Building a SaaS product is hard enough, but pricing it? That's where most founders either leave money on the table or price themselves out of the market entirely. After working with dozens of SaaS companies across B2C, B2B, and enterprise segments, I've seen the same pricing mistakes repeated over and over.
The truth is, there's no universal "right" pricing model. What works for Slack won't work for Canva, and what works for Salesforce definitely won't work for your early-stage startup. But there are frameworks, principles, and hard-learned lessons that can guide your decisions.
The Pricing Reality Check
Let's start with some uncomfortable truths:
Most SaaS pricing is cargo cult copying. Founders look at successful companies in adjacent markets and copy their pricing tiers, assuming that if it worked for them, it'll work for everyone.
The "value ladder" isn't always valuable. The conventional wisdom says you need a Good/Better/Best pricing structure to maximise revenue per customer. Sometimes, this just confuses customers and dilutes your core value proposition.
Enterprise doesn't always mean enterprise. Just because someone from Microsoft signs up doesn't mean you should pivot your entire pricing strategy to chase enterprise deals.
Free trials aren't always better than freemium, and freemium isn't always better than paid trials. The "best" acquisition model depends entirely on your product complexity, sales cycle, and customer behaviour.
The goal isn't to find the "perfect" pricing model, it's to find the model that aligns with how your customers actually buy, use, and derive value from your product.
Understanding Your Market Position
Before you can price effectively, you need to understand the context you're operating in.
Blue Ocean vs Red Ocean Products
Blue Ocean products create new market categories or serve previously underserved needs:
Customers need education about the problem and solution
Less price sensitivity initially
Higher tolerance for complexity during early adoption
Pricing can be value-based rather than competitive
Red Ocean products compete in established markets with clear alternatives:
Customers understand the problem and existing solutions
High price sensitivity and feature comparison
Need clear differentiation to justify premium pricing
Pricing often becomes competitive and feature-driven
Pricing implications:
Blue Ocean: Can start with higher prices, focus on value communication
Red Ocean: Need competitive pricing, clear feature differentiation
The B2C/B2B/Enterprise Spectrum
This isn't just about who your customers are, it's about how they buy, how they use your product, and what drives their purchasing decisions.
B2C SaaS Characteristics
Decision makers: Individual users
Purchase process: Impulse to considered (minutes to days)
Price sensitivity: High, personal budget impact
Usage patterns: Personal productivity, entertainment, lifestyle
Support expectations: Self-service, community-driven
B2B SaaS Characteristics
Decision makers: Small teams, department heads
Purchase process: Evaluation-driven (days to weeks)
Price sensitivity: Moderate, business ROI focused
Usage patterns: Team productivity, business processes
Support expectations: Responsive support, some hand-holding
Enterprise SaaS Characteristics
Decision makers: Multiple stakeholders, committees
Purchase process: Complex evaluation (weeks to months)
Price sensitivity: Low for proven ROI, high for unproven value
Usage patterns: Mission-critical operations, integration-heavy
Support expectations: White-glove service, dedicated resources
The Makers vs Shakers Framework
One of the most important distinctions in SaaS pricing is understanding whether you're selling to the people who use your product (Makers) or the people who buy your product (Shakers).
The Makers: Bottom-Up Adoption
Who they are:
Individual contributors and practitioners
People who will actually use your product daily
Often have limited budget authority
Value hands-on experience before committing
How they buy:
Want to try before they buy
Prefer self-service onboarding
Make decisions based on personal experience
Often become internal champions for larger purchases
Pricing implications:
Free trials and freemium models work well
Lower entry-point pricing
Usage-based pricing aligns with value
Focus on individual user value, not organisational ROI
Marketing approach:
Product-led growth strategies
Content marketing and education
Community building
Viral/referral mechanics
The Shakers: Top-Down Purchasing
Who they are:
Executives and decision-makers
Budget holders and strategic planners
May not be daily users of your product
Focus on organisational impact and ROI
How they buy:
Want to see business case and ROI projections
Prefer sales-assisted evaluation
Make decisions based on strategic fit
Often require vendor evaluation processes
Pricing implications:
Demo-first, trial-later approach
Higher price points with clear ROI justification
Seat-based or department-wide pricing
Custom pricing for large deployments
Marketing approach:
Sales-led growth strategies
Executive-focused content and events
Account-based marketing
Relationship building and trust
The Hybrid Reality
Most successful B2B SaaS companies don't choose between Makers and Shakers, they design pricing that serves both:
Bottom-up entry, top-down expansion:
Start with individual or small team plans (Makers)
Provide clear upgrade paths to department/company plans (Shakers)
Offer features that create organisational value at higher tiers
Enable Makers to become champions for larger purchases
Example flow:
Individual developer signs up for free trial
Invites teammates to collaborate
Team hits usage limits or needs advanced features
Team lead evaluates business plan
Success drives interest from other departments
IT/Procurement gets involved for enterprise features
Business Model Categories: The Foundation
Your pricing model should align with your business model complexity and customer interaction requirements.
