#BMPowerUp ?? Pricing strategies for SaaS Products

We will guide you through this itinerary where we will reveal the most popular SaaS models of pricing. Which is the strategy that best suits your business??

In nazaríes intelligenia, we understand that choosing the suitable pricing strategy is the key to success for every SaaS product. Being product development and strategic consulting experts through our 'PowerUps', we accompany companies during the design of business models that maximize their growth and scalability.?

In this article, we will explore the main pricing strategies and how they impact customer conservation as well as revenue, to help you choose the option that best suits the needs of your business.

1. Freemium: An entry-level model with premium options?

Freemium is probably one of the most well-known models in the SaaS ecosystem. In this scheme, the user has free access to a basic version of the product, whereas the most advanced functionalities are to be accessible in a paid version. This approach allows the users to get familiar with the platform without any obligation, reducing the entry barrier and generating a wide base of potential users.

The main challenge of the freemium model is to turn these free users into paying customers. This requires offering clear value in the free version but reserving key features to motivate the subscription to the premium version. It is ideal for products that can offer constant value even in their free version.?

2. Permanent monthly/annual license: stability and predictability?

This traditional model establishes a fixed price to be paid monthly or annually, independently of the use of the software. It is a popular option for the SaaS that offer a complete set of functionalities from the beginning, providing both the supplier and the customer with stability.?

The permanent license model allows the companies to plan their long-term expenses without worrying about the variable consumption. It also guarantees recurring revenues to the supplier, facilitating the financial forecast. Nevertheless, it may not be ideal for users that do not make the most of the product, what could result in higher cancellation fees.?

3. Pay-as-you-go: Flexibility adapted to consumption?

The pay-as-you-go scheme introduces higher flexibility, allowing users to buy credits that are consumed depending on their use of certain features of the product. This model is attractive to companies that wish to pay only for what they really use. It is common in cloud storage services or data processing platforms, where the consumption can drastically vary from one month to the next.?

This approach can be beneficial for both small companies and big corporations, since it scales according to real use. Nevertheless, it can generate uncertainty to the user if the consumption is unpredictable, making the expenses forecast difficult.?

4. Tariffs according to the volume of functionalities: adapting to different business sizes?

A truly effective approach to SaaS products with a diverse user base is offering different tariffs according to the volume of functionalities. Inside this model, a reduced version is offered to small businesses or individual users at a lower price, while more complete and advanced plans are reserved for bigger companies, at a higher price.?

This approach ensures that the customers only pay for what they need, and it facilitates that the small companies can access the tool without compromising their budget. At the same time, it provides big corporations which require additional functionalities or extended support with a scalable option.?

5. Pay-per-user: ideal for big teams!

Finally, the pay-per-user model is an excellent option for SaaS products aimed at companies. In this scheme, the price varies according to the number of users or employees who access the software. It is common in collaboration, project management or CRM tools, where each user has its own access and needs different levels of interaction with the software.?

This model has the advantage that it grows with the company: while the organization adds more employees, the cost increases proportionally. For the supplier, it secures increasing revenues with the expansion of the customers. Nonetheless, for fast-growing companies, the costs could become elevated, what can motivate the search for more economic alternatives.?

Conclusion?

The selection of the adequate price schedule for a SaaS product depends mostly on the nature of the product and on its user base. While a freemium model is excellent to build a wide user base, the pay-per-use and pay-per-user models offer higher flexibility and scalability to different sized companies.

Understanding the customers’ profiles and how they behave with the product is key to selecting the pricing strategy that maximizes the value for the user as well as the revenue for the company.