How to Choose the Right Pricing Strategy for Your SaaS

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Choosing the right pricing strategy can make or break a SaaS startup. Too high, and potential customers will hesitate. Too low, and you risk undervaluing your product or limiting growth. The goal is to find a balance that reflects your product’s value, supports sustainable revenue, and aligns with your growth strategy.

In this article, we’ll share a structured approach to selecting a pricing model that fits your SaaS business, with practical insights on what works at different stages and for different audiences.

Step-by-step guide to pricing strategy for SaaS

Every business is different, and your pricing strategy should adapt to the niche and market. Here are some recommendations on how to proceed.

1. Understand your customer segments

Before choosing prices or plans, you need a clear picture of who your customers are and why they use your product. Most SaaS products serve more than one type of customer, and each segment values different things. Pricing works best when it reflects those differences instead of forcing everyone into the same plan.

Start by defining your main segments. Look at company size, role, maturity, and the problem they are trying to solve. Then identify what “value” means for each group and how much complexity they are willing to accept.

Case 1. Marketing automation platform

A marketing platform often serves very different users:

• Solo marketers and freelancers usually want simplicity. They care about quick setup, basic automation, and affordable pricing. Their willingness to pay is lower, but they are sensitive to ease of use.
• Small marketing teams value collaboration, integrations, and reporting. They are willing to pay more if the platform saves time and supports team workflows.
• Enterprises or agencies need advanced features such as custom permissions, white labeling, API access, and priority support. Price matters less than flexibility and control.

In this case, tiered pricing works well. Lower tiers focus on ease and limits, while higher tiers unlock scale and customization.

Case 2. CRM platform

CRM products also serve multiple segments, but with different priorities:

• Small businesses want an all-in-one solution that is easy to adopt. They value simplicity and predictable pricing.
• Growing sales teams care about automation, integrations, and performance tracking. They expect pricing to scale with team size.
• Large enterprises require deep customization, security controls, and system integrations. They often expect custom pricing.

Here, per-user pricing combined with feature-based tiers aligns well with customer expectations.

In both cases, customer research helps you understand willingness to pay and which features belong in each plan. This insight becomes the foundation for pricing levels, packaging, and long-term growth.

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2. Define your value metrics

A value metric defines how customers pay in relation to the value they receive from your product. It is not just a billing unit. It is a signal that explains what your product is really selling. When chosen correctly, the value metric feels fair, predictable, and easy to justify. When chosen poorly, it creates friction, limits adoption, or leads to constant pricing objections.

Common value metrics include per user, per project, per transaction, and usage-based models. The key is to match pricing to how customers experience value, not how your system is built.

For example, productivity and team collaboration tools often charges per active user. Each additional user increases collaboration and productivity, so the cost grows with the benefit. This model is easy to understand and works well for internal tools. However, it can discourage companies from inviting all team members, which may slow adoption.

A marketing automation platform might charge per number of contacts or emails sent. Here, value increases as campaigns scale, making a usage-based metric feel natural. Small teams pay less, while larger teams pay more as they generate more impact.

A data processing or API-based product often charges per API call or volume of data processed. Customers pay in direct proportion to how much they use the service. This aligns cost closely with value, but requires clear usage tracking and transparent reporting.

The right value metric grows with customer success. It supports expansion, reduces friction, and makes pricing feel like a logical extension of product value.

3. Choose a pricing model

Common SaaS pricing models include:

Flat-rate pricing

Flat-rate pricing charges a single price for all users, regardless of usage or features. Its main advantage is simplicity—customers understand exactly what they are paying, and billing is easy to manage. However, it is inflexible and does not scale well as different users or organizations have varying needs. Small customers may feel they overpay, while larger ones may feel constrained. Flat-rate pricing works best for simple products with a clear, uniform value proposition, such as a basic SaaS tool for individual professionals or small teams. It is less suitable for products with multiple features or varying levels of usage.

Tiered pricing

Tiered pricing offers multiple plans with increasing features, limits, or support levels. Its advantage is flexibility: it caters to different segments and allows customers to upgrade as their needs grow. Tiered pricing is highly effective for startups because it supports a clear path from entry-level adoption to enterprise usage. The downside is that too many tiers can confuse customers, and misaligned features can create frustration. Ideal use cases include marketing platforms, project management tools, or SaaS products serving both small teams and larger organizations.

