SaaS Pricing Strategies: 5 Models With Real Examples

Pricing is the fastest lever to improve SaaS revenue. A 1% improvement in pricing yields an 11% improvement in profits, according to research from Price Intelligently. Yet most SaaS companies set their price once and never revisit it.

This matters because the difference between a company charging $49/month and one charging $79/month, for effectively the same product, is often nothing more than pricing confidence. The sections below cover five SaaS pricing strategies, the data behind freemium versus free trials, pricing psychology, and a framework for deciding when to change what you charge.

Why Pricing Matters More Than You Think

According to the Price Intelligently / Paddle SaaS Pricing Report, a 1% improvement in pricing increases profits by 11.1%, compared to 3.3% for a 1% improvement in customer acquisition and 6.7% for a 1% reduction in churn. Pricing is roughly 2-4× more impactful than the levers most teams focus on.

Lined up side by side, the gap is stark: the same one-percent effort returns roughly 3.4 times more profit when aimed at pricing than at acquisition, and about 1.7 times more than at churn. Most teams pour their scarce time into the two weaker levers, building funnels and fighting cancellations, while leaving the strongest one untouched for years. That misallocation is the practical reason underpricing is so widespread, and it is why a disciplined pricing review pays back faster than almost any growth experiment a team can run.

Despite this, research from OpenView Partners suggests the median SaaS company spends fewer than six hours on pricing before launch, and many never revisit it. The result is widespread underpricing: most SaaS companies charge 20-40% less than customers are willing to pay.

If you want to model how pricing changes affect your MRR and other metrics, the SaaS Metrics Calculator can help you quantify the impact before you commit.

Five SaaS Pricing Strategies

Every SaaS pricing decision falls into one of five buckets, or a combination. Here is each strategy, when it works, and a real company that uses it.

1. Cost-Plus Pricing

Calculate your costs (hosting, support, development), add a target margin, and that is your price. Simple, but rarely optimal for software because marginal costs are near zero, cost-plus pricing almost always leaves money on the table.

Real example: Rackspace historically priced managed hosting as a markup on infrastructure costs. It works for commoditised infrastructure but undervalues differentiated software.

When to use: Only when your product is truly commodity, minimal differentiation, highly price-sensitive buyers, and transparent cost structures.

2. Competitor-Based Pricing

Set your price relative to competitors. You can match, undercut, or charge a premium with clear differentiation. This is one of the most common SaaS pricing strategies for early-stage companies because it requires the least customer data.

Real example: Notion entered a market dominated by Confluence and Evernote with a generous free tier and lower paid plans, using price as a wedge to gain adoption before expanding revenue per account.

When to use: In crowded markets where buyers actively compare options. Useful as a starting point, but risky as a long-term strategy because competitors set your ceiling.

3. Value-Based Pricing

Price according to the economic value your product delivers. If your software saves a customer $100,000 per year, charging $10,000 is easy to justify, even if your cost to serve is $50/month. Among SaaS pricing strategies, value-based pricing consistently produces the highest revenue per customer.

Real example: HubSpot prices on the number of marketing contacts, a direct proxy for the revenue potential the customer gains. More contacts means more value, which justifies a higher price.

When to use: When you can quantify the value delivered and your customers understand it. This is the ideal strategy for most B2B SaaS past the earliest stage.

4. Penetration Pricing

Launch at a low price to capture market share quickly, then raise prices as you build switching costs and brand recognition. This is a deliberate strategy, not just "being cheap", it requires a clear plan for when and how to increase prices.

Real example: Zoom entered the video conferencing market at a fraction of WebEx and GoToMeeting pricing, prioritizing user growth. Once it became the default tool for millions of teams, it introduced higher-priced plans and add-ons.

When to use: When network effects or switching costs will protect you once prices rise, and you have the runway to sustain lower margins in the near term.

5. Hybrid Pricing

Combine elements from multiple SaaS pricing strategies. The most common hybrid is a base subscription fee plus usage-based charges, giving customers predictable costs while letting revenue scale with their success.

Real example: Twilio charges a platform fee plus per-API-call pricing. Snowflake combines storage fees with compute-based charges. Both align price with consumption while maintaining a revenue floor.

When to use: At scale, when you have enough data to understand both the baseline value you provide and the marginal value of additional usage. Hybrid models are increasingly popular, OpenView reported that 45% of SaaS companies used some form of usage-based component by 2024.

Freemium vs Free Trial: The Data

The choice between freemium and free trial is one of the most debated SaaS pricing strategies. The data is clearer than the debate suggests.

Totango's benchmark data shows that free-trial-to-paid conversion rates average 15-25%, while freemium-to-paid conversion rates average 2-5%. On the surface, trials look far superior. But freemium plans attract vastly more users, so the absolute number of conversions can be higher, Slack reported roughly 30% of teams converting from free to paid, but Slack's viral mechanics are atypical.

Freemium works when: your marginal cost per user is near zero, the product has network effects or viral loops, and there is a natural upgrade trigger (e.g., hitting a storage limit or message history cap).

Free trials work when: the product requires onboarding, the value takes time to experience, and you need urgency to drive a purchase decision. A 14-day trial is standard; 7 days works for simple tools; 30 days works for complex enterprise products.

For a deeper look at how conversion rates affect LTV:CAC ratios, see the dedicated guide.

Pricing Psychology: Anchoring, Decoy Effect, and Charm Pricing

Pricing is not purely rational. Three psychological effects consistently influence SaaS buying decisions.

