Monetizely FAQ – Your Guide to SaaS Pricing & Strategy

Based on the insights from our SaaS pricing book, Price to Scale, there isn’t a one‐size‐fits-all answer – the right model for your product depends on several factors.

Here’s a breakdown of the three models and the key considerations for each:

• Flat-Rate Pricing
– This model offers simplicity and ease of understanding for your customers.
– It works well if your product delivers a uniformly consistent value across all segments.
– It minimizes billing complexity and helps accelerate sales conversations.
– Consider whether a single price point can capture the varying levels of value different customer segments experience.

• Per-User Pricing
– Per-user (or per-seat) pricing ties directly to the value each additional user brings.
– This model can scale with your customers’ growth and aligns pricing with usage, making it attractive for organizations that expand over time.
– However, it sometimes penalizes highly collaborative environments or teams with shared resources since each additional user incurs extra cost.
– Evaluate whether the incremental value per user justifies the associated costs, and how your customers view individual versus team usage.

• Tiered Plans
– Tiered pricing involves several levels, each offering different feature sets or usage limits. This approach helps address a broad range of customer needs.
– It allows you to capture more value from high-usage or enterprise customers while keeping an affordable entry point for smaller customers.
– Tiered plans enable you to segment the market effectively, but they also add complexity in both sales and internal billing structures.
– Consider how clearly you can differentiate feature bundles so that customers can self-select the plan that truly matches their needs.

Key factors to drive your decision include:

Customer Segmentation: Understand how your customers derive value differently from your product.
Value Capture: Ensure the model aligns pricing with the value delivered, whether that’s per user, per usage, or through differentiated tier levels.
Simplicity vs. Granularity: Balance the ease of a simple pricing structure with the need to segment and capture value across varied customer types.
Competitive Landscape: Factor in how your competitors price their offerings so that your model remains both attractive and economically sustainable.
Scalability & Operational Complexity: Assess whether your internal systems and sales processes can support more complex pricing plans.

In summary, our book Price to Scale emphasizes that your pricing model should reflect how customers derive value as well as the internal dynamics of scaling your business. Whether you choose flat-rate, per-user, or tiered plans, confirm that the model aligns with both market posture and long-term business objectives. The key takeaway is to carefully match your pricing structure not only to customer behavior and segment needs but also to your company’s operational capabilities and growth strategy.

Frequently Asked Questions

Should we have flat-rate pricing, per-user pricing, or tiered plans – and what factors should drive that decision?

What are all of the different ways we could price our SaaS product, and which approach makes the most sense for our market?

How do we determine the initial price for our product without scaring off customers or leaving money on the table?

Is it better to start with a low introductory price to gain early users and then raise it later, or to set a higher price from the beginning?

At what point in our startup’s journey should we start charging for our service (immediately at launch or after building a user base)?

Should we price based on our costs or based on the value we deliver to customers (cost-plus vs. value-based pricing)?

Am I charging the right price for our SaaS product, or have we potentially underpriced it compared to the value we provide?

How can we tell if we’re underpricing or overpricing our product when clear market benchmarks are lacking?

Is a one-size-fits-all pricing approach okay for all customer segments, or do we need different models for different types of customers (e.g., SMB vs enterprise)?

Should we offer monthly subscriptions, annual subscriptions, or both, and how do we decide between giving customers flexibility versus locking in commitment?

Would a hybrid pricing model (for example, a base subscription plus usage fees) better align price with our product’s value, or just complicate things?

How do other products or services in adjacent markets set their prices, and what can we learn from their strategies?

If our market suddenly grew 10× and we captured a large share, would our current pricing model still make sense (i.e., is it scalable for huge growth)?

Should we prioritize rapid user growth (possibly by keeping prices very low or free initially) or focus on monetization early on? How have others balanced growth vs. revenue at launch?

Should we deliberately set a low price initially (penetration pricing) to capture market share, or will that strategy hurt our ability to raise prices later?

Our product caters to a niche but high-value market – should we price it higher (as a premium product) because the value is high, or lower to avoid scaring off the limited pool of customers?

What methods can we use to find out if our pricing is optimal (customer surveys, willingness-to-pay studies, A/B testing prices), and which of these have others found most useful?