Usage-based pricing

Usage-based pricing charges customers according to how much they use the product. The key advantage is fairness: customers pay in proportion to the value they receive, which encourages adoption and aligns pricing with success. The disadvantage is unpredictability—revenue can fluctuate and forecasting becomes harder. This model works best for scalable platforms, such as APIs, cloud storage, or data-processing services, where usage naturally varies between customers.

Freemium

Freemium provides a free basic plan with optional paid upgrades. It is highly effective for user acquisition because it allows customers to experience the product without risk. The advantages include rapid growth and market penetration. The disadvantages are that free users may never convert, and supporting them can be costly. Freemium works best for products with low marginal cost per user and clear premium features, such as marketing automation, collaboration tools, or content platforms.

Per-user pricing

Per-user pricing charges based on the number of active users in a team or organization. Its main advantage is transparency: each user’s cost is clear and predictable. It also scales naturally with team growth. However, it can discourage adoption in large organizations because costs increase as teams grow, and it may not reflect the true value provided by heavy users. Ideal use cases include team collaboration tools, CRMs, or project management software where value scales with each additional active user.

Different types of businesses benefit from different approaches, often shaped by their value metric.

Case 1. Project management tool

A project management tool usually serves teams of varying sizes. The value metric is often per active user or per team. Here, per-user pricing works well because each additional user contributes directly to collaboration and productivity. Tiered plans can add advanced features like reporting, integrations, or security controls. A flat-rate model would be simple but could either undercharge large teams or overcharge small ones.

Case 2. API-based service

For a platform offering machine learning APIs, the value metric is usage—per API call or data processed. Usage-based pricing is ideal here. Customers pay according to how much value they extract. Tiered plans may also be used, with higher tiers offering bulk discounts or additional features like dedicated support or enhanced performance.

Case 3: Marketing automation platform

A marketing platform often tracks contacts or emails as the value metric. Freemium can be effective to attract small teams, allowing them to experience the product before upgrading. Tiered plans then scale with contact list size or advanced automation features, ensuring revenue grows with customer success.

Case 4: Internal team tools for enterprises

Enterprise tools often use flat-rate or tiered pricing based on company size or feature bundles. Simplicity and predictability are more important than fine-grained usage tracking. Per-user pricing may be secondary, often combined with feature tiers for premium capabilities.

Choosing a pricing model requires understanding the value metric and mapping it to customer behavior. The right combination ensures pricing feels fair, supports adoption, and scales with your business growth.

4. Test price sensitivity

Testing price sensitivity helps you understand what customers are actually willing to pay and how pricing affects adoption and retention.

Start with small, controlled experiments. For example, offer early adopters slightly different price points or feature combinations and track their behavior. Surveys can reveal perceived value and pricing objections, while A/B tests show real-world conversion impacts. Pilot programs for specific segments, such as small teams versus enterprises, can uncover differences in willingness to pay.

Pay attention not just to immediate conversions, but also to long-term retention and engagement. A lower price may boost sign-ups but lead to higher churn if customers feel the product is too basic. Conversely, a higher price can attract serious, committed users who extract more value. By iterating and measuring responses, you can refine both your pricing and packaging to match customer expectations and maximize sustainable revenue.

5. Align pricing with customer journey

Your pricing should support your onboarding and activation strategy. Low initial friction encourages trial and adoption, while clear upgrades guide customers to higher-value plans.

Consider offering discounts for annual plans, bundling features, or providing add-ons for advanced users. The goal is to balance accessibility with revenue optimization.

6. Monitor metrics and iterate

Pricing strategy is not a one-time decision. Track key metrics like:

• MRR and ARR growth
• Conversion rates from trial to paid plans
• Churn and expansion revenue
• Customer feedback on pricing and perceived value

Learn more about which metrics SaaS should track to refine plans, adjust tiers, or introduce new value propositions.

Choosing the right pricing strategy is just one piece of the puzzle for growing your SaaS business. To maximize revenue and streamline operations, you need the right tools to support your strategy. Albato Embedded lets you integrate powerful automation directly into your platform, delivering seamless experiences for your users.

Ready to see it in action? Book a demo session today and discover how Albato Embedded can transform your SaaS offering.