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Frameworks, core principles and top case studies for SaaS pricing, learnt and refined over 28+ years of SaaS-monetization experience.
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In the competitive SaaS landscape, your pricing strategy isn't just a revenue mechanism—it's a strategic lever that can dramatically impact adoption, growth, and long-term value creation. Two dominant models have emerged: user-based pricing and company-based pricing. While seemingly straightforward alternatives, the choice between them requires nuanced consideration of your product's value proposition, target market dynamics, and long-term business objectives.
The Strategic Importance of Pricing Architecture
Pricing is far more than setting numbers. According to a study by Price Intelligently, pricing strategy has a 4x greater impact on your bottom line than acquisition and a 2x greater impact than retention efforts. Despite this outsized influence, McKinsey research indicates that fewer than 15% of SaaS companies employ dedicated pricing teams.
"Pricing is the most effective lever to pull to improve profitability—yet it receives the least attention from management teams," notes Patrick Campbell, CEO of ProfitWell.
Understanding User-Based vs Company-Based Pricing
User-Based Pricing: The Per-Seat Model
User-based pricing—charging per user, seat, or license—remains the most prevalent SaaS pricing model. This approach:
- Creates predictable revenue streams: Each new user represents a clear, quantifiable revenue unit
- Aligns with adoption: As customer organizations grow their usage, revenue grows proportionally
- Simplifies forecasting: Sales teams can easily calculate potential deal values based on company size
- Provides intuitive value metrics: Customers understand paying for what they use
Companies like Salesforce, Slack, and Monday.com have successfully employed this model, creating predictable expansion revenue as their customers scale usage across departments.
Company-Based Pricing: The Enterprise Approach
Company-based pricing—charging fixed rates based on company size, tier, or usage volume—has gained traction for products with widespread organizational value. This approach:
- Encourages broad adoption: Without per-user penalties, customers deploy more widely
- Simplifies procurement: Single price regardless of fluctuating headcount reduces purchasing friction
- Creates value-based relationships: Prices can align with overall impact rather than seat count
- Reduces churn risk: Customer value increases with usage while costs remain fixed
Notably, Intercom shifted from user-based to company-based pricing in 2019 and reported significant improvements in both customer satisfaction and revenue growth afterward.
Strategic Experimentation: Finding Your Optimal Model
Effective pricing isn't discovered—it's developed through intentional experimentation. Here's how leading SaaS companies are navigating these decisions:
1. Identify Your True Value Metric
The most fundamental question: what actually creates value for customers? According to OpenView Partners' 2022 SaaS Benchmarks Report, companies that align pricing with customer-perceived value metrics achieve 25% higher growth rates.
- User-value dominant: If each additional user derives substantial independent value (e.g., collaboration tools, CRM), user-based pricing typically aligns well
- Organization-value dominant: If value comes from broad deployment or organization-wide insights (e.g., security tools, analytics platforms), company-based models often perform better
2. Analyze Expansion Patterns
Study how your most successful customers grow their usage:
- Linear user adoption: Slack and Asana saw that value and adoption expanded user-by-user, making per-seat pricing a natural growth mechanism
- Step-function adoption: HubSpot observed that customers typically deployed to entire departments at once, leading to their tiered, department-based approach
3. Test Hybrid Approaches
Many successful SaaS companies have developed hybrid models:
- Tiered user-based pricing: Different per-user rates based on company size brackets (Zoom)
- Usage + seat model: Base fee by company size with incremental user-based components (Amplitude)
- Value-tier model: Fixed pricing tiers based on company attributes with unlimited users within each tier (Intercom)
4. Run Controlled Experiments
According to Profitwell research, companies that regularly test pricing (at least quarterly) grow 2-4x faster than those with static pricing strategies.
Segment, the customer data platform, documented a comprehensive testing approach:
- They identified target customer segments for each model
- Deployed different pricing structures to similar prospects
- Measured not only conversion rates but time-to-decision and expansion velocity
- Discovered that different customer sizes responded optimally to different models
Real-World Transformation Cases
Case Study: Atlassian's Pricing Evolution
Atlassian's journey from strict per-user pricing to their current tiered model provides valuable lessons:
- Initially used straightforward per-user pricing
- Found enterprise customers hesitated to deploy widely due to per-user cost concerns
- Introduced tiered pricing with user bands (e.g., 1-10, 11-100, 101-500)
- Reported 28% increase in enterprise-wide deployments
- Achieved higher revenue while removing adoption barriers
Case Study: Intercom's Pricing Pivot
In 2019, Intercom made headlines by abandoning their user-based pricing:
"We're moving away from a 'per-seat' model and toward a model based on the number of people you want to reach… We realized that charging based on the number of people who log in to use Intercom penalizes our customers for getting more teammates involved." - Intercom Blog
The results:
- 60% reduction in pricing-related support inquiries
- 15% improvement in expansion revenue
- Significant increase in deployment breadth within customer organizations
Implementation Considerations
When experimenting with pricing structures, consider these practical aspects:
1. Grandfathering and Transition Strategies
When Zendesk adjusted their pricing structure, they:
- Grandfathered existing customers on their current plans for 12 months
- Provided migration incentives for early adopters
- Saw 82% voluntary migration to new plans within the first year
2. Sales Team Alignment
New pricing structures require sales strategy adjustments:
- Revise compensation structures to align with new models
- Develop clear value messaging for each approach
- Create training materials with specific customer scenarios
3. Customer Success Preparation
According to Gainsight, pricing changes represent one of the highest-risk moments for customer relationships. Successful transitions require:
- Proactive communication about the reasoning behind changes
- Clear documentation of value alignment
- Prepared responses to objections and concerns
- ROI calculators demonstrating value under new models
Making the Decision: Key Questions
Consider these fundamental questions when evaluating your pricing structure:
- Do additional users represent independent value centers or merely access points?
- Does your product deliver more value with broader deployment?
- Is your target customer sensitive to per-user scaling costs?
- Does your sales cycle length correlate with pricing complexity?
- What pricing structure do your closest competitors employ?
Conclusion: The Continuous Pricing Journey
The most successful SaaS companies view pricing as a continuous experimentation process rather than a fixed decision. Intercom's Des Traynor notes: "Your pricing should evolve as your product evolves, as your understanding of your customers evolves, and as your market evolves."
Remember that pricing isn't purely about revenue maximization—it's about aligning your business model with your customers' value perception and usage patterns. The right pricing structure removes friction from high-value use cases while capturing appropriate value from those deriving significant benefits.
As you navigate these decisions, prioritize pricing transparency, conduct regular customer interviews about perceived value, and measure not just conversion metrics but also long-term customer success indicators across different pricing approaches. The insights gained from intentional experimentation may unlock significant growth potential that transcends the traditional user vs. company pricing dichotomy.