Self-Service Model
Target customers: Individuals, startups, small businesses
Price range: Free to few hundred dollars per month
Sales process:Automated, product-led
Support model: Self-service, community, documentation
Key characteristics:
Sales: None required, product sells itself
Marketing: Full revenue responsibility through content, automation, and conversion optimisation
Support: Automated onboarding, extensive documentation, community forums
Product: Intuitive UX, minimal learning curve, immediate value
Pricing considerations:
Simple, transparent pricing
Monthly subscriptions with annual discounts
Usage-based pricing for scalable value
Free trials or freemium to reduce friction
Success metrics:
Conversion rates from trial to paid
Time to value (how quickly users see benefits)
Customer acquisition cost (CAC)
Monthly recurring revenue (MRR) growth
Transactional Model
Target customers: Small to medium businesses, departments within larger companies
Price range: Hundreds to several thousand dollars per month
Sales process: Inside sales, some automation
Support model: Responsive support, guided onboarding
Key characteristics:
Sales: Inside sales reps supported by automation and content
Marketing: Qualified lead generation, sales enablement, conversion optimisation
Support: Inside support reps with defined SLAs, complemented by self-service tools
Product: More complex features, customisation options, integration capabilities
Pricing considerations:
Tiered pricing with clear value differentiation
Annual contracts with quarterly payment options
Seat-based or usage-based pricing
Professional services add-ons
Success metrics:
Sales qualified leads (SQLs) to customer conversion
Average deal size and sales cycle length
Customer lifetime value (LTV)
Net revenue retention
Enterprise Model
Target customers: Large businesses, enterprises, government
Price range: Thousands to hundreds of thousands per year
Sales process: Field sales, complex evaluation
Support model: White-glove, dedicated resources
Key characteristics:
Sales: Territory sales reps with sales engineering support
Marketing: Brand awareness, relationship building, account-based marketing
Support: High-touch support including on-site assistance, dedicated account management
Product: Highly customisable, enterprise security, extensive integrations
Pricing considerations:
Custom pricing based on specific requirements
Multi-year contracts with annual payments
Implementation and professional services
Success-based pricing models
Success metrics:
Pipeline value and conversion rates
Average contract value (ACV)
Sales cycle efficiency
Customer expansion revenue
The Startup Graveyard: Misaligned Models
The most common fatal mistake: Trying to serve enterprise customers with a self-service model, or trying to scale a high-touch model to serve small customers.
Warning signs you're in the wrong model:
Your customer acquisition cost exceeds customer lifetime value
You're spending more time on support than product development
Your sales team is chasing deals that never close
Your customers are asking for features that don't fit your product vision
You're constantly explaining why your pricing is "different"
The enterprise trap: Just because a big company signs up doesn't mean you should pivot to enterprise. Ask yourself:
Is this a department-level purchase or company-wide initiative?
Does the contact have budget authority or are they just exploring?
Are they asking for features that serve your broader market?
Can you serve them profitably with your current model?
Pricing Model Fundamentals
Free Trial Variations
Not all free trials are created equal. The structure of your trial significantly impacts both conversion rates and the quality of customers you acquire.
Free Trial with Credit Card Required
How it works: Users must provide payment information to start trial, automatically charged if they don't cancel.
