Pricing is not a one-time decision—it's an ongoing experiment. Most founders agonize over their initial pricing, launch, and never touch it again. Wrong approach. The best SaaS companies iterate on pricing constantly, often doubling or tripling prices as they discover their true value proposition.
There's no perfect pricing model. Each has tradeoffs. Your job is to pick the model that aligns with how your customers perceive value and how your product delivers it.
The 6 Major SaaS Pricing Models
1. Flat-Rate Pricing (Single Price for Everyone)
What it is: One price, one plan. Everyone pays the same regardless of usage or team size.
Examples:
- Basecamp: $299/month for unlimited users and projects
- Hey Email: $99/year per user, one plan
Pros:
- Simplest to communicate and understand
- Low friction—no complex decision-making
- Easy to budget for customers
- Reduces sales complexity
Cons:
- Leaves money on the table from high-value customers willing to pay more
- May be too expensive for price-sensitive small customers
- Hard to capture expanding value as customers grow
Best for: Products with consistent value delivery across customer sizes. Works well for opinionated products with strong brand that don't want to nickel-and-dime customers.
2. Tiered Pricing (Good/Better/Best)
What it is: Multiple pricing tiers with increasing features and limits. Most common model in SaaS.
Examples:
- Notion: Free, Plus ($10/user/mo), Business ($18/user/mo), Enterprise (custom)
- HubSpot: Free, Starter, Professional, Enterprise across different product lines
- Mailchimp: Free, Essentials, Standard, Premium
Pros:
- Captures customers at different willingness-to-pay levels
- Natural upgrade path as customers grow
- Middle tier benefits from anchoring effect
- Can segment by feature needs (power users vs. basic users)
Cons:
- Choice paralysis if too many tiers (keep it to 3-4)
- Requires careful feature gating—frustrate users with wrong limits
- Complex to communicate all differences
Best for: Most B2B SaaS products. Works when you have a clear feature progression and customer segments with different needs.
Design tips:
- 3 tiers is optimal for decision-making (backed by research)
- Make middle tier most attractive (highlighted, "most popular" badge)
- Price gaps should be significant (2-3x between tiers, not 20%)
- Feature differentiation should be clear, not a laundry list of checkmarks
3. Per-User Pricing (Seat-Based)
What it is: Price scales linearly with number of users/seats. Can be combined with tiers.
Examples:
- Slack: $8.75/user/month (Pro plan)
- Zoom: $15.99/user/month (Pro plan)
- Monday.com: Starts at $9/seat/month
Pros:
- Revenue grows automatically as customer teams grow
- Predictable for both you and customer
- Easy to understand and calculate
- Aligns pricing with value (more users = more value)
Cons:
- Creates incentive for customers to share logins (seat minimization)
- Can become expensive quickly for large teams
- Doesn't capture value from power usage by small teams
- May discourage adding users, limiting product adoption
Best for: Collaboration tools, team productivity apps, any product where value clearly scales with team size.
2026 trend: Companies moving away from pure per-seat to avoid "Zoom fatigue"—the frustration customers feel when pricing explodes with team growth. Consider caps or volume discounts.
4. Usage-Based Pricing (Pay for What You Use)
What it is: Price based on consumption—API calls, storage, compute, emails sent, etc.
Examples:
- AWS: Pay for compute hours, storage GB, data transfer
- Stripe: 2.9% + 30¢ per transaction
- Snowflake: Pay per query/compute time
- Twilio: Pay per SMS/call
Pros:
- Perfect alignment between value delivered and price paid
- Lowers barrier to entry (start small, pay little)
- Revenue grows automatically with customer success
- Customers feel it's fair—no paying for unused capacity
Cons:
- Unpredictable revenue month-to-month
- Customers face unpredictable bills (can cause churn)
- Requires robust usage tracking infrastructure
- Can discourage usage if customers fear costs
Best for: Infrastructure/developer tools, API products, communication platforms, anything with clear, measurable usage metrics.
Hybrid approach: Combine base subscription with usage overages. Example: "Included: 10K emails/month. $0.001 per email beyond that."
5. Freemium (Free Forever Plan + Paid Upgrades)
What it is: Free tier with limited features/usage. Paid plans unlock more.
Examples:
- Dropbox: 2GB free, pay for more storage
- Figma: Free for individuals, pay for teams and advanced features
- Grammarly: Basic free, Premium for advanced checks
Pros:
- Massive top-of-funnel growth (low friction to try)
- Word-of-mouth spreads faster with free users
- Let product demonstrate value before asking for money
- Creates network effects if free users invite others
Cons:
- Free users cost you money (support, infrastructure)
- Typical conversion rates: only 2-5% of free users ever pay
- Can cannibalize paid conversions if free tier is too generous
- Takes longer to generate revenue
Best for: Products with low marginal cost per user (software-only, minimal support needed). Strong network effects. Viral potential.
Critical success factors:
- Clear value gap between free and paid (not just arbitrary limits)
- Free tier should be genuinely useful, not a crippled trial
- Upgrade triggers should be natural pain points (hit limit, need team features)
6. Feature-Based Pricing
What it is: Different tiers unlock different features, not just higher limits.
