How to Price Your SaaS Product Subscription

If you’re like most people, you probably have no idea how to price your SaaS product. And that’s understandable! After all, there are a lot of factors to consider, and it can be tough to know where to start. But don’t worry – we’re here to help.

In this blog post, we’ll walk you through the process of how to price your SaaS product. We’ll also give you some tips on what to avoid, so you can make sure you’re getting the most bang for your buck. So let’s get started!

How to Price Your SaaS Product

To price your SaaS product, you’ll need to consider your development costs, marketing expenses, and desired profit margins. You’ll also need to research the prices of similar products on the market and make sure your price is competitive.

Once you have all of this information, you can set a price for your product.

What is SaaS?

Software-as-a-Service (SaaS) is a business model where customers pay a subscription fee to access a product or service online. Examples of popular SaaS products are Google Analytics and Salesforce.

Pricing plans are crucial to the success of a SaaS product. Therefore, developing a good pricing structure is very important. The target audience, the products or services, and business goals all play into determining the price point.

The right SaaS pricing model can help increase your customer base and subscription sales, leading to more monthly recurring revenue. By finding a pricing strategy that works for your unique business needs, you can maximize your chances of success.

Why is SaaS Pricing Important?

A reasonably priced software-as-a-service (SaaS) product does two important things: it provides value to customers and it gives businesses a competitive edge.

Pricing a SaaS product is tricky. If you price it too low, you may not make enough profit to keep your business running. If you overprice it, your customers may not renew their subscriptions.

Providing value is simple. When someone buys a car, they want to make sure what they’re paying is worth the price tag.

Like consumers, businesses want to make sure they’re getting the best bang for their buck when purchasing a SaaS product.

You want them to say that what they spent on your product is worth it. This is referred to as the cost-to-value ratio.

Choosing a pricing model that provides the best cost-to-value ratio is key to winning the market.

How To Price A SaaS Product

Before deciding on the exact price for your SaaS, you need to choose an overall strategy for setting your prices. Then you can determine your prices for the different subscription and tier levels.

To figure out how much to charge for your subscription, you’ll need to look at your business expenses, then calculate a percentage that you’ll charge on top of that. You’ll also need to look at what your competitors are charging and set your prices accordingly.

Let’s look at five common pricing strategies.

1. Cost-Based Pricing

This is a basic pricing structure.

By evaluating the costs involved in providing your service (R&D, payroll salary, etc) and adding a certain percentage to that, you can ensure that you will always see a positive return on your initial investment.

For instance, if you spend $100 designing your software and you charge $125 for it, you’re guaranteed a 20% profit margin.

Cost-based pricing for SaaS products is a safe choice. It’s easy to calculate and understand.

However, this strategy comes with downsides. There’s no way to know for sure how much your costs will be, and it’s impossible to predict if your revenues will cover your expenses.

Cost-based pricing also does not factor in competitors’ prices.

how to price your saas product (Source)

2. Competitor-Based Pricing

You can base your pricing on how much your competitors charge their clients. You can set a price that is lower, higher, or the same as the competition.

This pricing model is a valuable strategy for selling new software. Because your new product hasn’t had time to prove itself, you need another way to capture market share.

If you’re launching a new software product, make sure you research all the costs associated with it. You don’t want to end up losing money on your product because you didn’t account for all the overhead.

If you want to succeed in the current market, it is important to study your competition. This will provide you with a good baseline for establishing your price. You do not want to start too high or low, as this will deter potential customers. Find a middle ground by researching your competition’s pricing and using it as a starting point.

Streaming services often use a competitor-based pricing model. For example, take a look at how Netflix prices its subscription packages:

how to price your saas product

Hulu’s pricing is quite close — only a dollar off in some plans.

how to price your saas product (Source)

Find the prices of your competitor’s products on their website. If you charge somewhere in-between, you’ll get more customers.

However, pricing your SaaS product based on competitors can be detrimental. Your company creates new software products with the intention that they’ll be the best in the market – therefore, they’re worth more than what the competition is offering. If you price your new product using what your competition charges, you could end up undervaluing your own.

3. Penetration Pricing

Penetration pricing is a sales tactic where companies lower prices for a limited time frame to attract new customers.

You could, for example, offer a 6-month introductory price of $79 then increase it to $99 later.