Pros:
Higher conversion rates (users who provide CC are more committed)
Automatic revenue capture (reduces friction at conversion)
Filters out casual browsers
Immediate revenue recognition
Cons:
Lower trial signup rates
Higher perceived risk for users
Potential chargeback issues
May deter legitimate prospects
Best for: Products with clear, immediate value that can be demonstrated quickly.
Free Trial with No Credit Card Required
How it works: Users can access full product for limited time without payment information.
Pros:
Higher trial signup rates
Lower perceived risk
Better user experience
Broader top-of-funnel
Cons:
Lower conversion rates
More casual users who never intended to buy
Additional friction at conversion point
Harder to predict revenue
Best for: Complex products that need time to demonstrate value, or markets with high payment friction.
$1 Authentication Charge (Fully Refunded)
How it works: Small charge to verify payment method, immediately refunded.
Pros:
Verifies payment method without psychological barrier of full price
Reduces fraud and fake signups
Smoother conversion experience
Filters for serious prospects
Cons:
Still creates some signup friction
Requires clear communication about refund
May confuse some users
Additional payment processing complexity
Best for: Products targeting business users who expect payment verification but want to reduce trial friction.
Discounted Paid Trial
How it works: Users pay reduced rate (e.g., $1 for 14 days) for full access.
Pros:
Immediate revenue generation
High-commitment users
Clear value demonstration
Easy transition to full pricing
Cons:
Significant signup friction
May deter price-sensitive prospects
Requires strong value proposition
Complex messaging
Best for: Premium products with clear ROI, targeting business customers with established budgets.
Freemium: Marketing Strategy vs Revenue Model
The freemium reality: Freemium is primarily a customer acquisition strategy, not a revenue model. The free tier exists to demonstrate value and convert users to paid plans.
When Freemium Works
Product characteristics:
Network effects (more users = more value)
Viral sharing mechanisms
Clear upgrade triggers (usage limits, advanced features)
Low marginal cost to serve free users
Market characteristics:
High customer acquisition costs through other channels
Long consideration cycles
Strong word-of-mouth potential
Competitive market requiring trial experience
Business model alignment:
Self-service or transactional models
Product-led growth strategy
Sufficient funding to support free users
Clear path to monetisation
When Freemium Fails
The "too good" problem: If your free tier provides too much value, users never upgrade.
The "not good enough" problem: If your free tier doesn't provide real value, users don't engage enough to see upgrade value.
The "wrong audience" problem: If your target customers prefer to buy rather than try, freemium creates unnecessary friction.
Resource drain: Supporting free users without clear conversion paths can drain resources without generating revenue.
Freemium with Paid Feature Trial
The hybrid approach: Offer basic features free forever, with time-limited trials of premium features.
Structure:
Users get permanent access to core features
Premium features available for limited trial (7-30 days)
After trial, users can subscribe for continued premium access
No credit card required for either free tier or premium trial
Advantages:
Demonstrates full product value
Reduces commitment anxiety
Allows feature-specific conversion optimisation
Provides multiple conversion opportunities
Challenges:
Complex user experience
Difficult to optimise conversion funnels
Requires sophisticated feature flagging
May confuse pricing communication
The Value Ladder Myth
The conventional SaaS wisdom says you need a "Good/Better/Best" pricing structure to maximise revenue. This creates a "value ladder" where customers start at the bottom and climb up as they need more features.
Why Value Ladders Often Fail
Feature Bloat and Confusion
The problem: Adding features to justify higher tiers often creates products that are harder to use and understand.
Example scenario:
Basic plan: 5 projects, basic reporting
Pro plan: 25 projects, advanced reporting, integrations
Enterprise plan: Unlimited projects, custom reporting, API access, SSO
The reality: Most customers just want to solve their core problem. Additional features often feel like unnecessary complexity rather than added value.
The Goldilocks Problem
Too little differentiation: If tiers are too similar, customers always choose the cheapest option.
Too much differentiation: If tiers are too different, customers feel like they're being forced to pay for features they don't need.
Just right: Finding the perfect balance is incredibly difficult and often changes as your market evolves.
Upgrade Friction
The assumption: Customers will naturally upgrade as their needs grow.
The reality: Customers often find workarounds to stay on lower tiers, or they churn rather than upgrade.
Alternative Approach: Core Product + Add-Ons
Instead of forcing customers up a feature ladder, consider offering a single core product with optional add-ons.
