B2B SaaS Pricing Models: A Comprehensive Guide

Curious about B2B SaaS pricing models? Let’s take a comprehensive look at your options.

But before we dive in, it’s important to distinguish between pricing models and pricing strategy.

A pricing model specifies how you will charge your customers: monthly or annually, per user or per feature, and whether or not you will have pricing tiers.

Your pricing strategy, on the other hand, is the logic behind your pricing. It is about estimating the value of your product based on the competition, development and support costs, or the value your product produces for users.

In this article, we shall discuss both popular SaaS pricing models and winning pricing strategies so you can find the right fit for your B2B SaaS business.

Types of SaaS B2B Pricing Models

In this section, we will be discussing popular SaaS B2B pricing models to help you gain more insight into how each of these operates. Without further ado, let’s get to it:

1. Tiered Pricing

Customers can pick between different prices and options based on their demands and price points with tiered user pricing. Pricing is most typically divided into three tiers: basic, standard, and premium.

Creating more than three tiers can result in what is termed analysis paralysis i.e. your customer has way too many options and a lack of clarity in which adds the most value. This is why a conservative approach to tiering is usually a winning strategy within this pricing model.

Presenting a preferred option might help persuade potential customers to make a choice. The material is properly laid out, making upselling simple if necessary.

It is critical that your clients understand their requirements and select the appropriate tier. Another disadvantage of this price strategy is that it does not cater to heavy users.

Tiered pricing is appropriate for the majority of SaaS organizations and can be implemented in combination with other models in what is termed hybrid billing.

Example: HubSpot is a SaaS company, among many others, that utilize the tiered pricing model.

2. Pay Per-User Pricing

Pay-per-user pricing is one of the most common models employed by B2B SaaS companies and is dependent on the number of collaborators that have access to their product.

User-based and active-user pricing are two types of per-user pricing.

User-based billing simply means that you charge per user regardless of whether or not they utilize your service.
Active user pricing, on the other hand, indicates that you only charge for users actively using your SaaS. Customers benefit from this since they no longer have to keep track of inactive users.

It is advantageous for SMBs since they may begin utilizing your SaaS at an early stage and expand alongside your product. This pricing model is very easily scalable to your B2B client needs.

It is also a straightforward, clear pricing plan that leads to predictability on both sides: your consumers know exactly how much they will spend and when they need to upgrade, and the business sees little change month after month.

However, this can result in login-sharing, with multiple persons utilizing a single premium account which can lead to revenue leakage.

Example: Salesforce uses this pricing strategy for their CRM, charging for each user of their product.

3. Flat Rate Pricing

This is the simplest pricing model because it involves charging a single price for a single service with the same attributes. There are no extras or options to choose from; there is just one formula to subscribe to. Flat-rate pricing is more typically utilized by B2C enterprises selling physical things.

Flat-rate pricing works best in the SaaS business with basic solutions for their B2B customers. It is also effective in narrow markets with few or no competitors.

It is the simplest to administer, both for users (limited choice and transparency) and for your SaaS company (simple pricing and invoicing processes).

On the other side, it is risky and is becoming increasingly rare in the SaaS sector. A one-size-fits-all solution may limit your options for expansion depending on your consumer base.

It’s similar to going “all in” in a casino: if your clients are happy with your goods and the value you provide, wonderful. If not, they will have to look elsewhere. Choosing a tiered pricing strategy may mitigate this by providing greater flexibility and diversity.

Example: Basecamp is an example of a SaaS company that uses flat-rate subscriptions: you can obtain full access to their platform for $99 per month. This package covers all of their features, as well as no restrictions on the amount of projects or users permitted.

4. Usage Based Pricing

This price plan is pay-as-you-go, as the name implies: you only pay for what you consume. It might be the amount of API requests, for example, for SaaS companies.

Customers and suppliers gain from usage-based pricing. Although it is more complicated than flat-rate pricing, its benefits outweigh the hassle.

For starters, usage-based pricing assists clients in cost management. As they scale up, so does their subscription to your SaaS. This also aids in client retention and overall satisfaction. However, it may grow rather complicated to bill and invoice customers without robust subscription billing automation. Billing accuracy and transparency are key so make sure that your B2B clients understand how your pricing works including overage charges.

MRR and ARR can likewise be challenging to anticipate with usage-based models. It is ideally suited to B2B SaaS enterprises that provide scalable services.

Example: Zoho Campaigns charges dependent on the number of contacts registered on their email marketing platform.

5. Freemium

In the B2B SaaS industry, freemium pricing structures are well-known. Users can use your SaaS for free, but access is usually limited to minimal functionality or a certain number of users.

