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SaaS Subscription Models

In addition to product quality, the implementation of various pricing models plays a crucial role in the customer acquisition process. Due to its importance, there are a large number of pricing models, which are used by SaaS companies depending on several factors (from the nature of the product to the desire and demand of the customer). You need to get the most from your product. But, at the same time, you should be careful not to overprice your product. Expensiveness leads to rejection from hundreds if not thousands of potential customers. We will discuss those models that are the most widespread among SaaS companies today.

SaaS pricing models

Companies tend to utilize only a few SaaS pricing models even though there are way more pricing opportunities out there. We will guide you through the three most popular methods. In the end, you can see which one is best suited to your company’s needs.

  1.  Usage-based

This SaaS pricing model is pretty self-explanatory. Costs increase with its usage. 

This model is also known as “Pay as you go” and it has some clear positive sides for newly signed customers. 

The cost of usage will be low because they will spend less time on it than seasoned customers. 

Additionally, those who use your product a lot will be charged for it accordingly. 

The negative side is that predicting your company revenue is mission impossible because usage for customers varies dramatically from day to day basis. Also, this means that subscription billing models are different for every user causing a huge headache for your SaaS subscription management. 

  • + Great for newly signed customers
  •  – Impossible to predict company revenue 
  1.  Flat rate/Subscription

If you don’t want to overcomplicate things, this one is right for you. It simplifies everything- one pricing model for one single product. Flat rate is also known as a term subscription model.

This method gives a clear picture so that a customer can see how much they need to pay exactly for service. Furthermore, companies are also sure to know the revenue they will get from this monthly subscription model.

  • + Customers exactly know how much service cost
  • + You will precisely calculate your revenue
  • – You may underprice yourself with this method
  1.  Per-user

Last and perhaps the most popular pricing model in today’s SaaS world. Main and maybe the only cause for its ubiquity is simplicity. You have one customer and the price is fixed per month, two make it double, and so on, and forth. One more positive side is that this linear system makes it easy to foresee your money generation because revenue scales directly alongside adoption.

However, your company may face dire consequences if you adopt this method for a long period. Basically, you limit the number of potential active users with this method and it encourages prone to cheat. Both of these consequences can be catastrophic for the health of SaaS companies.

  • + Simple for company and customer to understand
  • + Easy to track and predict revenue
  •  – Limits your customer base
  •  – Susceptible to cheating 

Conclusion

To achieve the best possible results, keep your pricing model simple to comprehend, target ideal customers, and charge them based on the value you provide. Always keep in mind that the most successful pricing model would be the one that promotes service usage.