The EazySites Model
Rather than traditional tiered pricing, we moved to a single core plan where users pay only for the add-ons they actually need:
Core product: Full website building functionality Add-ons:
Custom domains
Advanced analytics
E-commerce functionality
Priority support
Additional storage
Benefits:
Customers pay for value they actually use
Clearer pricing communication
Easier product development focus
Reduced feature bloat
Higher customer satisfaction
When Add-On Models Work
Product characteristics:
Clear core value proposition
Modular feature architecture
Features that serve different use cases
Easy to understand value of each add-on
Customer characteristics:
Diverse needs and use cases
Price-conscious but willing to pay for specific value
Prefer customisation over pre-packaged solutions
Clear understanding of their requirements
Implementation Considerations
Technical requirements:
Modular product architecture
Feature flagging system
Flexible billing system
Usage tracking and limits
Business considerations:
Pricing each add-on appropriately
Bundling strategies for common combinations
Clear communication of total costs
Support for different add-on combinations
Pricing Structure Options
Beyond the traditional tiered approach, there are several ways to structure your pricing that can better align with customer value and usage patterns.
User-Based Pricing
How it works: Price scales with number of users/seats.
Pros:
Easy to understand and predict costs
Scales with customer growth
Aligns with organisational value
Simple to implement and track
Cons:
May discourage user adoption
Doesn't always correlate with value received
Can create artificial usage limits
May not fit all use cases
Best for: Collaboration tools, communication platforms, productivity software.
Considerations:
Define "user" clearly (active users, licensed seats, etc.)
Consider team vs individual pricing
Plan for guest/external user scenarios
Think about seasonal usage patterns
Feature-Based Pricing
How it works: Different price points unlock different feature sets.
Pros:
Clear value differentiation
Allows for product line segmentation
Can serve different customer segments
Encourages feature adoption
Cons:
Can create artificial limitations
Complex to communicate and understand
May frustrate customers who need specific features
Requires careful feature categorisation
Best for: Products with distinct use cases, professional vs consumer markets.
Considerations:
Ensure each tier provides complete value
Avoid holding "basic" features hostage
Consider feature combinations carefully
Plan for feature evolution
Usage/Consumption-Based Pricing
How it works: Customers pay based on actual usage (API calls, storage, transactions, etc.).
Pros:
Perfect alignment with value received
Scales naturally with customer success
Low barrier to entry
Fair for different usage patterns
Cons:
Unpredictable costs for customers
Complex billing and tracking
May discourage usage/experimentation
Requires sophisticated metering
Best for: Infrastructure services, APIs, data processing, communication services.
Considerations:
Provide usage forecasting tools
Offer spending limits and alerts
Consider hybrid models with base fees
Ensure transparent usage tracking
Value-Based Pricing
How it works: Price based on the value/ROI delivered to the customer.
Pros:
Maximises revenue potential
Aligns pricing with customer success
Justifies premium pricing
Focuses on outcomes over features
Cons:
Difficult to measure and communicate
Requires deep customer understanding
May be hard to standardise
Complex sales process
Best for: Business-critical software, ROI-driven solutions, consulting-like services.
Considerations:
Develop clear value metrics
Provide ROI calculators
Consider success-based pricing
Ensure measurable outcomes
Hybrid Models
Combining approaches: Many successful SaaS companies use hybrid models that combine multiple pricing structures.
Examples:
Base subscription + usage overages
Seat-based with feature tiers
Freemium with usage limits
Core product + add-on modules
Benefits:
Serves different customer segments
Provides multiple revenue streams
Allows for pricing optimisation
Reduces customer churn risk
Challenges:
Complex to communicate
Difficult to optimise
May confuse customers
Requires sophisticated billing
The Enterprise Deception
One of the biggest mistakes SaaS founders make is assuming that a signup from a large company means they should pivot to enterprise pricing and sales.
The Microsoft Scenario
The situation: Someone from Microsoft signs up for your product. Your immediate thought: "We've got an enterprise customer! Time to pivot our pricing strategy!"
The reality check: Before you start dreaming of six-figure deals, ask these critical questions:
Who is the person that signed up?