Do we need a different pricing approach for B2B versus B2C SaaS, given that individual consumers might be more price-sensitive or expect different pricing models than business clients?

If we plan to move upmarket to enterprise later on, should we design our pricing now with that future in mind, or focus on our current SMB customers and adjust as we go?

Would it be wise to offer a special introductory deal or grandfathered low price to initial customers and then increase prices later, or does that just create complications down the road?

What pricing strategy will best balance the need to attract new users with the need to generate revenue in our early stage?

Are there opportunities for us to price-differentiate within our product line (for instance, using a Good/Better/Best tier structure for different customer segments)?

How many pricing tiers should we offer – is it best to start with a single plan or multiple tiers even at launch?

What’s the ideal number of plans to present on our pricing page to avoid overwhelming potential customers while giving enough choice?

How should we decide which features go into which tier or plan – for example, what to include in a basic plan versus a premium plan?

Is it better to load more value into lower-priced plans to attract users, or to hold back key features to incentivize upgrades to higher tiers?

We have a long list of features – how do we package them into tiers without cannibalizing our higher-priced plans?

At launch, is it smarter to keep things simple with one plan for everyone or to introduce a tiered pricing structure targeting different types of users?

Should we list an “Enterprise” tier on our pricing page with custom pricing, or just handle enterprise deals privately on a case-by-case basis?

How should we handle add-ons or extra modules – as separate purchasable add-ons to a base plan, or only bundled into higher-tier subscriptions?

Does it make sense to offer an “unlimited” plan (all features with no caps) at a premium price, or will that undermine our ability to upsell as customers grow?

What’s the best way to determine usage limits or quotas for each tier (e.g., number of users, projects, or amount of usage included per plan)?

If we introduce a major new feature, should we give it to all existing plans for free, add it only to higher tiers, or create a new tier around it?

How should we handle things like premium support or onboarding services – include them in the top tier or charge separately as an add-on service?

Do the names of our plans matter (e.g., calling them Basic/Pro/Enterprise vs. more creative names), and can the naming affect how customers perceive the tiers?

Should each pricing tier target a specific customer persona or use-case (e.g., Starter for individuals, Professional for small teams, Enterprise for large orgs), and if so, how do we clearly define those tiers for those audiences?

How can we prevent our middle tier from cannibalizing sales of the highest tier (by offering too much value for the price), while still making the middle option attractive enough so that the lowest tier isn’t the only one people choose?

Is offering à la carte pricing (letting customers pick and pay for individual features instead of predefined tiers) practical for us, or would that become too complex to manage and communicate?

Should we use a traditional subscription model or a usage-based pricing model for our SaaS, and which is likely to convert better for our target customers?

What are the pros and cons of usage-based pricing versus flat monthly subscriptions, especially for an early-stage SaaS?

How do we determine the right usage metric to charge for (for example, API calls, data volume, number of transactions) that best correlates with the value customers get?

Should we implement overage charges when users exceed a certain included amount of usage, or automatically move them to the next plan tier when they go over limits?

What’s the optimal way to structure tiered usage pricing (e.g., offering packages or volume-based discounts at higher usage levels) so that it’s clear and appealing?

Do we need to set a minimum monthly fee or base charge in a usage-based model to ensure even small customers are profitable (and to avoid lots of tiny accounts paying almost nothing)?

How can we prevent “bill shock” for customers on a usage-based plan so that a sudden spike in usage doesn’t result in an unexpectedly huge bill?

Is a usage-based model suitable for our product at launch, or should we keep pricing simple (like a basic subscription) until we have more usage data and then consider switching to usage-based?

For a product that is essentially an API/developer tool, does usage-based pricing (pay per use) generally work better than seat-based licensing? What have others experienced for developer-focused SaaS?

Has anyone successfully mixed a subscription and usage-based model (for example, a base subscription that includes some usage quota, then pay-as-you-go for overages)? How well did that work?

If we go with usage-based pricing, should customers pay upfront for a block of usage (buy credits or a prepaid plan) or be billed in arrears for what they used each month? What do customers prefer?

What usage metrics do other SaaS companies in our domain charge on, and are customers in this market comfortable with that model (or will we need to educate them if we choose a novel metric)?

