Choosing from among the many pricing models for SaaS products is a hassle that business owners face every now and then.

So many factors, such as the cost of production, marketing, profit expectation, target audience, and other expenses, take precedence.

If you undercharge, you risk going bankrupt without sufficient revenue to sustain your business.

And if you overcharge, a significant testimony of this will only appear after you have damaged your user base – and lost many of your customers.

Moreover, you don’t want to irk your clients with unreasonable pricing models that don’t fit their needs.

So, in this article, we covered six SaaS pricing models and a data-backed example of companies that successfully scaled their business using these models.

Pay As You Go Model

Pay As You Go, also known as Usage-based, is a pricing model that charges users based on how often or how much they use a product.

This is not a one-time product fee or flat rate pricing where you pay for the product itself. Customers only get billed for their consumption at the end of each billing cycle.

Depending on the product, your clients might get charged based on the number of API use, per transaction, per call, or gigabytes consumed.

In a few cases, some companies adopt a hybrid billing method – a mix of a usage-based model and a fixed upfront fee to maximize their revenue.

Companies That Successfully Nailed It

Our down-the-line case study is Mailgun. And so far, this SaaS company has grown their services across a large expanse using the usage-based pricing model.

Mailgun is a cloud-based email automation service used for sending and receiving emails.

This SaaS product also allows users to track emails and manage inbound routes.

As far as email marketers are concerned, their primary focus is on how many effective emails can be processed.

And Mailgun leveraged this need by providing a pay-as-you-go billing method.

For each extra 1000 emails sent, users are billed $0.6 to $1. For Mailgun’s flex plan, you only need to pay $1 after sending more than 1000 emails in a month.

The minimum payable fee increases when you send up to 2000 emails.

Freemium Model

Thanks to the ravaging marketing competition, businesses no longer focus on driving sales through only a top-to-bottom approach.

Moreover, your users preferably want a first-hand experience of your product over reading tons of knowledge base articles.

And that’s where the freemium model comes in. The Freemium model, also known as a free plan, allows potential customers to use your products without paying.

You could either decide to give them free access to all functionalities but for a limited time. Or restrict functionalities and provide them with lifetime access.

The goal is to make them upgrade to other paid plans after a live experience with your product or services.

Companies That Successfully Nailed It

If you surf the net, you will find Dropbox as one of the most successful SaaS businesses that scaled the freemium pricing model. 10 years was all it took for them to earn $10 billion in revenue.

Unlike other standalone pricing models, the freemium strategy has to be combined with other models like tiered pricing – exactly what Dropbox did.

Once your potential customers are done exploring the free access, they can request paid plans for continual usage.

Pay Per Feature Model

You should use a feature-based pricing model if your SaaS business is packed with much essential product functionality.

This means subscribers only pay for the features they need instead of getting billed for an all-out product with many unnecessary features.

Since the feature pricing model comes in tiers, customers can upgrade to a higher plan if they need more functionalities.

Higher tiers offer more exciting features for multiple personas but come with aggressive costs, which could be double or triple the initial plan.

Companies That Successfully Nailed It

You’ve probably heard of DoorDash, an American food delivery company. While DoorDash is not a SaaS company, it offers SaaS-priced storefront software to online restaurants.

Clients can opt-in for their preferred subscription based on which features they need.

And this allows newly developed restaurants with low budgets to utilize DoorDash for scaling their food business.

Large restaurants can go for premier-based plans or go for custom pricing.

Regardless, each of the tiers available addresses a different persona of the same target audience.

Flat Rate Model

This is one of the oldest pricing models where customers only have to pay a fixed subscription fee to use your product and its features.

While this model lacks the flexibility to deal with many personas, many consumers prefer it for being straightforward.

There’s no need to choose from several price tiers – a common problem that leads to indecision.

Companies That Successfully Nailed It

Basecamp is a project management and team communication tool with a favorite pick on the flat-pricing model.

With a single and specific flat fee, the Basecamp sales team have scaled up their revenue.

Moreover, the fixed pricing gives customers access to every tool, including an unlimited number of users that can be added to a single account, and other resources, without paying any extra fee.

Pay Per Active User

Pay Per Active User is an attractive pricing model where customers have to pay based on the number of active users they want.

Let’s say you run a team of drivers and use tracking software that operates on the Pay-per-active user model. You have to pay an additional fee for every other driver who has access.

This pricing model is most suitable for software that addresses small and medium-sized businesses with several team workers.

Companies That Successfully Nailed It

Our final case study is Canva, a graphic design tool with built-in collaboration features.

Canva offers two tiers of paid subscriptions and a freemium plan. The first paid tier gives access to only one user, while the second paid tier allows more than two users – at a higher cost.

The primary recourse for enterprise-level clients is that they don’t have to pay for inactive users. And that cuts their subscription cost.

Regardless, Canva has maintained its lead in the graphic design market because of the combination of a freemium and pay-per-active users’ model.

Conclusion

Although these models offer great possibilities, there is no one-size-fits-all solution.

Before you decide which one your SaaS business will leverage, ensure you conduct proper market research and find out what works for your competitors.

Whether you choose a flat-rate pricing model or find the tiered pricing strategy more beneficial, the choice is yours.