Pricing Strategy
SaaS pricing fundamentals and optimization.
Value-Based Pricing
Price based on the value delivered, not your costs.
Value Metrics
- Per-user/seat: Simple, predictable (Slack, Notion)
- Per-usage: Scales with value (AWS, Twilio)
- Flat fee: Easy to understand, limits growth
- Per-feature: Unlock capabilities at each tier
- Hybrid: Combine seat + usage (most SaaS)
Good-Better-Best Tiers
Structure
- Free/Starter: Low barrier, product-led growth
- Pro: Core value, individual power users
- Team/Business: Collaboration, admin features
- Enterprise: Custom, security, compliance
Pricing Psychology
- Anchoring: Show the expensive plan first
- Decoy effect: Make the middle tier look best
- Charm pricing: $29 vs $30 matters
- Annual discount: 15-20% for annual commitment
Research Methods
- Van Westendorp: At what price is it too cheap? A bargain? Getting expensive? Too expensive?
- MaxDiff analysis: Rank feature importance
- Competitive benchmarking: Map competitor pricing
When to Raise Prices
- After adding significant value
- When conversion rates are too high (>50%)
- During annual renewals with advance notice
- Grandfather existing customers (time-limited)