Your pricing has a significant impact on your revenue.
We will discuss and learn the most popular types of SaaS pricing models.
Nevertheless, the typical SaaS business only devotes six hours to developing their pricing plan.
However the typical SaaS firm only devotes six hours to developing a pricing plan. Six hours, never, to define, test, and optimize everything, not six hours a week, not six hours a month.
It makes sense because there are so many pricing models, techniques, and approaches that it can be difficult to know where to begin. So, that’s why we will teach you the most popular types of SaaS pricing models in this article.
I’m reviewing the seven main SaaS pricing structures to help you get the most out of your SaaS application. The price structures discussed here should assist you in determining the best strategy for marketing, selling, and expanding your SaaS company, whether you are constrained by tiered pricing or irritated by freemium.
Types of SaaS Pricing Models
Several SaaS businesses that we have worked with to create their products find it difficult to choose the best pricing strategy. We wish to help users like them in distinguishing between the most common pricing structures so that they can decide wisely based on accepted industry standards.
Seven of the most popular SaaS pricing models available have been examined.
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Freemium
Freemium is one of the most often used SaaS pricing strategies. You give your clients a minimal set of functionality to use your program for free. In other words, you provide users a chance to experience your service without charging them. They must upgrade to a paying subscription in order to proceed and gain the maximum benefit from your SaaS.
On the market, freemium is not the only pricing strategy employed; it is typically supplemented with per feature or tiered pricing (will cover them further).
This from the list of SaaS Pricing Models is used by many new companies.
A well-integrated Freemium pricing strategy is demonstrated by Zoom.
In addition to having a fantastic feature set, the most extensively used video and audio communication SaaS platform also provides a Basic Personal Meeting plan, which contributes to its popularity.
With the Zoom platform, you may register for free to gain access to an unlimited number of one-on-one and group sessions as well as extra video conferencing services (screen sharing, recording). Single users and small teams like this plan a lot.
Pros:
- You’ll create a sizable customer database. You may better engage with Freemium users by gathering their emails, test your marketing funnels, and persuade them to use your extra services or subscribe to one of your paid plans.
Cons
- Your financial, operational, and time resources may be impacted by providing service to an endless number of freemium consumers.
- You could find it difficult to categorize your clients and prove the worth of your offerings. In the future, what was once free hardly ever becomes paid. Free things appeal to people, and they will work to maximize their use.
Flat Rate
Simple SaaS pricing is used. You offer all of your clients a single product at a single price with a single set of features. The only options you provide are monthly or yearly fees for using your SaaS product. It is also one of the favorite SaaS Pricing Models of service providers.
Precog, one of our clients, uses a flat-rate pricing structure. Precog is a tool for data preparation that makes data analysis easier. It offers software that enables business teams and data engineers to access any data, regardless of source, size, or structure, and quickly transform it into tables that are ready for analytics.
There are no trials or complicated price structures; the buyer is merely given the option of selecting a Monthly or Annual subscription plan.
Pros
- Easy to market, easy to manage, and easy to communicate.
- Communicating value. Choices are good, but occasionally people have trouble choosing. One option and a distinct outcome are provided for everyone by flat rate pricing.
- Distributing marketing materials. You focus on one product, creating crystal-clear channels to market and sell it.
Cons
- The variety of buyer personas you may draw with the flat fee approach is constrained. For instance, your product’s price may be too high for mid-sized firms if it is set for the enterprise market.
- Scale and upselling are not your story. To put it another way, it prevents you from generating further income and lowers LTV (Lifetime Value), as your customer may outgrow your SaaS.
Usage Based
Usage-based The pricing structure is fairly transparent and just for your clients. They only pay for the amount they really utilize. Pay as you go is another name for it.
For SaaS providers, it resembles a conventional utility bill with a counter. Charges may be made in accordance with the volume of transactions, requests, data used, scheduled posts, invoices sent out, calls, and messages. Tiered and Freemium SaaS pricing structures are compatible with it. It is known to be most favourable SaaS Pricing Models.
For TextMagic, the usage-based payment model was the ideal choice. It is a comprehensive text messaging service that has proven useful in facilitating mobile marketing for small businesses all around the world. They provide a free account creation and full access to all services. Only the quantity of outgoing text messages is charged (sent from personal or business email, virtual, or existing mobile number).
All incoming texts are free. Hence, TextMagic clients only pay their invoices at the conclusion of the billing cycle.
Pros
- You can avoid confusion with your clients and hold them accountable for charges by using a transparent financial model.
- Your clients’ primary considerations are not price. Usage fees are generally minimal. Your initial clientele will come quite quickly.
Cons
- Your customers wind up being very important to the expansion of your firm. The scale is only feasible if the clientele expands.
- uncertain revenue. Your SaaS product’s variable metrics include MRR (monthly recurring revenue) and ARR (annually recurring revenue). It will be challenging to predict and control them.
