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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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Usage limits should serve as a natural trigger rather than an artificial barrier when moving PLG users from free to paid plans.
Here are a few key points drawn from our SaaS pricing book, Price to Scale:
• Usage Limits as a Growth Signal:
As users expand their interaction with your product, reaching or nearing a usage cap signals that their needs have grown. By clearly defining the free tier’s limits, you help users recognize when it makes sense to upgrade. This natural progression—not a forced upgrade—aligns with the philosophy we outline in our book.
• Designing Natural Tiers:
Our book emphasizes that you can’t change a user’s underlying needs or willingness to pay. Instead, you should structure tiers so that increased usage (for example, moving from limited free usage to blocks of usage in paid tiers, similar to cell-phone plan models) feels like a logical step in their journey.
• Balancing Predictability and Flexibility:
The more predictable and measurable your usage metrics, the more granular you can make your pricing tiers. This not only maximizes revenue capture but also avoids surprising users with unexpected overages. For cases where usage is less predictable, larger buckets or fixed pricing (like t-shirt sizing) may provide the necessary balance.
• Avoiding the “Forced Upgrade” Pitfall:
A caution highlighted in Price to Scale is that any sense of “forced” upgrading can backfire. The limits should be structured to encourage a natural transition rather than to compel an upgrade that might lead to buyer’s remorse or churn later.
In summary, when converting PLG users from free to paid plans, usage limits should be designed to reflect natural business growth. They create clear thresholds that indicate when an upgrade is beneficial—both for the user who is experiencing increased usage and for the business aiming to capture added value—without imposing undue pressure. This approach ensures that upgrades feel like a logical and welcomed progression rather than an unwanted mandate.