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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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The best pricing model for a GenAI product depends on your specific product, target market, and business goals. Here are the key approaches to consider:
Tiered Subscription Model
A tiered subscription approach with packages like Essentials, Pro, and Enterprise allows you to segment customers based on their needs and willingness to pay. This model works well when:
- Your GenAI product has clear feature differentiation
- You want predictable revenue streams
- Different customer segments have varying needs
For example, you might structure tiers with basic AI capabilities in lower tiers, while offering advanced features like custom model training, higher usage limits, or dedicated support in higher tiers.
Usage-Based Pricing
Usage-based pricing ties costs directly to consumption metrics relevant to your GenAI product, such as:
- API calls
- Tokens processed
- Compute time
- Output volume
This model is particularly effective when:
- Customer usage patterns vary significantly
- You need to compete with similar low-entry offerings
- Your costs scale directly with usage
Hybrid Model (Platform Fee + Usage)
Our experience with GenAI products often points to a hybrid model being most effective. This approach combines:
- A base subscription fee that covers access to core capabilities
- Usage-based components for variable consumption
In one case study, we implemented this model for a digital communication SaaS provider, successfully introducing usage-based pricing ($/voice minute and $/message) while preventing a potential 50% revenue reduction impact.
Strategic Considerations
When selecting your GenAI pricing model:
- Align with your go-to-market strategy - Enterprise-focused products typically benefit from subscription models with value-based metrics
- Consider your cost structure - If your costs scale directly with usage, mirror this in your pricing
- Evaluate competitive positioning - Anti-commoditization packaging may be necessary in crowded markets
- Plan for future features - Your model should easily accommodate monetization of new GenAI capabilities
The right model will ultimately depend on conducting proper pricing research, understanding your customers' usage patterns, and aligning with your overall business strategy.