Before attracting visitors, a new SaaS company must decide how it is going to charge for its product. This is important for two reasons:
- A pricing model will affect a user’s willingness to consider their solution, and
- It could affect a company’s rate of growth. As PwC reported, it takes two years for a typical SaaS company to break even.
So, let’s review various pricing models you could use in your product.
The freemium model offers a significant number of features for free, along with additional paid packages. Slack, Dropbox, or Airstory are examples of freemium-based SaaS products. Most users can use these products free of charge. But when they need more than the basic feature-set, they must upgrade to a premium package. This is a typical scenario. Offering free aspects of a product to lure customers to purchase additional products that they are convinced they need. It is a very common practice.
In this pricing model, a company offers a single product with a standard feature at a flat rate.
Basecamp, for example, charges a flat fee of $99 per month so that a person can use all its features.
The most common pricing practice is to offer multiple packages. Each package includes a different feature set, designed to suit various user needs.
This is the model used for Hubspot:
Some companies offer a different option depending on the number of users. Instead of paying a flat fee or choosing a feature-set, they can pay per user. Asana, for example, charges companies a flat rate for every person they sign up to the app.
Finally, some products charge for usage, rather than feature sets or users. Companies using Stripe, for example, pay for every transaction processed.
SaaS Learning Resources
Want to learn more? We’ve pulled together some of the top online resources that cover everything to help you expand your knowledge on SaaS. Click on the following links for additional information:
- Tomasz Tunguz
- Startup School
- For Entrepreneurs
- Chaotic Flow
- Sixteen Ventures
- On Startups
- Predictable Revenue
SaaS offers incredible business opportunities. Adoption of the software as a service model continues to grow rapidly. However, with high demand and competition, founders must understand the dynamics of the market and work to stand out by providing unique solutions and immense value to users.
As you continue to explore SaaS and make your introduction into this multi-billion dollar industry, remember to keep these goals at the core of your offering.