Tuesday 26 March 2024

3 ways to price your SaaS Product

3 well-known ways to price your SaaS Product:

1. Per-user pricing: in this model, you charge a flat fee per user per month. You can offer discounts if the customer purchases the annual plan. Also, many companies offer per-user per-month pricing across multiple plans. The higher plans have more features, often implying more benefits for the customer.

2. Outcome-based (per outcome) pricing: in this model, you charge a fee only when the customer achieves a successful outcome. For instance, per lead pricing for lead generation software. The benefit for the customer here is that they only pay when they get value.

3. Consumption-based (per consumption) pricing: in this model, you charge the customer for every unit of consumption, irrespective of the outcome. For instance, for WhatsApp Messaging API, the pricing is on a per message/conversation basis. That message might not lead to a direct benefit for the customer.

For the SaaS company, the per-user per month is a great pricing model because the revenue is often quite stable and is independent of the usage or outcome. Of course, it is harder to convince the customer of this pricing model since they've to commit to a fixed monthly cost.

On the other hand, the per outcome model is the best for the customer since they only pay when they get value. Per consumption is somewhere in between where the onus of outcome is on the customer, but at the same time, as a SaaS company, you have a reasonable amount of stability in the revenue.

Which pricing model do you use in your Business model?

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