If you are working with SaaS, you will need to determine the way you will be billing your customers. Here are the seven most successful SaaS pricing models that you can choose from and start making money with your business.
1. Pricing per User
The first model you can use is the pricing per user model. In this SaaS pricing model, users need to pay different amounts of money depending on the number of individuals currently using the software. This is an extremely popular pricing model, but some SaaS companies may get damaged by it especially if you work with client companies where there are many individual users. The pricing models of SaaS companies don’t always depend solely on the number of users, but this factor still has a lot of influence.
The problem with the per-user pricing model is that you basically have to cut down on the number of people inside the company who can use and love your software. It limits the potential number of users and, consequently, limits your abilities to grow. Sometimes such an organization works, but more often than not you will need to give more value with such a model.
2. Flat-Rate Pricing
Another popular model is the flat-rate pricing. This is when a company charges one fixed fee for the software they offer. Alternatively, it can be a single fee regardless of the target group. In the latter case, the price usually depends on the number of features in each plan optimized for a certain audience. However, this approach also has its downsides.
The bad thing is that you can’t really retain your users. Once they get what they want by paying once, they are no longer obligated to keep in touch with you. If they don’t like your product, they will simply stop using it and you won’t even have a clue about it. This means that you will constantly need to acquire more new customers which usually costs more than retaining old ones. On the other hand, with subscription models, you will be able to develop a lasting relationship.
3. Tiered User Pricing
This model is pretty similar to the per-user pricing, but here the number of permitted users increases in bands instead of single digits. For instance, one SaaS product can have a different price for up to 5 users, up to 10 users, and so on. You can offer different pricing plans with the user limit differing according to the different pricing strategies. Of course, just like any other pricing model, tiered user pricing also has its own disadvantages.
Tiered user pricing combines the disadvantages of per-user pricing along with a few others. For example, you will not be able to provide value to solopreneurs with this model. These business people only need some basic features rather than the full kit. If you opt for this pricing model, you will need to carefully think through all of the options you will be offering as well as the way you will display them.
4. Feature-Based Pricing
The feature-based pricing model is similar to the tiered user one as it also divides the prices into tiers, but this one mostly depends on the services and upgrades you offer in each plan. For instance, if you have a translation feature (that you can easily make by hiring a professional from a translation service like The Word Point), you could increase the price of that particular plan.
In the feature-based pricing model, the more features you offer in your plans, the higher you can make your price. At the same time, consider offering the same features with more abilities. For example, if your product allows the users to send out emails automatically, one plan can have 100 emails per day while another one can have 1000 emails per day. Try to get creative with such a strategy in order for your efforts to yield the best results.
5. “Pay As You Go”
The “Pay As You Go” SaaS pricing model is very different from all the models listed above. In this structure, users are charged based on how much they use your service. One of the most popular examples of using such a model is the Amazon Cloud Server. If you have ever used it, you can easily understand the logic of the “Pay As You Go” pricing model.
One of the biggest advantages of this model is that a small company doesn’t need to pay a lot of money if they are using only a small number of features. This is also suitable for companies with fluctuating service usage. On the other hand, there is the problem of not knowing how much the software will actually cost for your customers.
6: Pricing per Storage & Freemium
Both pricing per storage and freemium pricing models are quite similar to each other. The pricing per storage model can be useful for those whose customers need to first get acquainted with the product. For example, Google Drive gives you 15 GB of storage for free and lets you purchase more space once you realize that you’ve run out.
The Freemium model provides users with a number of free features allowing users to upgrade if they want to. For example, LinkedIn works this way allowing you to get some paid features in addition to the free account. If your additional features that can be purchased are extremely valuable to your target audience, this model is for you. There is always the possibility of your customers simply being uninterested in your upgrades and you will end up with many free users.
7. “Roll Your Own”
Last but certainly not least, the “Roll Your Own” pricing model is perfect in almost every way possible. In this case, customers have the ability to customize their own package. Users can pick the different features they want to use and pay for these particular features.
You can offer “Roll Your Own” along with the main pricing model. Then, you can charge an additional fee for giving your customers the power to customize their purchase. This pricing model also works quite well for smaller organizations.
In conclusion, it doesn’t matter which SaaS pricing model you choose as long as you acknowledge all its advantages and disadvantages and use them to your benefit. Keep in mind what your product is and then make your decision.
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