
Frameworks, core principles and top case studies for SaaS pricing, learnt and refined over 28+ years of SaaS-monetization experience.
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Join companies like Zoom, DocuSign, and Twilio using our systematic pricing approach to increase revenue by 12-40% year-over-year.
The pricing model you choose for your SaaS product isn't just a financial decision—it's a strategic one that affects customer acquisition, retention, and your overall growth trajectory. Among the most common pricing structures, per-user and per-feature models stand out as primary options, each with distinct advantages and potential drawbacks. For SaaS executives, understanding these models and selecting the right pricing axis can mean the difference between sustainable growth and stalled momentum.
According to OpenView Partners' 2023 SaaS Benchmark Report, companies that align their pricing model with their core value proposition experience 15% higher retention rates and 23% greater expansion revenue. Yet many executives still struggle with determining which pricing approach best suits their product and market.
This article examines both per-user and per-feature pricing strategies, their market applications, and provides a decision framework to help you determine which pricing axis will drive the most value for your business.
Per-user pricing (sometimes called seat-based pricing) charges customers based on the number of individual users who access your software. This model is straightforward: each additional user costs a set amount, typically billed monthly or annually.
Per-user pricing tends to excel in specific scenarios:
When value scales with adoption: Products like Slack, Microsoft 365, or Salesforce deliver increased value as more employees use them, making per-user pricing intuitive.
For collaboration tools: When your product's primary benefit comes from enabling teammates to work together, charging by user aligns with that value.
When usage is relatively uniform: If most users consume similar resources and derive similar value, per-user pricing creates predictability.
According to Gainsight's 2023 Customer Success Industry Report, 67% of collaboration and communication tools use some form of per-user pricing model.
Per-feature pricing (also known as tiered or value-based pricing) structures offerings around access to different feature sets. Basic plans include core functionality, while premium tiers unlock advanced features that deliver additional value.
Products with clear feature segmentation: When your product has distinct features that cater to different user needs or sophistication levels.
Solutions with varying value levels: If certain features deliver substantially higher value or cost more to provide, segmenting by feature better captures this value differential.
When targeting diverse market segments: If your product serves both SMBs and enterprise customers with different needs, feature-based tiers can effectively address this range.
HubSpot provides a classic example of per-feature pricing, with distinct marketing, sales, and service hubs, each with multiple tiers based on feature access.
According to a ProfitWell study, companies utilizing feature-based pricing reported 38% higher customer lifetime value compared to those using strictly per-user models.
Many successful SaaS companies employ hybrid models that incorporate both per-user and per-feature elements:
According to Paddle's 2022 SaaS Pricing Strategy Report, 58% of the fastest-growing SaaS companies now employ some form of hybrid pricing approach.
Salesforce exemplifies this hybrid model effectively—different editions (Essentials, Professional, Enterprise) offer distinct feature sets, each with per-user pricing within those tiers.
To determine which pricing model best suits your product, consider these key factors:
Ask: How does your product primarily deliver value?
Examine your customer base:
Consider your growth objectives:
Analyze your market:
Evaluate your cost structure:
Regardless of which pricing model you choose, these practices increase your chances of success:
Test before full deployment: Use customer interviews and potentially A/B testing to validate pricing changes.
Provide grandfathering options: When transitioning pricing models, consider respecting existing customers' arrangements.
Focus on value communication: Clearly articulate why your pricing structure aligns with the value customers receive.
Monitor key metrics: Track conversion rates, expansion revenue, and churn closely after implementing any pricing change.
Iterate based on feedback: Be prepared to refine your approach based on market response.
The choice between per-user and per-feature pricing isn't simply about maximizing short-term revenue—it's about aligning your pricing strategy with your product's value proposition, your customers' expectations, and your long-term business objectives.
The most successful SaaS companies regularly revisit their pricing strategies, using customer feedback and performance data to refine their approach. Rather than viewing this as a one-time decision, consider it an ongoing strategic conversation about how your pricing can both reflect and enhance the value you deliver.
By thoughtfully evaluating the factors outlined in this decision framework and potentially implementing a hybrid approach that captures the strengths of both models, you can create a pricing structure that drives sustainable growth while maintaining strong customer relationships.
Remember that pricing is one of the most powerful—yet often underutilized—levers in your strategic toolkit. The right pricing axis doesn't just capture value; it communicates it, reinforces it, and ultimately helps create more of it for both your customers and your business.
Join companies like Zoom, DocuSign, and Twilio using our systematic pricing approach to increase revenue by 12-40% year-over-year.