.png)
Frameworks, core principles and top case studies for SaaS pricing, learnt and refined over 28+ years of SaaS-monetization experience.
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
In the ever-evolving software landscape, a significant shift is taking place. Horizontal SaaS solutions that once dominated the market with their one-size-fits-all approach are increasingly making way for vertical SaaS platforms designed to serve specific industries. This transition isn't just about specialized features—it's fundamentally changing how software is priced, sold, and valued. For enterprise leaders navigating this new terrain, understanding the rise of vertical SaaS and its accompanying industry-specific pricing models has become essential for making informed technology investments.
What is Vertical SaaS and Why Is It Gaining Momentum?
Vertical SaaS refers to software solutions built to address the unique needs of specific industries or "verticals." Unlike horizontal SaaS platforms that offer general functionality applicable across multiple sectors (think Slack, Salesforce, or Microsoft 365), vertical SaaS delivers specialized tools tailored to particular industries like healthcare, construction, manufacturing, or legal services.
The growth in this segment has been remarkable. According to Bessemer Venture Partners' State of the Cloud Report, vertical SaaS companies now represent over 25% of cloud unicorns, compared to just 8% five years ago. This shift is happening because:
Domain expertise creates superior solutions: Vertical SaaS companies typically employ industry veterans who understand sector-specific challenges intimately, resulting in more relevant product development.
Niche market penetration: By focusing on underserved sectors, vertical SaaS providers can capture significant market share in industries that horizontal players overlook.
Regulatory compliance built-in: Industries with strict regulations (healthcare, finance, etc.) benefit from software that incorporates compliance requirements from the ground up.
workflow optimization: Vertical solutions mirror existing industry workflows rather than forcing users to adapt to generic processes.
How Industry-Specific Pricing Is Transforming Software Economics
Perhaps the most interesting evolution in the vertical SaaS movement is the emergence of industry-specific pricing models. Traditional SaaS typically relies on per-user or tiered subscription pricing, but vertical SaaS is pioneering pricing approaches uniquely aligned with each industry's economics and value metrics.
Industry-Aligned Value Metrics
Vertical SaaS companies are increasingly anchoring their pricing to industry-specific value metrics:
- Healthcare: Pricing based on patient volume or care episodes rather than seat licenses
- Construction: Charging by project size, square footage, or equipment tracked
- Logistics: Pricing tied to shipment volume, routes, or vehicles managed
- Real Estate: Fees structured around property units managed or transaction value
- Manufacturing: Costs linked to production volume, SKUs, or factory floor size
According to OpenView Partners' SaaS Benchmarks Report, companies using value metrics aligned with customer success see 10-15% higher net revenue retention compared to those using standard subscription models.
The Specialized Pricing Advantage for Both Vendors and Customers
This specialized pricing approach creates mutual benefits that further accelerate vertical SaaS adoption:
For Vendors:
Revenue alignment with customer growth: When pricing scales with customer-relevant metrics, revenue naturally expands as customers derive more value.
Reduced sales friction: Industry-familiar pricing makes purchase decisions more intuitive for buyers.
Competitive moat: Specialized pricing models are harder for horizontal competitors to replicate.
Lower customer acquisition costs: Focused industry targeting enables more efficient marketing and sales strategies.
For Customers:
Fair value exchange: Organizations pay based on metrics that directly correlate with the value they extract.
Predictable costs that align with business outcomes: As operations scale, software costs scale proportionately.
ROI clarity: When pricing aligns with industry-specific value, ROI calculations become straightforward.
Real-World Success Stories in Vertical Strategy
Several companies demonstrate the power of combining vertical focus with industry-specific pricing:
Veeva Systems transformed pharmaceutical CRM and data management with its industry-focused approach. By pricing based on the number of pharmaceutical representatives and drug products managed, Veeva created a model that scales naturally with customer success. The result? Veeva has grown to a market cap exceeding $25 billion by focusing exclusively on life sciences.
Procore revolutionized construction management software with pricing based on project volume and size rather than users. This approach recognized that construction companies might have numerous occasional users but value based on project scope. Procore's industry focus and aligned pricing helped it achieve a valuation over $9 billion.
Toast serves restaurants with point-of-sale and management software, using a combination of transaction-based fees and hardware costs—a model that restaurants understand because it resembles payment processing. Toast's deep domain expertise and industry-specific pricing have helped it grow to serve tens of thousands of restaurants.
How Domain Expertise Drives Pricing Innovation
The ability to create effective industry-specific pricing models doesn't emerge from traditional SaaS thinking—it requires deep domain expertise. Successful vertical SaaS companies typically feature:
- Leadership teams with significant industry experience
- Product development informed by sector specialists
- Customer success teams fluent in industry terminology
- Sales representatives who understand customer operations intimately
This expertise enables these companies to identify the most meaningful value metrics within each industry. According to Gartner, by 2025, more than 50% of enterprise software purchases will be based on industry-specific solutions rather than general-purpose applications.
The Future of Industry Focus in SaaS
As vertical SaaS continues its ascendancy, several trends are emerging that enterprise leaders should monitor:
Micro-vertical targeting: Even within industries, companies are focusing on specific sub-segments (e.g., not just healthcare, but specifically behavioral health clinics)
Ecosystem development: Vertical SaaS platforms are becoming the center of industry-specific app marketplaces
AI specialization: Artificial intelligence implementations becoming highly customized for industry-specific use cases
Hybrid pricing models: Combinations of industry-specific metrics with traditional subscription components
Cross-vertical expansion: Successful vertical players carefully expanding to adjacent industries
What This Means for Enterprise Decision-Makers
For executives and technology leaders evaluating software solutions, the vertical SaaS revolution offers both opportunities and considerations:
Evaluate TCO through an industry lens: Consider how vertical solutions might deliver better ROI through industry-relevant features and pricing alignment
Assess domain expertise, not just technology: When evaluating vertical vendors, scrutinize their industry knowledge as closely as their technical capabilities
Consider workflow alignment: Vertical solutions typically require less customization and process change than horizontal alternatives
Examine pricing transparency: The best vertical SaaS providers can clearly articulate how their pricing aligns with industry value creation
Watch for vertical consolidation: As this market matures, strategic acquisitions may affect product roadmaps and support
The rise of vertical SaaS and industry-specific pricing models represents a natural maturation of the software market. As SaaS penetration increases across industries, the advantages of specialized solutions with aligned pricing become increasingly compelling. For enterprise leaders, understanding this shift is crucial for making strategic technology investments that deliver maximum value tailored specifically to their industry needs.