User Based
The amount of users using your SaaS platform actively or inactively is one type of “pay as you go” pricing method. User-based and active-user-based pricing models are available. Either the whole number of users who have signed up for an account or just the active users are charged to clients. Each time they create an account and give it to an employee under a user-based pricing model, they are required to pay a monthly cost.
Your clients will find active user-based more convenient because you just charge them for use of their accounts (employee is logged in, makes calls, checks reports, schedules posts, etc.). They are not required to monitor inactive users (those who do not work anymore or on a sabbatical vacation). The feature-based or tiered pricing models can be integrated with the user-based pricing model. This one from the list of best SaaS Pricing Models is widely used by big corporates.
Zendesk uses an Active User-Based pricing model in its CRM (Customer Relationship Management) solution to handle client interactions and contacts databases. They charge on a monthly or annual basis per active agent. In addition to charging for a number of accounts, Zendesk gives users a choice of tiers and features.
You may select the Basic plan and pay $5 per month per agent, who will be able to use widgets, create client cards, and contact with clients via emails and social media messengers. Instead, you can choose the Team plan for $19 per agent/month, which includes all of the Essential capabilities as well as giving each active agent access to dashboards and integrating additional apps.
Pros
- The User-Based pricing model for your clients is simple to understand because they only pay for the amount of accounts/users who require access to the SaaS platform.
- RRM (Recurring Revenue Management) can be taken under your management, and you can project sales based on the user base.
Cons
- If you decide to charge per User, upselling is not a possibility. Unless you truly mix it with different price strategies, introduce tiers, or include more features.
- It is possible to cheat. Users frequently reveal account information to third parties rather than adding them as users. Abuse of the login process dramatically reduces product value.
Feature-Based
The Feature-based pricing model would be your best choice if you provide a wide range of functions. This strategy can be used in conjunction with tiered pricing to produce various plans with various feature sets for various clients.
A feature-based pricing model is used by ActiveCampaign, a platform for marketing automation procedures, email marketing, and customer service. If their businesses grow or they require more features, their clients can upgrade. Also integrating user- and usage-based SaaS pricing models is Active Campaign.
For $9/mo (with an annual subscription), you may choose the Lite plan, which allows you to send an unlimited amount of emails (newsletters, forms), as well as offer chat and email support to your customers for 3 people. The $49/month Plus package is a better choice if you also need to engage with your Facebook audience, manage your content and leads, integrate other apps, and give access to a SaaS platform to more than 3 people.
Pros
- Consumers can select from clear offerings and only pay for functionality that is relevant to them. You create many strategies for companies of various sizes (small, medium, and large) and advise choosing the one that best suits their requirements.
- You can segment your audience and modify your marketing and communication tactics to suit the needs of the various groups when you have several planned plans.
Cons
- To understand which features can be merged in a way that helps their firm at the various growth stages, you will need to engage closely with buyer personas.
- Your plans are inextricably linked to customer acquisition. You won’t hit the target and will lose the lead if you don’t combine characteristics in pertinent strategies. It is evident that a customer will choose your rival when unable to discover what they require.
Tiered
With a tiered pricing strategy, all of your SaaS’s capabilities are combined into preset packages, allowing your customers to select the one that best meets their requirements. With a tiered pricing strategy, all of your SaaS’s capabilities are combined into preset packages, allowing your customers to select the one that best meets their requirements.
You design two to five different plans, each with a set of features and a price. You can provide B2C (business to customer) and B2B services using the tiered pricing approach (business to business of different sizes). Zapier is an online platform that links apps and automates time-consuming, repetitive tasks. They provide the option to select from tiers created for various consumer kinds (Starters, Professionals, Teams, Companies). Even more intriguingly, they merged the Tiered Pricing model with the Usage-based, Feature-based, and Freemium business models.
Pros
- Increased market share (B2C and B2B) as a result of a larger audience, including people and businesses of all sizes.
- High Lifetime Value (LTV) due to the ability to scale and provide your clients with more beneficial features. They won’t think about switching to your competition and will remain devoted to your company, extending their membership.
Cons
- In order to strategically mix features in tiers, you will need to invest a significant amount of time and money in thorough audience research.
Blended
The best price model will be easier for you to select the better you understand your product. It can be challenging for certain market participants to cram all features into one template. As a result, they use several SaaS pricing structures to market their goods to various customers. Gains are fairly obvious with a blended pricing approach, but losses are also substantial. You must control and, if at all possible, forecast your revenue streams in addition to managing your pricing as separate products.
A streaming platform called Vimeo is going down that path. They combine Tiered, Freemium, Usage-based, Feature-based, User-based, and Usage-based SaaS pricing structures to maximize the value they can provide to their customers.
Now, you will be able to choose a perfect price for your SaaS by reading and implementing these popular SaaS pricing models. You must consider these because these are known to be one of the best SaaS pricing models.