Technology & Innovation

8 SaaS pricing models to adopt and scale your SaaS company

Are you looking to optimize pricing for your SaaS product? Explore 8 proven SaaS pricing models designed to help you scale and maximize recurring revenue.

If you’re a SaaS founder, product manager, or CFO, choosing the right pricing model for your SaaS product is one of your most important decisions.

The right approach drives product-market fit, helps differentiate your offering, and creates predictable revenue streams to fuel long-term growth.

When thoughtfully selected and paired with accurate forecasting and tools, SaaS pricing models can accelerate growth more than nearly any other lever.

But the wrong choice—or using outdated or rigid subscription billing systems—can slow you down and create unnecessary friction.

This article walks through 8 effective SaaS revenue models to help you confidently scale.

Along the way, you’ll dive into what makes SaaS pricing unique and why it plays a central role in building a successful software business.

Here’s what we’ll cover:

What is a SaaS pricing model?

A SaaS pricing model is the framework a software company uses to charge customers for access to its product or service.

It determines how value is packaged and monetized—whether through a fixed monthly fee, per-user charges, usage-based billing, or a combination of these.

These models can range from straightforward flat-rate pricing to more flexible and scalable options like usage-based or hybrid SaaS revenue models.

The goal is to align pricing with customer needs while supporting sustainable growth for your business.

Why SaaS pricing models are unique and important for scaling your business

Understanding what sets SaaS billing apart enables your team to maximize recurring revenue, boost retention, and scale more predictably.

The importance of choosing the right pricing model in SaaS cannot be overstated.

It provides a stable revenue stream, supports long-term planning, and allows you to focus on customer value instead of chasing one-time deals.

How SaaS billing models are different than other models

The Today’s SaaS pricing strategies have come a long way from the early days of flat-fee models.

As the market has matured, so have the expectations of your customers—and the need for more flexible, scalable, and data-driven SaaS revenue models.

So, what sets SaaS billing models apart from traditional pricing?

• Recurring revenue: most SaaS subscription pricing models rely on ongoing monthly or annual payments. This recurring structure makes it easier to forecast revenue, plan for growth, and build long-term customer relationships.
• Data-driven decision-making: you can closely monitor key metrics like Monthly Recurring Revenue (MRR), churn rate, Customer Acquisition Cost (CAC), and Customer Lifetime Value (CLTV). These KPIs help guide pricing strategies, product development, and marketing efforts.
• ASC 606 compliance: unlike traditional one-time sales, SaaS revenue must be recognized over time based on when the service is delivered. This requires alignment with ASC 606 standards and the use of specialized accounting tools to ensure accurate reporting.

Understanding these differences is essential when choosing or refining your SaaS pricing model—and making sure it supports your company’s growth and profitability goals.

How to develop SaaS pricing models

When developing a SaaS pricing model, consider the following key steps:

• Analyze your costs: make sure your pricing covers your expenses while delivering a healthy margin.
• Assess the value you offer: determine the true value your product provides to customers and price accordingly.
• Research the market: study competitors and industry trends to position your pricing strategically.
• Choose the right pricing structure: select the model that best aligns with your business goals.
• Refine as you grow: continuously adjust your pricing based on customer feedback and market shifts.
• Be transparent and communicative: clearly explain your pricing structure and any changes to build trust with your customers.

8 SaaS pricing models to scale your SaaS business

The SaaS model has completely transformed how businesses and consumers access software—offering continuous updates, built-in scalability, and lower upfront costs.

But as a SaaS founder, product manager, or CFO, your long-term success depends on choosing a SaaS pricing model that supports sustainable growth, maximizes customer value, and aligns with your product strategy.

Below are eight effective SaaS revenue models, along with real-world SaaS pricing models examples, plus key advantages and potential drawbacks to help identify the right approach for both the product and target market.

1: Usage-based (drawdown) or pay as you go

A usage-based model charges customers based on how much they use the service during a billing period.

It’s ideal for companies that offer variable-use tools such as APIs, data processing, or bandwidth.

Examples of companies that use this type of model include Amazon and Twilio.

Pros:

• Transparent pricing that’s easy for customers to understand.
• Naturally reduces churn, since users only pay for what they use.

