SaaS Pricing Models & Strategies: The Ultimate Guide

Pricing plays a crucial role in shaping how customers perceive the value of your SaaS product and how your company generates revenue!

However, many companies focus heavily on building features and attracting users while overlooking the importance of a well-defined SaaS pricing strategy. Without early consideration, products may launch with pricing models that undervalue their worth, fail to scale with usage, or miss the target audience. 

In this blog, we will explore the variety of SaaS pricing models, the strategies behind them, and the psychology that influences buyer behavior. With these insights, you will be equipped to build a pricing system that fits your product, resonates with your audience, and drives sustainable growth for your business.

5 Common Types of SaaS Pricing Models

Choosing  the right B2B SaaS pricing models​ is crucial to match your product with customer expectations and business objectives. Let’s now review 5 different SaaS pricing models​ to help you identify the ideal approach for your offerings. 

1. Flat Rate Pricing

Flat rate pricing is the simplest way to sell a SaaS product: one product, one set of features, and one fixed price. Customers pay a single, predictable fee regardless of usage or the number of users. This approach is similar to traditional software licensing but usually involves monthly payments, which help customers can plan their budgets effectively.

For example: Scrintal, a visual thinking tool, offers a single plan at $9/month, giving all users full access to every feature. The only alternative is an annual payment option, which offers a 25% discount for those who choose to pay upfront.

Pros of Flat Rate Pricing

• Easy to sell: Focusing on a single, clearly defined offer allows sales and marketing efforts to be straightforward and targeted.
• Simple to communicate: Customers quickly understand the price and what they get, avoiding confusion from complex pricing structures.
• Predictable revenue: Fixed pricing provides steady income that is easy to forecast and manage.

Cons of Flat Rate Pricing

• Limits revenue potential: Without tiering, you may miss out on higher revenue from larger customers who use more resources.
• No flexibility: Customers must either accept the full package or walk away, with little room to tailor to different needs.
• One chance to convert: The lack of options means fewer opportunities to sway hesitant buyers with alternative pricing.

2. Usage-Based Pricing

Usage-based pricing, also known as pay-as-you-go, charges customers based on the amount of product or service they use. This model aligns cost directly with consumption, making it flexible and scalable for users with varying needs. It allows customers to pay only for what they use, which is especially attractive for startups or businesses with fluctuating demand.

For example: Microsoft Azure bills users based on the amount of storage they use each month. For those on a Premium plan, the rate is $0.15 per GB — so the more storage you consume, the more you pay, and vice versa.

Pros of Usage-Based Pricing 

• Price scales alongside usage: It is logical to link price with actual usage; if demand fluctuates, customers pay less during slower periods and more during busy times.
• Reduces barriers to entry: Without large upfront costs, even small startups can begin using the product confidently, knowing their expenses will grow only as their usage increases.
• Accounts for heavy user costs: This model prevents heavy users from consuming disproportionate resources without contributing fairly to the cost.

Cons of Usage-Based Pricing

• Disconnects value from the product: Customers may care more about the overall benefit or experience than the specific usage SaaS metrics, such as API calls or transactions.

• Harder to predict revenue: Monthly income can vary widely, making it challenging for companies to forecast financial performance accurately.

• Unpredictable customer costs: Customers with fluctuating usage may face unexpected spikes in their bills, which can cause dissatisfaction or hesitation.

3. Per User Pricing

Per user pricing charges customers based on the number of individual users who access the software. This Saas model pricing is common for collaborative tools such as project management platforms and CRM systems. It aligns cost with value by ensuring customers pay only for the users who benefit from the product, making it simple to scale usage up or down as needed.

Pros of Per User Pricing

• Simplicity: The pricing structure is straightforward, making it easy for customers to understand and predict their monthly costs.
• Revenue scales with adoption: As more users join, revenue grows proportionally, rewarding customer growth.
• Predictable income: Recurring revenue is easier to forecast since charges are tied directly to user count.

Cons of Per User Pricing

• Limits adoption: Charging per user can discourage adding new users, leading to underutilization or shared logins.
• Increases churn risk: Smaller user bases are more likely to abandon the service, reducing customer retention.
• May not reflect true value: The difference between a few users and many may not correspond to the actual value customers receive.

Note: A common variation of this model is Per Active User Pricing, which charges companies only for users who actively engage with the software during the billing period. This model helps reduce costs related to inactive accounts and aligns well with enterprise SaaS pricing models that focus on efficiency in large-scale deployments.

4. Per Feature Pricing

Unlike the previous models that focus on users as the pricing variable, per-feature pricing uses the functionality offered as its value metric. Different pricing tiers are created based on the features included, with higher-priced plans providing access to more advanced or additional capabilities. This approach allows companies to charge according to the value delivered through specific product functionalities.