Anchoring. The first number a buyer sees sets the reference point. If your pricing page shows the enterprise plan ($299/mo) first, the professional plan ($99/mo) feels like a bargain. Research by Ariely and others demonstrates that anchoring can shift willingness to pay by 20-60%.

The decoy effect. Adding a third option that is intentionally less attractive makes the target option look better. If you offer a Basic plan at $29 and a Pro plan at $79, adding a "Plus" plan at $69 with far fewer features than Pro makes Pro the obvious choice. The Economist famously used this to increase print+digital bundle subscriptions by 43% (documented by Dan Ariely in Predictably Irrational).

Charm pricing. Ending prices at 9 ($49, $99, $199) still works, even in B2B. A study published in Quantitative Marketing and Economics found that charm pricing increased demand by an average of 24% compared to round numbers. However, premium positioning sometimes benefits from round numbers ($100 vs $99) to signal quality.

When to Change Your Pricing

Most SaaS companies underprice and wait too long to adjust. Here are the triggers that indicate it is time to revisit your SaaS pricing strategies.

• Trial-to-paid conversion above 40%. If nearly half of trial users convert without hesitation, your price is too low. Healthy conversion rates are 15-25%.
• No price pushback in sales calls. If prospects never negotiate, you have room to raise.
• Significant feature additions. Every major feature release is an opportunity to re-align price with value. Track how features affect your core SaaS metrics before and after changes.
• Market shifts. If competitors raise prices or a new entrant disrupts the market, reassess your positioning.
• Annual calendar trigger. At minimum, review pricing every six months. Put it on the calendar so it does not fall off the radar.

When you do raise prices, grandfather existing customers or give at least 60 days notice. Apply new pricing to new signups first, then introduce it to renewals with clear communication about additional value delivered.

Pricing Page Best Practices

Your pricing page is often the highest-intent page on your site. Small changes can meaningfully shift conversion rates. Here is what the data supports.

Three tiers. The good/better/best framework is dominant for a reason. It reduces decision fatigue, enables anchoring against the premium tier, and captures different willingness-to-pay segments. Highlight the middle tier as "Most Popular" or "Recommended", this drives 60-70% of signups to that plan, according to data from Profitwell (now Paddle).

Anchor high. Display tiers from highest to lowest price (left to right or top to bottom). The first number sets the reference point. Users scanning left-to-right will see the enterprise price first and perceive the mid-tier as reasonable.

CTA placement. Every tier needs a clear call-to-action button. Use a visually distinct (filled, colored) button on the recommended tier and outlined or muted buttons on the others. Place CTAs above the fold if possible.

Grade your current pricing page against 10 best practices with the Pricing Page Grader to surface the specific elements most likely lifting or hurting conversion.

Show annual savings. Toggle between monthly and annual billing, and display the percentage saved (typically 15-20%) next to the annual price. This nudges users toward higher-commitment plans, improving profit margins and reducing churn. Not sure whether monthly or annual fits your product? Try the Monthly vs Annual Pricing Decision Engine for a data-driven recommendation based on your churn, price point, and cash flow needs.

A Worked Example: The $49 to $79 Decision in Dollars

The article keeps returning to the same illustrative move, a product priced at $49 a month versus one at $79 for effectively the same software, so put real numbers behind it. Take a SaaS company with 1,000 paying customers at $49 a month, which is $49,000 in monthly recurring revenue and $588,000 a year. Raising the price to $79 is a 61 percent increase per seat. If every customer stayed, monthly recurring revenue would jump to $79,000, but no price increase retains everyone, so model the loss the experience note flags: the data consistently shows that raising prices by 20 percent loses fewer than 5 percent of prospects. A jump to $79 is steeper than 20 percent, so be deliberately pessimistic and assume a 10 percent loss of customers.

Run it. Lose 10 percent of 1,000 customers and 900 remain, each now paying $79, which is $71,100 in monthly recurring revenue against the $49,000 the company started with. That is a 45 percent revenue increase after absorbing a customer loss double what the article suggests a smaller increase would cost. Annualized, monthly recurring revenue moves from $588,000 to $853,200, an extra $265,200 a year, and because SaaS marginal costs are near zero almost all of that incremental revenue is profit. The 100 fewer support relationships even trim cost slightly, so the margin story is better still.

Now connect it to the profit-lever figure. According to the Price Intelligently / Paddle SaaS Pricing Report, a 1 percent improvement in pricing lifts profit by 11.1 percent, and the OpenView data cited above suggests most SaaS companies are underpriced by 20 to 40 percent to begin with. A company sitting 30 percent below willingness to pay is leaving exactly the kind of room this example captures. The lesson is not that every company should charge $79, it is that the downside of testing a price increase on new signups is small and bounded, while the upside compounds across every customer for as long as they stay subscribed. That asymmetry is why the single most common pricing mistake remains charging too little.

For SaaS Founders: Pricing Calculators as Conversion Tools

SaaS founders who are actively working through their pricing strategy are high-intent prospects for consulting, tooling, and services. An interactive pricing calculator, where a visitor models different price points, tiers, and conversion assumptions, captures intent signals that static content cannot.

Embedding a calculator on your site lets visitors self-qualify. A founder modeling the impact of a price increase from $49 to $79/month reveals their current MRR, customer count, and growth assumptions. That data makes follow-up conversations far more productive. CalcStack's embeddable interactive tools are built for exactly this use case.