SaaS Pricing Model

Pricing is the highest-leverage growth lever and the least-tested. A 1% price improvement often beats a 1% gain in acquisition or retention. This skill designs pricing that aligns what you charge with the value you create.

Step 1: Choose the Value Metric

The value metric is the unit you charge by - seats, events, GB, transactions. A good value metric:

• Scales with the value the customer receives.
• Is easy for the customer to predict and budget.
• Grows naturally as the customer succeeds (this is your expansion engine).

Per-seat is simple but caps with headcount. Usage-based aligns with value but hurts predictability. Hybrid (platform fee + usage) is increasingly standard.

Step 2: Package into Tiers

Use three tiers as the default. The middle tier should be the one you want most customers to choose - anchor it with a deliberately under-featured low tier and a premium high tier.

• Good: removes friction for the self-serve buyer; gates the features that signal you are ready to pay.
• Better: the target. Includes the features 70% of buyers need.
• Best / Enterprise: security, SSO, SLAs, support. Price on value, often "contact us."

Gate features by buyer sophistication and willingness to pay, not by cost to build. SSO and audit logs belong in the top tier because they signal budget.

Step 3: Design Expansion

Net revenue retention above 100% is the engine of SaaS compounding. Build expansion in from the start:

• The value metric should grow with usage so good customers pay more naturally.
• Add expansion seats, premium modules, and usage overages.
• Price the first unit to land, price expansion to monetize.

Step 4: Set the Numbers

• Anchor on value delivered, not cost-plus. Estimate the dollar value the customer captures and price at 10-25% of it.
• Use round, confident numbers. Odd prices read as consumer, not B2B.
• Always offer annual billing at a 15-20% discount to improve cash and retention.

Validation

• Run the "too cheap / too expensive" Van Westendorp survey on real prospects.
• Check that fewer than ~20% of deals close without a single objection - if nobody balks, you are underpriced.
• Test price increases on new logos first; never surprise existing customers.

Anti-Patterns

• Charging by a metric the customer wants to minimize (e.g. per-API-call when they want fewer calls).
• Too many tiers - analysis paralysis kills conversion.
• Grandfathering forever; build price-increase rights into contracts.

Deliverable

Produce a pricing page spec: the value metric and its rationale, three tiers with feature gates, list prices, annual discount, and the expansion path with target net revenue retention.