How do we handle very large customers in a usage model – should we cap their costs to give them predictability, offer bulk pricing, or negotiate a custom enterprise usage deal?

Does usage-based pricing truly align our interests with the customer’s (they pay more only as they get more value), or can it backfire by making costs too unpredictable for customers’ comfort?

How frequently should we bill under a usage-based model – should charges be calculated and billed monthly, in real-time, or when a user hits certain usage thresholds? What billing cycle works best from the customer’s perspective?

If our customers’ usage is seasonal or variable, should we offer any accommodations (like averaging usage over a period or allowing unused quota to roll over) to make pricing feel fair and stable?

Would it make sense to set a maximum charge per month (a cap) in a usage model to protect heavy users from runaway costs, or would that unnecessarily limit revenue from our most active users?

Do we need to provide customers with detailed usage dashboards or alerts in a usage-based model, so they can monitor their consumption and avoid surprises? Have others found providing such tooling important for customer satisfaction?

Does implementing a usage-based model add too much complexity (in terms of billing infrastructure or explaining the model to customers) at our current stage? Or is the added complexity worth it for the flexibility and fairness it provides?

Should we offer a free tier (freemium model) or just a free trial for our SaaS product, and what are the trade-offs between these two approaches?

What free trial length tends to work best for converting users to paid customers – 7 days, 14 days, 30 days – and how can we decide the optimal trial period for our product?

We’re planning a freemium model – which features or usage limits should the free tier include to provide enough value but still encourage users to upgrade to paid plans?

Is it better to give free trial users access to all features (so they see the full value) or to limit the trial to basic features (so they aren’t “spoiled” by features they won’t get unless they upgrade)?

Should a free trial require a credit card up front, or will that deter too many potential sign-ups? What have others seen in terms of conversion quality vs. quantity with credit-card-required trials?

For those who do offer a free trial, do more people end up converting if you require a credit card (ensuring they’re serious) or if you don’t require one (lowering friction)?

How can we improve the conversion rate from free trial to paid – are there changes in pricing or plan structure that can nudge more trial users to become paying customers?

Does a freemium model actually lead to enough conversions to be worthwhile, or do you end up supporting a lot of free users with only a small fraction upgrading to paid?

We have a lot of free users compared to paying users – is that a sign our free tier is too generous or that our paid tiers aren’t compelling enough to upgrade?

At what point should we consider removing or restricting our free plan because it’s not converting users to paid (or because it’s costly to support so many free users)?

Should our free offering be truly free forever (with limited features) or essentially a time-limited trial that expires? Which model is more effective at eventually getting people to pay?

What percentage of free users converting to paid is considered “good” for a SaaS freemium model, and how can we tell if our conversion rate is healthy or if our pricing might be a barrier?

If we eliminate our free tier (assuming we have one), will that significantly hurt our ability to get leads and signups, or can a free trial or demo request model generate enough interest on its own?

What should we do with users who stay on the free plan indefinitely – keep supporting them as is, periodically prompt them to upgrade, or gradually limit their usage/features to encourage a switch to paid?

We’re in beta right now – is it better to keep the beta free to gather feedback and users, or start charging a small amount during beta to validate that people will pay for this product?

Is offering a money-back guarantee (say, 30-day refund) on paid plans a good idea to reduce perceived risk, and how does that compare to or complement having a free trial period?

If a user’s free trial expires without converting, should we reach out with a special offer (like extending their trial or giving a one-time discount) to try to win them as a paying customer?

What kind of discount should we offer for annual prepayment versus monthly? Is the typical approach to give “2 months free” (about ~16–17% off), or do some companies do a different discount for yearly plans?

Should we give significant discounts to our first few customers or beta users to gain traction, or will that set unrealistic pricing expectations down the line?

How should we handle it when a potential customer asks for a discount? Should we have a standard discount policy (and limits) in place or decide on discounts case-by-case during sales negotiations?

Is it better to publicly advertise special pricing (e.g., for nonprofits, students, or startups) or handle those situations one-on-one as they come up, to avoid everyone asking for an exception?

At what point (for example, a certain number of users or large deal size) should we consider offering volume discounts, and should those discounts be published on our pricing page or only discussed in sales conversations?