Cons:

• Revenue can be unpredictable and harder to forecast.
• Performance depends heavily on customer usage patterns.

2: Per-user / per active user

The per user (or per active user) pricing model charges customers based on the number of individual users—or “seats”—who have access to the software.

It’s one of the most widely adopted SaaS subscription pricing models, especially among collaborative tools and B2B platforms.

This model is commonly used by companies like Trello, Asana, and HubSpot. 

Pros:

• Easy to scale as customer teams grow.
• Encourages bulk seat purchases.

Cons:

• Not ideal for single-user or low-collaboration tools.
• Team churn can significantly impact revenue.

3: Tiered pricing

Tiered pricing offers different sets of features or service levels at ascending price points, allowing you to serve a broader range of customer needs.

This is one of the most widely used and flexible SaaS pricing models, with companies like Dropbox, Salesforce, and Shopify successfully adopting it.  

Pros:

• Appeals to a wide range of customer types.
• Encourages upgrades as your users grow.

Cons:

• May deter price-sensitive prospects.
• Poorly structured tiers can confuse buyers.

4: Flat-rate or subscription-based

With flat-rate pricing, your customers pay a fixed monthly or annual fee for full access to your product—regardless of usage or team size.

This straightforward model is used by popular platforms like Grammarly, Hootsuite, and Zoom. 

Pros:

• Simple and easy for customers to understand.
• Streamline billing and forecasting.

Cons:

• Lack of flexibility for different user needs.
• Limits opportunities for upsells or expansion of revenue.

5: Feature-based or per feature

The feature-based pricing model charges customers based on the specific features or functionality they need.

These features are typically bundled and tailored to different segments—such as freelancers, small businesses, or enterprise clients.

This approach allows pricing to closely reflect the value delivered to each user group.

Pros:

• Enables precise targeting based on user personas.
• Makes it easier to align marketing and product positioning.

Cons:

• Can overwhelm prospects with too many options.
• Requires deep insights into your customer base.

6. Bundling or roll your own

The bundling or roll-your-own pricing model allows customers to mix and match features to create a personalized service package.

Rather than forcing users into pre-set tiers, this model gives them flexibility to pay only for what they need.

It’s especially effective for SaaS companies with a broad range of tools or feature sets, such as Google Workspace, Salesforce, or Microsoft Office 365.

Pros:

• Empower users to tailor their own solutions.
• Increases potential for high-value purchases.

Cons:

• This makes revenue forecasting more challenging.
• Some customers may opt for only basic features, reducing potential revenue.

7: Freemium or ad-supported

The freemium model gives users limited access to your product for free, with the option to upgrade to premium features.

Alternatively, an ad-supported version can generate revenue while encouraging users to convert.

This approach is used by platforms like Dropbox and Spotify.

Pros:

• Low barriers to entry encourage adoption.
• Build goodwill while collecting user insights.

Cons:

• Monetization is often delayed.
• Higher likelihood of churn among non-paying users.

8. Performance-based

Performance-based pricing ties your revenue to the results your software delivers—such as increased revenue, improved efficiency, or cost savings.

This model works well if you can clearly demonstrate ROI for your customers.

Pros:

• Align your pricing with customer outcomes.
• Can justify premium pricing if value is proven.

Cons:

• Difficult to implement and track accurately.
• Requires robust attribution and analytics systems.

Hybrid SaaS pricing models

Many SaaS businesses combine multiple pricing strategies to better serve diverse user needs.

For example, tiered pricing might be paired with usage-based add-ons, or per-user pricing might be bundled with feature-based options.

Hybrid SaaS pricing models offer more flexibility, allow for personalized experiences, and can help you increase Average Revenue Per User (ARPU) while improving retention over time.

Building and forecasting a subscription billing business

After exploring several effective pricing models for SaaS, the next step is understanding how to confidently build and forecast a subscription-based business.

Automation plays a critical role in scaling operations, enhancing billing performance, and minimizing variability in financial forecasts.

Below are key strategies to help optimize your SaaS billing process and improve the accuracy of your revenue forecasting.

Capture and increase CMRR

Contracted Monthly Recurring Revenue (CMRR) is one of the most critical metrics for any SaaS finance leader.