Individual contributor: May have no budget authority
Team lead: Might have small departmental budget
Executive: Could have significant purchasing power
Intern: Might just be exploring tools for a project
What is their role and department?
Engineering: Often has different budget and needs than Sales
Marketing: May need different features than Operations
R&D: Might be experimenting, not implementing
Procurement: Could be doing vendor research, not actual buying
Geographic and organisational context
Global vs local: Are they part of a global initiative or local team?
Headquarters vs subsidiary: Different budget authorities and processes
Department vs company-wide: Vastly different scale and requirements
Collaboration scope
Individual use: Just solving a personal productivity problem
Small team: 5-10 people in a specific department
Department-wide: 50-100 people with shared processes
Company-wide: Thousands of users with enterprise requirements
The Enterprise Trap Indicators
Warning signs that you're chasing the wrong opportunity:
Budget Misalignment
They want enterprise features at startup pricing
They expect extensive customization for standard pricing
They ask for free trials that last months
They want to "start small" but expect enterprise support
Process Misalignment
They want to buy through procurement but expect self-service onboarding
They need legal review for standard terms
They require security audits for basic features
They want custom contracts for standard products
Feature Misalignment
They ask for features that don't serve your broader market
They need integrations with systems only large companies use
They require compliance certifications you don't have
They want customisations that would break your product for others
Making the Right Decision
When to pursue enterprise opportunities:
The contact has clear budget authority
Their requirements align with your product roadmap
They're willing to pay enterprise prices for enterprise value
The deal size justifies the sales investment
Success would create a referenceable customer for similar prospects
When to politely decline:
They want enterprise features at self-service prices
Their requirements would derail your product strategy
The sales cycle would consume resources better spent elsewhere
Success wouldn't be replicable with other customers
They're not willing to pay for the value they're requesting
The Hybrid Approach
Instead of choosing enterprise OR self-service, consider:
Departmental Enterprise
Serve departments within large companies
Enterprise-grade security and compliance
Self-service or inside sales model
Pricing that scales with department size
Enterprise Features, Self-Service Delivery
Offer enterprise features through your standard product
Maintain self-service onboarding and support
Price based on usage or seats, not custom contracts
Provide enterprise SLAs through higher-tier plans
Implementation Strategy
Choosing Your Starting Model
Start with your customer, not your competition. The biggest mistake founders make is copying successful companies without understanding why their model works for their specific market.
Customer Research Framework
Before choosing a pricing model, understand:
How do your customers currently solve this problem?
What do they pay for existing solutions?
How do they evaluate and purchase tools?
What's their decision-making process?
Who's involved in the buying decision?
What's their budget and procurement process?
Individual budget vs departmental vs company-wide
Monthly vs annual budget cycles
Approval processes and stakeholders
Preferred payment methods and terms
How do they measure value?
Time savings vs cost savings vs revenue generation
Individual productivity vs team efficiency vs business outcomes
Quantitative metrics vs qualitative benefits
Short-term vs long-term value
What are their usage patterns?
Daily vs weekly vs monthly usage
Seasonal variations
Growth patterns over time
Feature adoption curves
Market Testing Approaches
A/B test different models with real prospects:
Create landing pages with different pricing structures
Test signup flows with different friction levels
Survey users about pricing preferences and concerns
Analyse conversion and churn patterns
Interview existing customers:
How did they evaluate your pricing?
What almost prevented them from signing up?
How has their usage evolved over time?
What would make them upgrade or downgrade?
Transition Strategies
Most successful SaaS companies evolve their pricing over time.Plan for transitions from the beginning.
Common Evolution Paths
Self-service → Transactional:
Add inside sales for larger deals
Introduce annual contracts and discounts
Develop more sophisticated onboarding
Create customer success processes
Transactional → Enterprise:
Build field sales capabilities
Develop enterprise features and security
Create custom pricing and contracting
Establish partner and channel programs
Freemium → Paid trial:
Gradually reduce free tier value
Introduce time limits on premium features
Improve trial-to-paid conversion
Focus on higher-value customer segments
Managing Existing Customers
Grandfathering strategies:
Honour existing pricing for current customers
Provide upgrade incentives to new pricing
Set sunset dates for old pricing tiers
Communicate changes well in advance
Migration approaches:
Automatic migration with opt-out
Voluntary migration with incentives
Forced migration with extended notice
Hybrid approach based on customer segment
Common Pitfalls and How to Avoid Them
The "Whale Hunting" Trap
The temptation: A large company shows interest, so you pivot your entire strategy to chase enterprise deals.
