Pricing Strategy for SaaS Startups

Pricing is one of the most powerful levers in your business. Get it right and you accelerate growth. Get it wrong and you leave millions on the table.

The Value-Based Approach

Don't price based on costs or competitors. Price based on the value you deliver.

Calculate Customer Value:

• How much money do you save them?
• How much revenue do you generate for them?
• How much time do you save them?

Charge 10-20% of the value you create. If you save a customer $100K per year, you can charge $10-20K.

Pricing Models That Work

Tiered Pricing

• Good/Better/Best structure
• Most customers choose middle tier
• Anchor high price to make middle seem reasonable

Usage-Based Pricing

• Aligns cost with value received
• Scales naturally with customer growth
• Can be unpredictable for customers

Per-Seat Pricing

• Simple and predictable
• Easy for customers to understand
• Natural expansion revenue

Psychological Pricing Tactics

Charm Pricing: $99 vs $100 Small difference in price, big difference in perception.

Decoy Pricing: Three tiers where middle is obviously best value Pushes customers toward your target tier.

Annual Discounts: 2 months free when paying annually Improves cash flow and reduces churn.

Common Pricing Mistakes

1. Pricing too low: You can always lower prices, but raising them is painful
2. Too many tiers: Causes decision paralysis
3. Feature-based tiers: Focus on outcomes, not features
4. No enterprise tier: Missing out on high-value customers

Testing Your Pricing

• A/B test with new customers
• Grandfather existing customers
• Survey willingness to pay
• Monitor conversion rates by tier

Remember: Pricing is not set-it-and-forget-it. Revisit quarterly as you learn more about your customers and value proposition.