For example: Notion offers four pricing plans — Free, Plus, Business, and Enterprise — where each higher-tier plan includes all the features of the previous one, along with additional tools and capabilities, at a progressively higher price.

Pros of Per-Feature Pricing

• Clear upgrade motivation: Unlocking extra features provides a straightforward reason for customers to move to higher tiers.
• Compensates for resource-heavy features: Features that require more resources to deliver can be placed in premium packages, ensuring fair compensation.

Cons of Per-Feature Pricing

• Challenging to balance: Misjudging which features customers want can either deter adoption or undervalue the product if key features are mispriced.
• Potential customer frustration: Paying a monthly fee yet missing access to important features can lead to dissatisfaction and resentment.

5. Freemium Pricing

Freemium pricing is one of the most common SaaS pricing models. It allows customers to use a basic version of the software for free, giving them a chance to experience its core features without any upfront cost. To access advanced features or unlock the full potential of the product, users need to upgrade to a paid plan.

For example: Anana offers a free plan for individual users and small teams, providing access to basic features. For growing teams and larger companies, it offers paid plans — a Starter plan at $10.99/month and an Advanced plan at $24.99/month — both of which include enhanced features and greater functionality.

Pros of Freemium Pricing

• Faster user acquisition: Offering a free tier helps attract leads quickly and reduces marketing expenses.
• Builds a large user base: Collecting emails from free users enables ongoing engagement and marketing opportunities.
• Testing ground: The free plan provides a way to test features on different customer segments and gather feedback.

Cons of Freemium Pricing

• Resource strain: Supporting a large number of free users can drain financial, operational, and time resources.
• Conversion challenges: Many users may never upgrade, making it difficult to demonstrate the true value of paid plans.
• Freebie mentality: Users often try to maximize free access, which can limit revenue growth.

Common SaaS Pricing Strategies

Your SaaS pricing model forms the backbone of your business, but achieving real growth and profitability depends on implementing an effective pricing strategy. So now, let’s explore key strategies to optimize your SaaS design and pricing for growth and profit.

1. Value-based Pricing

Value-based based is a pricing strategy in which pricing is determined by how much value customers believe the product or service provides. This approach ensures the price reflects the real benefits and impact the product provides to users.

For example: Both Ahrefs and Neil Patel offer SEO tools, but their pricing structures vary greatly. Neil Patel’s Individual plan starts at just $12/month, while Ahrefs’ Lite plan is priced at $129/month. This stems from the value each platform provides — Ahrefs supports more projects (5 vs 1), more tracked keywords per project(750 vs. 150), and includes a broader range of SEO features. This makes it more appealing to users who need deeper SEO insights.

2. Cost Plus Pricing

Cost Plus Pricing is a straightforward approach that sets the final price by applying a fixed markup on top of the full cost of building and running the SaaS product. This cost generally covers areas such as software development, system infrastructure, user support, and general overhead. The main objective is to cover all costs while maintaining a stable profit margin.

For example: A SaaS startup ​offering project management tools might incur total monthly costs of $50,000 (e.g., development, infrastructure, support, and overhead costs). With 1,000 active users, the cost per user is $50. By applying a 20% markup, the company sets the final price at $60 per user per month, ensuring all costs are covered while maintaining a steady profit margin.

3. Penetration Pricing

Penetration Pricing is an approach where a SaaS provider introduces its product at a low starting price to rapidly draw in users and capture a larger portion of the market. The goal is to draw users away from competitors by offering a better deal, then gradually raise prices once a loyal customer base is established. This strategy helps build brand awareness and accelerates user acquisition, often at the expense of short-term profits.

For example: A new video conferencing startup might enter the market with a $5/month plan, which is significantly lower than competitors charging $15 or more. This low-cost option appeals to budget-conscious customers, helping the company grow quickly. After gaining traction, the provider could raise prices or launch advanced plans with added functionality.

4. Free Trial Pricing

Free Trial Pricing is a pricing strategy that allows potential customers use the full SaaS product at no cost for a limited time. By removing the initial risk, users can experience the software’s benefits firsthand, which increases the likelihood of converting them into paying customers after the trial ends.

For example: Spotify offers new users access to its Premium features for free, typically for 1 to 3 months. This allows users to experience the full value of Spotify Premium without any initial cost, making it more likely they’ll subscribe once the trial ends. 

Besides the core approaches, there are other SaaS pricing strategies that businesses can consider:

• Captive Pricing: Offering the main product at a low or free price while charging higher fees for essential add-ons, advanced features, or complementary modules. It helps attract a broad user base and monetizes customers who need extended functionality. 
• Skimming Pricing: This approach sets a high initial price for a new SaaS product to capture early adopters who perceive strong value and are willing to invest upfront. As time passes, the price is slowly decreased to appeal to a wider range of customers. This method helps companies recover costs quickly while positioning the product as a premium offering from the start.
• Prestige Pricing: Setting elevated prices to reflect a product’s high-end positioning and create a sense of exclusivity and superior quality. It helps strengthen the brand’s image and attract buyers who prioritize quality over cost. To be effective, companies must consistently deliver exceptional value and maintain a reputation that justifies the premium pricing.