In another example, you could lower your prices by 50% for your first 100 clients.

Offering a time-sensitive discount on your products or services can encourage your customers to make a quick decision. This can help you close the sale if your prices are lower than your competitors.

Penetration pricing can be good if you’re selling a new product that hasn’t yet been tested.

It’s important to have a variety of pricing strategies in your toolkit to stay competitive. A continuous penetration pricing plan might make it seem like your company is having trouble attracting customers, which could make them doubt its worth.

It can be a valuable strategy in the beginning but it should only serve as a precursor to a stronger and more established pricing strategy.

4. Value-Based Pricing

In value-based pricing, products are priced based on how much value they will deliver and how much buyers think they are worth.

This approach focuses on what your customers want from the product, not how much your costs are or what your competitor charges.

If your customers understand the value of your product, you can price it higher than your competitors and make more sales.

This model also allows you to change or update your pricing.

The pricing of software like Photoshop and Illustrator is much higher than competing products because customers know the value of these products.

how to price your saas product (Source)

Adopting value-based pricing can be very beneficial but requires time and commitment. You’ll need to understand who your users are, what they desire, and how much they are willing to pay.

While you may have been able to figure out a pricing plan that works for the majority of your customer base, there may still be some groups who find different value in your product.

By taking the time to understand your audience and speak with them directly, you can ensure they have a positive interaction with your service, which they will then use to rate the value of your product.

If they feel as if you’re truly invested in their experience with your service, they are more likely to give a positive rating.

5. Freemium Pricing

Offering a freemium product is a popular strategy for software companies. It’s where companies offer a limited free version to entice users to sign up.

While the basic version is free, users must upgrade to a paid plan to access certain features.

Hubspot has a freemium pricing model for its CRM software.

how to price your saas product (Source)

Freemium is a straightforward pricing model. The most successful companies such as Google and Spotify have used freemium pricing to grow their customer base.

This strategy is much better than offering your products for cheap for a short time to win more customers. Instead, you offer a version of the product that is irresistible — free of charge. And when they are ready to move from free to premium, they will upgrade to a paid subscription.

However, a freemium pricing model comes with downsides. If you provide users with a valuable enough free service, they may never need to upgrade.

It’s crucial to find the right balance between offering enough free features and restricting others behind a subscription. If you offer too few, you risk driving away users who may otherwise become paying customers.

The key is to find the right balance so you don’t frustrate your users.

SaaS Pricing Models

You’ll also need to think about how you’ll charge for your service. Will you offer a flat fee for all features and services, or will you have tiered pricing based on the size of their enterprise?

When pricing your SaaS, it’s important to consider all the factors involved. Let’s take a look at a few popular models.

Usage Pricing

A usage-based plan is similar to how telecom companies charge you for mobile data. For example, if you have a 2GB monthly plan and go over, you’ll pay more.

This model is beneficial because it offers a lower price than what the user would be billed monthly. The initial low price is attractive to users and encourages them to select your service.

As a smaller business, you can be confident that you won’t be paying the same price as an enterprise company. This way, you can feel like you’re getting your money’s worth.

  • Lower bar of entry. Subscribers will only be charged for what they use.
  • Attractive to businesses. Usage pricing can attract a range of audiences.
  • Easy to unsubscribe. With this model, customers may not use your product if they find that it’s too expensive and doesn’t serve their business needs.

While enterprise businesses may pay more than small businesses, this is only because they are larger companies with more substantial daily requirements. Your service is not worth much to them and they can easily cancel.

User-Count Pricing

The seat-based model charges you based on how many accounts you have. Many companies use this pricing model.

For example, a personal plan for one user is $6, 10 users for $25, and 100 users for $45. Your monthly fees don’t change, no matter how much you use the service.

This monthly package is great for companies that want predictability in their bill. But, if your company is expecting growth, you may want to look at a pay-as-you-go plan.

If a business knows that hiring more employees will cost them more, they might choose a service that allows them to scale, regardless of price.

Some services offer a flat-rate per active user, so companies can sign up all employees but only pay for the users who actually use the service.

  • Easy to calculate. If the company only employs two people who’ll use the software, it will only pay for those users.
  • Shared login. While users know that more logins will equal higher fees, they may still share the account with other employees or between an entire team.
  • Unattractive to growing businesses. A business with growing employee numbers may want to avoid working with you if they know that they’ll have to pay more per seat.

