SaaS, or software as a service, is one of the most popular delivery models. Thanks to SaaS, people worldwide connect to cloud software such as digital calendars, e-commerce, online workplaces, etc.
As a SaaS business owner, figuring out your SaaS pricing models can make or break the software you’re selling. How does one understand the fair compensation for the services provided? Here, we will cover the top four pricing models and understand basic payment methods.
Flat Rate Pricing
If you’re looking for a simple start, flat-rate pricing is one of the most straightforward SaaS pricing models. You don’t have to unpack multiple tiers of products or solutions. There’s only one option: your customers pay for it monthly. The price stays the same if you don’t want to change it.
Pros:
Flat rate software is easy to sell to a customer since you have to promote only one product.
Paying once a month for one product is easy to understand for customers.
As customers continue their subscriptions, you receive a constant income stream.
The monthly and yearly income stream is predictable, saving time on forecasting.
Cons:
You might not get the maximum income since you have only one pricing model.
There is no possibility to upgrade your customers to a higher tier.
All individuals and businesses require different features, so not everyone will be willing to purchase an essential subscription.
Usage-Based Pricing
Among the various SaaS pricing models, the usage-based pricing model is exactly what it sounds like; the customer pays as much as they use the software. Facing a busy month in business? Then, you will use the service more and will pay accordingly. For example, if you’re using a social media tool, you might be expected to pay for each post.
Pros:
Customers don’t have to pay when not using the service, making it more fair and logical.
Smaller businesses will be encouraged to use the product and will not be scared to invest in it.
You’re being fairly paid for any customers who overuse the product.
Cons:
The returns are not easy to predict with that pricing model.
Customers will also find it hard to predict how much they will spend on your product monthly.