To scale predictably, it’s essential to capture CMRR accurately and implement strategies that drive consistent growth.

Start by ensuring your revenue recognition process aligns with ASC 606 standards.

This means matching billing events with contractual obligations to prevent revenue leakage and maintain compliance.

To grow CMRR, focus on upselling, optimizing pricing structures, and expanding existing customer accounts.

Even small adjustments—like adding new pricing tiers or bundling high-value features—can make a measurable difference.

Flexible pricing models, such as tiered or usage-based billing, can further increase CMRR by improving customer retention and maximizing lifetime value.

How to build the dataset to reduce forecast variability

Reliable forecasting starts with the right data.

To improve accuracy and make informed decisions, track the following key metrics:

• Monthly Recurring Revenue (MRR): your core source of predictable income.
• Churn rate: indicates how well you’re retaining customers.
• Customer Acquisition Cost (CAC): measures how efficiently you bring in new users.
• Customer Lifetime Value (CLTV): helps project long-term revenue from each customer.

Building strong forecasts based on these KPIs can help fine-tune your SaaS pricing strategy, minimize revenue surprises, and support better financial planning as your business grows.

Choosing the right pricing model for your SaaS business

Choosing the right SaaS pricing model is essential to align your product with your business strategy.

Consider the following factors when making your decision:

• Your product’s value proposition: evaluate the unique value your product provides to customers, focusing on key features.
• Customer buying behavior: understand how your target customers make purchasing decisions.
• Competitor pricing: analyze competitors’ pricing strategies to position your product effectively in the market.
• Brand positioning and market presence: make sure your pricing aligns with your brand’s identity and market positioning.
• Revenue goals and growth stage: select a pricing model that supports both immediate revenue and long-term growth.
• Test various pricing models: experiment with different models to identify the best fit for your customer base and business needs.
• Operational complexity: consider whether your team can manage the complexity of the chosen pricing model.
• Plan for growth: choose a model that can scale with your business as it expands.

Be ready to test, gather feedback, and adjust your pricing strategy as your business and market conditions evolve.

SaaS pricing strategies to know

Understanding different SaaS pricing strategies is essential for choosing the right model for your business.

Here are seven key strategies you should be aware of:

• Penetration pricing: this strategy involves setting a low initial price to attract customers quickly and gain market share. Once you’ve established a customer base, you can gradually raise prices.
• Captive product pricing: this model involves offering your main product at a low price but charging higher prices for complementary or essential products (e.g., accessories, add-ons) that customers need to use the main product fully.
• Skimming pricing: with this strategy, you set a high initial price to maximize profits from early adopters, then gradually reduce the cost over time as demand decreases.
• Prestige pricing: this pricing strategy focuses on setting a higher price to create a premium quality or exclusivity perception. It works well for high-end products or brands looking to position themselves as market leaders.
• Free trial pricing: offering a free trial allows customers to experience your product before committing to a paid subscription. This can help increase conversions by letting users see the value before purchasing.
• Cost-plus pricing: this straightforward model involves calculating the service’s cost and adding a markup to determine the price. It’s a simple and effective approach but may not fully account for the product’s perceived value.
• Value-based pricing: with this strategy, you set prices based on the perceived value your product delivers to customers, rather than your costs. This model aligns your pricing with customer needs and the outcomes they expect to achieve.

SaaS pricing best practices for businesses

To get the most out of your SaaS pricing models, keep the following best practices in mind:

• Keep your pricing page clear, simple, and easy to understand.
• Use value-based pricing models whenever possible.
• Regularly review customer usage patterns and feedback to identify optimization opportunities.
• Align pricing with customer success metrics to support long-term retention and growth.

Don’t undervalue your product—set prices that reflect the value you deliver and support sustainable growth.

Final thoughts

No matter which SaaS pricing model you choose, understanding the differences and their advantages and disadvantages will help you scale confidently.

Take control of your SaaS revenue models, streamline complex billing processes, and unlock real-time insights that fuel long-term, intelligent growth.

Stay ahead of the competition and achieve long-term success with Sage

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From automated forecasting to ASC 606 compliance, Sage solutions offer a robust financial management platform built specifically for SaaS and tech companies.

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Editor’s note: this article was originally published in May 2023 and has been updated and rewritten for relevance.