The pricing page is the deciding factor in whether you make or lose money. It's your goal line, and it either sends numbers up on our scorecard for success (putting YOU at an advantage) or sinks us under pressure when someone else gets there first with their offer!
A lot can happen between now and then- but if we do things right; this one small step could propel everything forward into high gear while putting competitors onto probationary status.
This is a huge problem for SaaS companies because it’s difficult to price your product or service. If we want people to buy from us, then they need an incentive – which means that our prices are going determine how much revenue generated by each customer segment in total
A lot of businesses struggle with pricing their products and services; however I am here today specifically talking about those who offer subscription-based offerings like software as opposed t o one shot deals where there's no ongoing commitment .
I went and looked at 100+ SaaS pricing pages models, and I want to go over some of the variations, plus the pros and cons of each different model. I also have a couple of examples of companies that pivoted from one model to the other, and how the transition went.
The world of startups was essentially transformed when we figured out SaaS. When companies pivoted from a one-time sale to a monthly subscription, a whole world of possibilities was unveiled.
SaaS allows predictable revenue. It lets us estimate customer lifetime value with unprecedented accuracy. These days you can even raise capital or get a loan based on your MRR.
A flat SaaS model means that the platform has a fixed cost regardless of features or usage.
I won’t spend too much time on Flat pricing because in this day and age it is pretty rare. While it’s simple and very easy to explain to customers, flat pricing doesn’t allow upselling, which translates to negative churn, which is SaaS nirvana.
Negative churn is when you make more money from the same set of customers because instead of canceling the upgrade their plans to a more expensive billing. The majority of products have plain and simple churn, which is when you lose customers or revenue from a cohort of users.
By the way, if that didn’t make a lot of sense, you should read our article on SaaS metrics, it’ll prepare you much better for what’s to come. OK so here are some examples of flat pricing.
Skillshare interestingly doesn’t show pricing on the page. You can only find it after you’ve signed up- I would guess this is to reduce friction and capture as many leads as possible.
Brain.fm is another example. Notice how simple and frictionless this is.
Here’s recurring.co our SaaS expense tracking platform:
Last but not least, this is Slidebean. We are moving to a single flat plan precisely because we want to make things simple for our customers. We are willing to sacrifice that possibility to upsell, in return for better conversion.
Previously we had something like this, which is a Tiered pricing plan.
When going tiered, you can essentially group sets of features into groups and force customers to upgrade if they want access to them.
As I mentioned, we used this model for years, and overall it worked well. Entry-level plans allow for customers to dip their toes while leaving a chance to upgrade.
You may also group features by the type of customer, and tailor the plan to them. Look at this page from Geckoboard.
Their cheaper plan is very cheap and has very few features, but the moment you need custom logos, or additional screens, the plan jumps by over 500%.
While that may sound like a lot, it relates to the type of customer it targets. An individual or super-early startup doesn’t need any of that. A small business with multiple employees, 3 screens, and multiple dashboards can probably afford $100 more.
Here’s another tiered example from another platform we use, Sproutsocial:
Most companies try to stick to 2-3 different tiers, with some going all the way up to 4 which does translate into confusing landing pages. Try and fit this into a responsive layout.
Tiered works really well if you can find that ideal balance of features so that a customer upgrading does so because the plan as a whole is tailored for them.
This balance can backfire if you have customers upgrading because of a single function they need access to. In those cases, the pricing can easily be perceived as ‘wasted’ if you aren’t really taking advantage of everything it offers.
An alternative way to scale that is with Usage-Based pricing.
Usage-Based has the advantage of being connected directly to the value the platform provides. These modules are usually associated to a very important KPI that the platform as an influence on.
For example Stripe, a payment processor, charges a flat 2.9% of transactions, period.
Algolia, which we use for database search, charges you a flat $1 per 1,000 search requests.
ChartMogul, a revenue tracking platform- bases its main plan on the MRR of its customer (which their platform tracks).
In their case, even though they don’t directly influence MRR, recurring revenue is a good measure of company size and therefore, the amount of value extracted. Coincidentally, the more MRR a company has, the more computing power their server needs to process it.
That’s the main advantage of this model: if the KPI selected is the right one, the pricing can feel ‘fair’ to the customer and reduce push-back.
One risk, though, is that usage-based pricing depends on the scale of the companies. Your growth is essentially tied to the growth of your customers.
The last model we’ll look at is user-based. Companies like Slack, ClickUp, Monday, Calendly and even Google’s Gsuite scale based on the number of team members using them.
It’s another way to proportionally scale pricing based on company size (and hopefully value extracted as well).
If the companies you target are large enough, this makes a lot of sense.
We actually tried this at some point with Slidebean, only to find out that it was mainly the CEO who used our pitch deck builder and rarely had to bring in new people. We even found some cases of sharing passwords, which broke our hearts.
That being said, we still do that with some platforms. Shame on us. We have a shared password for many of our stock footage libraries, for many of our marketing tools- simply because the people who need the platform on a regular basis are just 1-2, and never at the same time.
Amazon Business prime is a good example of this. They charge a few hundred dollars per additional user and for a company our size, it’s just simpler to have a shared Prime account where that only required team members can access. We don’t need a separate account for each one of them.
Now that being said, we also have combo pricing pages. Zapier for example expands both with features and with number of actions. It’s a combo of Tier-Based and Usage-Based.
The general conclusion with all of this is… understand customer usage, and adjust your pricing to that. You should adapt to your customers, not the other way around.
“You should adapt to your customers, not the other way around. ”
Now I am not going to get into onboarding/conversion tactics. We could go into Freemium vs Premium, Monthly vs Annual - which connects to a concept called ‘Time to Value’, or ‘Aha moment’- but let me know if you’d like us to cover that in the future.
Now I think a very interesting case study is ChartMogul. These guys moved from Tier-Based pricing to Usage-Based pricing a couple of years ago.
Our experience with pricing has also been a roller coaster. At some point, we had 5 different tiered plans which were just plain confusing to everyone, even for us.
Our most recent iteration is that we moved to a single, flat pricing plan. We’ve seen some really good conversion rates, up to 3x higher than our previous combo, but are yet to see if it works out.
This is a functional model you can use to create your own formulas and project your potential business growth. Instructions on how to use it are on the front page.