Tiered Pricing

Offering tiered packages is a great way to customize your offerings for different buyers. For example, you could offer different tiers for single users and medium-sized businesses.

Some customers may need more or fewer options, so we’ve given them the option to choose what works best for them.

Tiered pricing is one of the most popular models for selling products online.

  • Straightforward and familiar. Because so many businesses use tier-based packages, there will be no confusion about which plan to choose. Your clients can simply choose whichever one works best for them.
  • Personalized for different target markets. Because each package targets a different type of business, you can more effectively meet the needs of each business type.
  • May cause confusion. For this example, 3 tiers are usually offered. Too many options and the customer can become confused. Fewer options and the customer may move to a different company.

Flat Rate Pricing

This pricing method is based solely on one price. Every customer pays the same, and everyone gets the same options.

The flat-rate model is perfect for attracting customers who want a one-price solution. This model includes all product features and charges a single monthly fee, so your customers don’t have to worry about additional costs. Unfortunately, this also means that some of your products’ unique tools may go underutilized, as every customer has access to the same options.

Some customers may rarely use a certain feature, while other customers may use it daily.

  • Straightforward. The user pays one fee and is ready to go.
  • No custom options. Customers have different needs, and while they may want a certain feature, they may not use it. This can lead to them feeling as though they are paying for something they aren’t using.
  • Decreased profits. Companies that share a subscription will obviously lose out on money. So, flat rates only make sense if you’re targeting individual or small business customers.

Per-Feature Pricing

This is similar to a tier-based pricing model, but customers are only paying for specific features, such as email marketing, chatbots, or advertising. It’s the perfect solution for setting a fixed rate, but not wanting to pay for features that go unutilized.

If your service isn’t used fully, it’s harder to get data on how valuable it is and where to troubleshoot.

The prices for different packages vary based on how many features each plan includes. Most providers offer all the basic features of their cheapest plans to their most expensive.


  • Easy to scale. You can add more services as you need them, but never more than you need.
  • Affordable. While small businesses may be able to afford only a few basic features, larger enterprises may have to pay for hundreds of different services.
  • Confusing. Customers who don’t know what they’re looking for will need help choosing the right products. These customers need a product specialist who will help them find the right options without being overly pushy.

While this method has its benefits, it can sometimes be difficult for customers to determine what features should be grouped together in each package.

Or, perhaps, the customer wants a higher-end service, but can’t justify the cost.

Ready to up your game when it comes to your SaaS pricing model? Use these handy templates for reference.

SaaS Pricing Model Template

No matter which pricing plan you choose, your prices will be either a single package or multiple packages. These will be laid out on your price list for your customers to see.

If your only offer is a single plan, your pricing can look like the following:

  1. Product Name
  2. $/month or $/users/month
  3. Value Proposition Statement
  4. Most Important Feature
  5. Secondary Feature
  6. Tertiary Feature
  7. Call-to-Action

If you’re implementing multiple subscription models, it might look something like this.

  1. Target Customer 1
  2. Target Customer 2
  3. Target Customer 3
  4. $/month or $/users/month
  5. $/month or $/users/month
  6. $/month or $/users/month or Custom
  7. Value Proposition Statement
  8. Value Proposition Statement
  9. Value Proposition Statement
  10. Package Upsell Statement
  11. Package Upsell Statement
  12. Most Important Feature
  13. Most Important Feature
  14. Most Important Feature
  15. Secondary Feature
  16. Secondary Feature
  17. Secondary Feature
  18. Tertiary Feature
  19. Tertiary Feature
  20. Tertiary Feature
  21. Call-to-Action
  22. Call-to-Action
  23. Call-to-Action

Nailing Your SaaS Pricing Strategy

The pricing of a SaaS product depends on two factors: how much value it can provide and who it’s for. If you do your research on these two elements, customers will purchase your product.

It’s important to remember that prices can always be changed over time as your company grows or new software features are added.

In the end, all businesses will pick a pricing model that works best for them. If you spend time on your plans, your customers will respect your prices.


How to price your SaaS product? Pricing your SaaS product doesn’t have to be difficult. Just follow our simple guide and you’ll be on your way to success in no time. And don’t forget – if you’re ever unsure about something, just ask us! We’re always happy to help out however we can.

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