SaaS Pricing Strategies That Actually Work

Most SaaS founders spend months on product and minutes on pricing. That's backwards. A 1% improvement in pricing yields 11% more profit—more than any other lever.

This guide covers pricing strategies backed by data, not theory.

The Three Pricing Dimensions

Every SaaS price has three components:

1. Packaging: What features go in which tier? 2. Pricing metric: What do you charge for? (users, usage, flat rate) 3. Price point: How much do you charge?

Get all three right, and pricing becomes a growth engine.

Packaging: Designing Your Tiers

The Rule of Three

Three tiers work best:

• Good: Entry point, limited features
• Better: Most popular, core features
• Best: Everything, premium support

Why three?

• Two feels like cheap vs. expensive
• Four+ causes decision paralysis
• Three creates a natural middle anchor

Feature Allocation Framework

Decide which tier gets each feature:

Feature Type

Tier Placement

Core value	All tiers (drives adoption)
Power features	Better + Best (drives upgrades)
Scale features	Best only (justifies premium)
Admin/security	Better + Best (enterprise needs)

Example for a KPI dashboard:

Tier

Features

Free	1 project, daily refresh, basic metrics
Pro ($49)	10 projects, hourly refresh, alerts, API
Enterprise ($199)	Unlimited, real-time, SSO, dedicated support

The Decoy Effect

Make the middle tier look attractive by designing the top tier right:

Before (weak middle tier):

• Basic: $29 for 5 features
• Pro: $79 for 10 features
• Enterprise: $199 for 15 features

After (strong middle tier):

• Basic: $29 for 5 features
• Pro: $79 for 12 features ← Best value
• Enterprise: $199 for 15 features

The Enterprise tier isn't meant to sell—it makes Pro look reasonable.

Pricing Metrics: What to Charge For

Common Pricing Metrics

Metric

Best For

Example

Per user	Collaborative tools	Slack, Notion
Usage-based	Variable consumption	AWS, Twilio
Flat rate	Simple products	Basecamp, Netflix
Per feature	Modular products	Salesforce
Hybrid	Complex products	HubSpot

Choosing Your Metric

The best pricing metric: 1. Scales with value: Customer pays more as they get more value 2. Predictable: Customer can estimate their bill 3. Trackable: You can measure usage easily 4. Growable: Encourages expansion, not contraction

Red flags:

• Customers gaming the metric
• Metric doesn't correlate with value
• Hard to explain in a sales call

Price Points: How Much to Charge

Value-Based Pricing

Price based on the value you deliver, not your costs.

Steps: 1. Identify the customer's problem cost (time, money, risk) 2. Quantify your solution's impact 3. Capture 10-30% of that value

Example:

• Problem: Manual reporting takes 20 hours/month
• Solution: KPIStack saves 18 hours/month
• Value at $50/hour = $900/month saved
• Price: $49-99/month (5-11% of value)

Competitor-Based Positioning

Position relative to alternatives:

Position

When to Use

Premium/Discount

Premium	Better UX, more features	+20-50%
Parity	Similar offering	±10%
Discount	Simpler, fewer features	-20-50%
Disruptive	New market entrant	-50-80%

Price Anchoring

Start high, offer options down:

Wrong: "Our basic plan is $29, or you can upgrade to Pro for $79."

Right: "Most teams choose our Pro plan at $79. For smaller teams, Basic at $29 works great too."

Pricing Experiments to Run

1. Price Increase Test

Hypothesis: Market will bear higher prices Method: Increase prices 20% for new customers Measure: Conversion rate change vs. revenue change

When to raise prices:

• Win rate > 30% (you're too cheap)
• No price objections in sales calls
• Customers don't use discount codes

2. Annual Discount Test

Hypothesis: Annual prepay increases LTV Method: Offer X months free for annual commitment Common discounts:

• 2 months free (17% discount)
• 3 months free (25% discount)

Watch out for:

• Cash flow vs. revenue recognition
• Impact on monthly signup rate

3. Feature Unbundling Test

Hypothesis: Add-on pricing increases ARPA Method: Separate a premium feature, sell as add-on Example: Advanced analytics at $20/month extra

4. Packaging Restructure

Hypothesis: Better packaging improves conversions Method: Move features between tiers Common moves:

• Move stickiest feature to lower tier (improves retention)
• Move differentiating feature to higher tier (improves upgrades)

Common Pricing Mistakes

Mistake 1: Pricing Too Low

Symptoms:

• Customers never mention price
• Easy closes with no negotiation
• Customers upgrade immediately

Solution: Raise prices 20%, measure impact

Mistake 2: Too Many Tiers

Symptoms:

• Customers confused about which tier
• Sales team spends time explaining packages
• Features scattered illogically

Solution: Consolidate to 3-4 tiers max

Mistake 3: Wrong Pricing Metric

Symptoms:

• Customers downgrade to save money
• Metric doesn't grow with usage
• Pricing feels unfair

Solution: Change metric to align with value

Mistake 4: Static Pricing

Symptoms:

• Same prices for 2+ years
• Costs have increased
• Competitors have moved

Solution: Review pricing quarterly

Tracking Pricing Performance

Monitor these metrics:

Metric

Healthy Range

Conversion rate	2-5% visitor to trial, 15-25% trial to paid
Win rate	20-40% of qualified leads
Discount rate	<15% of deals
Annual plan mix	40-60% of revenue
Expansion rate	20-40% of revenue from upsells

KPIStack tracks these automatically from your Stripe data.

See your pricing metrics →

Summary

1. Use three tiers with clear differentiation 2. Choose a pricing metric that scales with value 3. Price based on value, not costs 4. Run experiments—pricing is never "done" 5. Track metrics to measure impact

Pricing is a skill. The more you practice, the better you get.