Choosing a Pricing Model as a SaaS Company
The inaugural class of Straight Shot,the first accelerator program focused solely on SaaS and e-commerce startups, is halfway through the 90-day curriculum. Some of the most frequent questions fielded by the founders have been “What is your pricing strategy?” and “How do you justify that pricing strategy?” Proper pricing is an integral part of succeeding as a SaaS company. There are countless pricing models, from freemium to 3 and 5 tiered pricing, all the way to custom pricing models.
KissMetrics, the online e-commerce and SaaS analytics platform, analyzed the pricing models of 12 successful SaaS companies and compared them here. The key takeaway for a SaaS company establishing pricing is the need to have sufficient justification behind any pricing model. If it is a 5-tiered model, what is the value, seriousness, and capability increase from tier to tier? Is pricing based on team size, number of clients, or another metric? The SaaS landscape is exploding, and the growing number of competitive startups means choosing the correct pricing model is critical for all SaaS companies.