It’s ideal for demonstrating value to clients early on and immediately onboarding them onto your product. It is easier to convert them into paying clients because they are already familiar with your product and its value. Because they are dedicated, they are more likely to continue using your product as they grow, making an upsell easier.

However, as the name implies, a freemium pricing plan necessitates providing a service for free.

It also necessitates a thorough study of your market and clients in order to determine which features would entice them to stay and eventually pay for your SaaS.

Because there is no commitment at the freemium level, the churn rate is higher. Freemiums typically work better for B2C client bases that offer a product/service to a very large group or target audience.

Example: Slack is an excellent example of a freemium pricing strategy. You can begin for free with a limited number of features and then improve your subscription as your needs and team expand.

6. Feature-Based Pricing

Customers pay based on the features they require with this pricing method, which is similar to usage-based pricing but is based on features.

Choosing this price strategy for your B2B SaaS company means increased client retention because your SaaS supports their growth with various features as they require them.

To determine which features to include in each package, you must first understand your product and your clients.

Example: Zoom charges dependent on features. You can add other features based on your demands as long as you have an active membership with them.

As you are aware, managing subscriptions as a B2B SaaS company can be pretty hard. As a result, we advocate employing strong subscription management software such as SubscriptionFlow to properly design a complex pricing model such as feature-based pricing.

You can proceed to the decision process now that you have an overview of the pricing plan possibilities!

Strategizing your Pricing Model

Choosing the right Software as a Service (SaaS) B2B pricing model is a critical decision that can significantly impact the success and sustainability of your business.

Here are some strategies and steps to help you decide on a pricing model:

1. Market Research and Customer Segmentation

Understand your target market and customer segments. What are their pain points, needs, and willingness to pay? Conduct surveys, and interviews, and gather feedback to gain insights into what your potential customers value most.

2. Identify Unique Selling Point

Determine the value your software provides to your customers. What problems does it solve for them? How much is that solution worth to them? Align your pricing with the perceived value your product delivers.

3. Competitive Analysis

Study your competitors’ pricing strategies. What models are they using? What are their price points? Differentiate your offering in terms of features, support, or other value-added services. Offering penetrative pricing for instance can be a good way for startups and SMEs to catch up to industry leaders.

4. Monetization Strategies

Consider different monetization strategies like subscription-based, usage-based, freemium, or tiered pricing models. Freemium models can help attract users and then upsell premium features. You want to test which works best in making you the most money whether it is through better acquisition or improved retention and account expansion.

5. Utilize Tiers to Tap into All Segments

Create different tiers with varying features and levels of service. This allows customers to choose the plan that best fits their needs and budget. This also lets you offer value to different customer segments.

6. Usage-Based Pricing

Charge customers based on how much they use your service. This can be beneficial for platforms with variable usage patterns. Usage-based billing has taken the SaaS world by storm as of late.

7. Pricing Experiments and A/B Testing

Test different pricing models or price points with a subset of your user base to gather data on what works best. Pricing is an ongoing dialogue. Keep revising your strategy till you find the sweet spot to grow revenue exponentially.

8. Feedback Loops

Continuously gather feedback from your customers regarding your pricing. Understand what’s working and what needs adjustment. Effective customer engagement and exit surveys can help highlight the revenue leaks so you can plug them into the future.

9. Customer Lifetime Value (CLV) vs. Customer Acquisition Cost (CAC)

Ensure that the lifetime value of a customer justifies the cost of acquiring them. This helps in determining sustainable pricing. Maximize value while minimizing acquisition costs to the best of your capacity.

10. Contract Length

Decide whether to offer monthly or annual contracts. Annual contracts often come with discounts and can help with revenue predictability. Choosing your billing intervals is a highly critical part of your pricing strategy as it defines your cash flow. Many B2B SaaS sell annual subscriptions and offer discounts to pay upfront increasing the lifetime value of a client.

11. Retention and Churn Rates

Monitor your customer retention and churn rates. High churn may indicate your pricing is not aligned with the value provided. Stay informed through proactive customer feedback.

12. Adaptability

The only constant is change. Be prepared to adjust your pricing model as your product evolves and as you learn more about your market and customers.

13. Transparency and Communication

Be transparent about your pricing. Clearly communicate what is included in each plan and any potential overage charges. The worst thing you can do is orchestrate a convoluted pricing strategy as this instantly destroys customer trust and loyalty.

Final Word

Remember that there is no one-size-fits-all approach. The right pricing model for your SaaS B2B

product will depend on your specific market, product offering, and customer base. Continuously monitor and adapt your pricing strategy as your business grows and evolves.

SubscriptionFlow is here to support your automated billing and invoicing regardless of which B2B SaaS pricing model you choose. Book a free demo with us to find out more!