diverse needs, industries and use cases.
Example of feature-based pricing
Time Doctor offers advanced features as an add-on for any plan instead of limiting them to just the highest-tier option.
7. Freemium pricing
The freemium pricing model involves offering a free plan with limited features or resources while encouraging customers to upgrade to a paid plan as their needs grow. Free users gain access to the core product, while advanced features, higher limits, or premium support are locked behind paid tiers.
Freemium pricing is typically used in combination with any of the above pricing models, as a way to get customers using the product early on. It’s particularly popular amongst SaaS companies because of its ability to fuel word of mouth marketing.
Pros of Freemium Pricing
- Low barrier to entry, attracting a large number of users quickly.
- Builds loyalty by providing value upfront.
- Creates a self-sustaining growth loop as free users upgrade to become paying customers.
- Highly successful at driving word-of-mouth marketing.
Cons of Freemium Pricing
- Free users don’t always convert into paying customers, eating up resources without providing ROI.
- Requires significant investment into onboarding and in-app produc upsell paths to cnvert users successfully.
- Risk of free plan abuse if limits or restrictions are not well-defined.
- Can impact your product’s future positioning negatively if exclusivity and customization are important to your buyers.
Best for: Products with rising consumption, where the customer’s needs increase over time, such as collaboration tools, storage solutions, or analytics platforms. It works particularly well for startups targeting early-stage customers and small businesses.
Example of Freemium Pricing
Survicate, a customer feedback solution, offers a free plan with essential features and a limited number of responses. Survicate’s premium plans provide access to more responses and advanced features.
8. Hybrid pricing
Hybrid pricing blends multiple pricing models within a single plan—and it’s gaining popularity as more SaaS companies look for ways to offer more flexible, scalable pricing options.
It typically centers on tiered pricing, with each plan adopting elements from other pricing models. Typically, each tier comes with a set cap on users, seats, or credits. Users can then add more seats or credits within their chosen plan without needing to upgrade to a higher-tier package.
On top of that, customers often have the option to purchase add-ons or extra credits for specific features.
Pros of hybrid pricing
- Highly customizable, allowing customers to choose the mix that best suits their needs.
- Offers flexibility across different customer segments, attracting a broader range of users.
- Scales well as your product becomes more complex with many different features and functionality.
- Allows for pricing experimentation.
Cons of hybrid pricing
- Complex to manage from a finance and operations perspective.
- The pricing structure may feel confusing to a customer, or create a feeling of there being hidden costs.
Best for: Any SaaS company with a maturing product.
Example of hybrid pricing
Almost all the examples mentioned above use some form of hybrid pricing. Buffer is a great example, where the final price can vary based on the plan tier and number of channels customers want to connect.
Which pricing model is right for you?
As competition tightens and customers keep a closer eye on budgets, SaaS pricing models are becoming more flexible and complex.
With hundreds of tools offering similar features, it’s tough for companies to stand out on functionality alone. In these situations, pricing can create a race to the bottom as SaaS companies fight to alter pricing without sacrificing profitability.
Most modern SaaS companies allow customers to build their own pricing plan by choosing a base plan, adjusting the number of users, buying credits as needed, and adding features a la carte.
Embrace granular pricing
This shift from plan-based models to granular pricing structures is happening because customers have more power in the current economic environment. This is something you have to consider when deciding on your pricing model.
Quantify your solution’s impact
Your pricing should reflect the value your customers get from the product. Does it scale with usage? A usage-based or credit-based pricing model might be the way to go. Do users benefit from granular access control and permission management? It won’t be difficult to justify per-user pricing then.
Understand it’s not just about price
If your pricing isn’t converting, it’s not always about price. Often it’s not about the price at all.
“If people aren’t buying the product, they [founders] lower the price. But the real reason they’re not buying the product isn’t the price, it’s probably that they don’t actually understand the value of the product.”
Matt Lerner, Founder and CEO of SYSTM
Customers may not be converting because they don’t clearly understand the value you’re offering, or they find your pricing structure too complex. Focus on making your pricing transparent and clearly aligned with the benefits your solution provides.
Adopt a hybrid model
A hybrid pricing model allows you to stay flexible and meet the needs and expectations of different customer segments. For instance, smaller clients might prefer a pay-as-you-go model, while larger customers may opt for an all-inclusive flat-rate package.
Don’t be afraid to mix and match different pricing models until you find the combination that works best for both your business and your customers.
Good luck!