Why it fails:
Enterprise sales cycles are long and unpredictable
You lose focus on your core market
Product development gets derailed by custom requirements
You burn through runway waiting for big deals to close
How to avoid it:
Set clear criteria for enterprise opportunities
Maintain focus on your primary market
Don't build custom features for prospects
Keep enterprise deals as upside, not core strategy
The "Feature Ladder" Obsession
The temptation: Create multiple pricing tiers with increasingly complex feature sets.
Why it fails:
Customers get confused by too many options
Feature development becomes unfocused
Support complexity increases exponentially
Core value proposition gets diluted
How to avoid it:
Start with single pricing tier
Add tiers only when customer data supports it
Ensure each tier provides complete value
Regularly audit and simplify pricing structure
The "Freemium Forever" Problem
The temptation: Offer so much value in the free tier that users never need to upgrade.
Why it fails:
Free users consume resources without generating revenue
No clear upgrade triggers or value differentiation
Conversion rates remain persistently low
Business model becomes unsustainable
How to avoid it:
Design clear upgrade triggers into the free experience
Limit free tier usage, not just features
Regularly analyse free-to-paid conversion funnels
Consider time-limited trials instead of permanent free tiers
The "Pricing Perfectionism" Paralysis
The temptation: Spend months analysing and optimising pricing before launching.
Why it fails:
Perfect pricing doesn't exist, it evolves with your market
Analysis paralysis prevents learning from real customer behaviour
Market conditions change while you're planning
You miss opportunities to gather actual usage data
How to avoid it:
Launch with "good enough" pricing based on research
Plan to iterate based on real customer feedback
Set regular pricing review cycles
Focus on customer value, not pricing optimisation
The "Competitor Copying" Shortcut
The temptation: Copy successful competitors' pricing structures.
Why it fails:
Their model may not fit your product or market
You don't understand the reasoning behind their choices
Market positioning and customer segments may be different
You miss opportunities for differentiation
How to avoid it:
Use competitor research as input, not blueprint
Understand your unique value proposition
Test different approaches with your specific audience
Focus on customer needs, not competitor features
The "Annual Contract" Push
The temptation: Push all customers toward annual contracts for better cash flow and retention.
Why it fails:
Creates barrier for customers who prefer monthly flexibility
May not align with customer budget cycles
Can mask underlying retention problems
Reduces ability to iterate pricing quickly
How to avoid it:
Offer both monthly and annual options
Use annual discounts as incentive, not requirement
Understand customer preferences and budget cycles
Focus on value delivery, not contract length
Conclusion
Pricing your SaaS product isn't about finding the "perfect" model, it's about finding the model that best serves your customers while building a sustainable business.
The most successful SaaS companies I've worked with share a few common characteristics:
They start with customer research, not competitor analysis. They understand how their customers buy, use, and derive value from software before setting prices.
They keep it simple initially. Rather than launching with complex tiered pricing, they start with one or two clear options and evolve based on real usage data.
They align pricing with value delivery. Whether that's through usage-based pricing, outcome-based pricing, or simple subscription models, the price customers pay correlates with the value they receive.
They plan for evolution. They know their pricing will change as their market matures, their product evolves, and their customer base grows.
They focus on customer success, not pricing optimisation. The best pricing strategy is one that helps customers succeed with your product, because successful customers become loyal, expanding customers.
Remember: your pricing model is a product feature, not just a business decision. It affects how customers discover, evaluate, adopt, and expand their use of your product. Design it with the same care you put into your user experience, and iterate it based on the same data-driven approach you use for product development.
The goal isn't to maximise short-term revenue, it's to build a pricing model that scales with your customers' success and creates sustainable, predictable growth for your business.
Building a SaaS product is hard enough without getting pricing wrong. Start with your customers' needs, keep it simple, and iterate based on real data. The perfect pricing model doesn't exist, but the right pricing model for your business and market definitely does.