Examples:
- Ahrefs: Different tools available at different price points
- Adobe Creative Cloud: Pay for individual apps vs. full suite
Pros:
- Captures value from specific high-value features
- Allows clear differentiation between plans
- Can charge more for specialized functionality
Cons:
- Creates resentment if "basic" features are gated
- Hard to decide which features belong where
- May frustrate users who just need one premium feature
Best for: Products with distinct feature sets appealing to different user personas.
How to Choose Your Pricing Model
Ask yourself these questions:
1. What's Your Value Metric?
What makes your product more valuable to customers? Align your pricing to that metric.
- Value grows with team size? → Per-user pricing
- Value grows with usage volume? → Usage-based pricing
- Value is consistent regardless of size/usage? → Flat-rate
- Value comes from specific capabilities? → Feature-based tiers
2. Do You Have Distinct Customer Segments?
If small businesses and enterprises both use your product but need different things → Tiered pricing
If all customers are similar → Flat-rate or simple 2-tier model
3. What Do Competitors Charge?
Don't copy competitors blindly, but understand market expectations. If everyone charges per-seat, switching to usage-based creates friction (but can be a differentiator).
4. What's Your Sales Model?
- Self-service/PLG? → Simple pricing (flat-rate or freemium)
- Sales-led? → Tiered with "Contact us" for Enterprise
- Hybrid? → Clear public pricing for SMB, custom for Enterprise
Pricing Psychology and Tactics
Anchoring Effect
Show expensive options first to make others seem reasonable. Decoy pricing works: Introduce a high-priced tier that makes your target tier look like a steal.
Example: Basic $10, Pro $30, Enterprise $100. Most customers choose Pro because it's "not as expensive as Enterprise" but "way better than Basic."
Charm Pricing (9s vs. 0s)
$99 vs. $100: Makes a difference for consumer products and small purchases.
For B2B SaaS? Less important. $47/month feels gimmicky. $49 is fine. $50 is clean.
Above $100: Round numbers ($500, not $497). Signals premium/professional.
Annual vs. Monthly Pricing
Offer annual plans with 15-20% discount. Benefits:
- Improves cash flow (get 12 months revenue upfront)
- Reduces churn (committed for a year)
- Lower transaction costs
Best practice: Show annual pricing by default, make switching to monthly require a click. Conversion rates improve significantly.
Enterprise "Contact Us" Pricing
When to hide pricing and require sales conversation:
- Deal sizes vary dramatically (could be $10K or $500K)
- Heavy customization or implementation required
- Negotiation is expected in your market
- Compliance/security requirements vary
Warning: "Contact us" hurts conversion for self-service customers. Only use it for true enterprise tier.
Common Pricing Mistakes to Avoid
1. Pricing too low out of fear: Most founders underprice by 2-5x. You can always discount. You can rarely raise prices on existing customers without backlash.
2. Too many pricing tiers: More than 4 tiers creates decision paralysis. Stick to 3-4 maximum.
3. Unclear differentiation between tiers: "What's actually different between Standard and Professional?" If customers can't tell, they'll pick the cheapest.
4. Ignoring price increases: Successful companies raise prices regularly (annually). Grandfather existing customers, charge new ones more. Your value improves over time—so should your prices.
5. Competing solely on price: Being the cheapest is a race to the bottom. Compete on value, not price. Someone can always undercut you.
6. Not testing pricing: A/B test your pricing page. Test different price points with new customers. Measure conversion rates and LTV, not just initial conversion.
When and How to Change Pricing
Signs it's time to adjust pricing:
- Too many customers choosing lowest tier (you left money on table)
- Too many choosing highest tier (not capturing full willingness to pay—add higher tier)
- Customers saying "yes" immediately without hesitation (you're too cheap)
- Low conversion rates but strong engagement (might be too expensive, or wrong messaging)
- You've added significant value/features since launch
How to change pricing:
- Grandfather existing customers at current prices (honor loyalty)
- Announce changes with plenty of notice (30-60 days for annual renewals)
- Explain the value you've added to justify increases
- Offer one-time discount for annual commitment at old rates
Real-World Pricing Evolution Examples
Slack: Started with freemium + simple per-user pricing. Added Enterprise Grid tier as large companies adopted. Introduced fair billing to reduce seat-sharing complaints.
Superhuman: Launched at $30/month (bold for email). Never wavered. Created scarcity with waitlist. Price became part of brand identity.
Linear: Waited until product-market fit before introducing paid plans. Went directly to $8/user/month, no freemium. Opinionated pricing for opinionated product.
Conclusion: Pricing is Product Strategy
Your pricing model shapes everything: who buys, how they use your product, how fast you grow, and whether your economics work.
Start with a hypothesis, launch, and iterate. Pricing is never "done." The best SaaS companies experiment constantly, often making small changes every quarter and major shifts annually.
Your action plan:
- Identify your value metric (what makes your product more valuable?)
- Research what 10 competitors charge and how they structure pricing
- Talk to customers: "What would you pay for this? What's too expensive?"
- Choose one pricing model to start (tiered per-user is safe default)
- Launch, measure conversion rates and LTV by plan
- Iterate every 90 days based on data
Remember: Underpricing hurts your business more than overpricing. It's easier to discount down than raise prices up. When in doubt, price higher and justify it with exceptional value delivery.