The Psychology behind SaaS Pricing Models

The psychology behind pricing models for SaaS​ explains how customer perceptions influence buying decisions. This section will use real SaaS pricing models examples to demonstrate how these psychological factors shape pricing strategies and guide customers toward specific plans.

1. Anchoring Pricing

Anchoring pricing is a psychological phenomenon in which customers base their judgment of value largely on the first price they encounter, known as the “anchor.” This initial figure influences how they view later prices, often making those follow-up prices appear more reasonable or appealing. Companies can apply anchoring by presenting a high-priced option first, which sets a reference point that influences how customers view other pricing tiers and encourages them to choose plans that seem like better deals.

For example, looking at Shopify’s pricing plans,  entrepreneurs often view the $49 Grow plan as a premium option, making the $19 Basic plan seem affordable and sufficient. Meanwhile, small teams comparing the $49 Grow plan to the much higher $299 Advanced plan see $49 as a balanced and cost-effective choice.

2. Charm Pricing

Charm pricing is a psychological strategy that sets prices just below a whole number, typically ending in 9 (such as $19.99 instead of $20). It takes advantage of the left-digit effect, where customers pay more attention to the first digit and perceive the price as noticeably lower than it actually is. This odd-even pricing technique creates a perception of a better deal, encouraging purchases by making prices feel more affordable. 

A clear example is Microsoft 365, which applies charm pricing to both its plans: $129.99/year (instead of $130) for the Family plan and $99.99/year (instead of $100) for the Personal plan. This subtle pricing choice helps make the offers feel more attractive, especially when combined with savings messages like “Save $25.89 with a yearly plan.”

3. High-Low Pricing

High-Low Pricing is a strategy where a product or SaaS design services is initially priced high and then temporarily discounted through promotions or sales. This approach leverages the psychological principle of anchoring by establishing a high reference price, the later reduced price feels like a great deal, motivating customers to act quickly.

This approach is evident in how GemPages promotes its premium plans. During special occasions such as Mother’s & Father’s Day, GemPages offers 20% off for new users who upgrade, using a discount code like MFD2025. 

4. Product bundle pricing

Product bundle pricing is a strategy that groups multiple products or services together and offers them at a discounted price. Psychologically, it leverages customers’ desire for convenience and perceived value by simplifying choices and creating a sense of getting more for less. 

For instance, Adobe offers the Creative Cloud All Apps bundle at $29.99/month, which includes over 20 applications across its ecosystem. This bundled pricing is significantly more affordable than purchasing each tool individually. 

5. Decoy Effect

The Decoy Effect is a psychological pricing strategy in which a third, less attractive option (the decoy) is introduced alongside other choices to make a specific product appear more appealing. This tactic leverages consumers’ tendency to compare options, guiding them toward the targeted, often higher-priced option. 

Looking back at the Adobe example, the single-app Photoshop plan ($22.99/month) acts as a decoy (less attractive), compared to the Photography plan (including Photoshop and Lightroom) at $19.99 per month and the All Apps bundle ($29.99/month).

Final thoughts

Whether you’re running a small SaaS startup or a large enterprise, it is important to take a fresh look at your pricing strategy to unlock new growth opportunities. When your SaaS pricing models and strategies truly reflects your product’s value and aligns with customer expectations, it can boost business revenue and strengthen your market position.

If you need expert help designing an impactful SaaS UX Design, Lollypop is ready to support! As a global SaaS design agency specializing in UI/UX, we recognize the rising impact of agentic automation and human-machine interaction in today’s SaaS landscape. Leveraging our deep SaaS expertise, we craft intuitive, user-centered designs that are tailored to drive meaningful results for your SaaS products.

Contact us for a FREE consultation, and let’s work together to craft the perfect pricing page design​ tailored to your unique strategy!

Frequently Asked Questions (FAQs)

1. Why is having  SaaS pricing models so important?

SaaS Pricing models help customers form a clear perception of what the business offers by signaling the value of its products or services. They influence how the brand is positioned in the market, where a higher price often implies higher quality. A well-structured model also enhances credibility and supports long-term customer trust.

2. What are some common pricing mistakes to avoid?

Common pricing mistakes to watch out for include: Underpricing the product, which leads to lost revenue opportunities; Overpricing, causing potential customers to turn away; Creating overly complex pricing structures that confuse buyers; Ignoring market positioning and competitor pricing; Not adjusting prices as the product evolves and matures; Overlooking cost coverage and profitability, risking business sustainability.