SaaS Pricing Strategies: 5 Ways to Set Your Price
A pricing strategy is how you decide what number to charge. There are five common starting points - your costs, your competitors, the value customers get, or a deliberate plan to launch low or high. Each one pushes your MRR, churn and payback in a different direction.
What is the difference between a pricing strategy and a pricing model?
The pricing model is the structure of the bill: one flat price, tiers, a price per seat, a price per unit of usage, a free plan with paid upgrades. The pricing strategy is how you choose the numbers on that structure.
The two are independent. A three-tier plan can be priced by copying competitors, by adding a markup to cost, or by working out what each tier is worth to the customer. Getting the model right decides whether revenue grows as customers grow; getting the strategy right decides whether you are charging enough in the first place. If you have not picked a structure yet, start with SaaS pricing models.
The five SaaS pricing strategies
Pricing strategies side by side
| Strategy | Price starts from | Best for | Main risk |
|---|---|---|---|
| Penetration pricing | A low launch price, raised later | Crowded markets, network effects | Price-sensitive customers who churn when it rises |
| Price skimming | A high launch price, lowered later | New or clearly better products | Cheaper plans cannibalising the premium one |
| Cost-plus pricing | Your cost to serve + a markup | Usage-heavy products (AI, messaging, storage) | Far below what customers would pay |
| Value-based pricing | The value the customer gets | Measurable outcomes, varied customers | Overestimating value nobody has tested |
| Competitor-based pricing | What similar products charge | New products in mature categories | Inheriting a competitor’s mistakes |
How do you choose a pricing strategy?
Most SaaS companies end up using several at once. A practical order of work:
- Set a floor. Work out your cost to serve one customer and add a margin. That is cost-plus pricing, used as the price you never go below.
- Find the ceiling. Ask customers what the product saves or earns them. That is the basis of value-based pricing, and it usually lands far above the floor.
- Check against the market. Compare with what buyers already pay elsewhere, on the same value metric - competitor-based pricing as a sanity check, not the answer.
- Decide your launch move. In a crowded market, a time-limited penetration price can buy early customers. With a genuinely new product, price skimming lets you start high and add cheaper plans later.
How to measure whether a price change worked
Whatever strategy you use, judge it by cohort: compare the customers who signed up before the change with those who signed up after, over at least two or three billing cycles. Watch trial-to-paid conversion, ARPU, churn rate and new MRR together. A higher price that lifts ARPU but doubles churn has not worked; a lower price that lifts conversion but stretches CAC payback past your runway has not either.
Frequently asked questions
What is a SaaS pricing strategy?
A pricing strategy is the method you use to decide how much to charge - starting from your costs, your competitors, the value customers get, or a deliberate plan to start low or high. It sets the price level, while the pricing model sets the structure the price sits on.
What is the difference between a pricing strategy and a pricing model?
The pricing model is how the bill is calculated - flat-rate, tiered, per-seat, usage-based, freemium or hybrid. The pricing strategy is how you choose the numbers on that structure. A tiered model can be priced with a value-based, competitor-based or penetration strategy.
What is the best pricing strategy for SaaS?
For most SaaS products, value-based pricing gives the highest sustainable prices, because software costs little to deliver compared with the value it creates. Competitor prices are a useful sanity check, and cost-plus is a useful floor, but neither should set the price alone.
Can you combine pricing strategies?
Yes, and most companies do. A common combination is a value-based list price, checked against competitors, never below a cost-plus floor - with a time-limited penetration discount at launch.
How often should a SaaS company change its pricing?
Review pricing at least once a year, and after any big product change. Many early-stage companies underprice, so a review often ends in a price rise for new customers.
How do I know if a price change worked?
Compare customers who signed up before and after the change. Look at trial-to-paid conversion, ARPU, churn rate and new MRR for each group over at least two to three billing cycles.
About the author
Written by
Serena PriftiFounder of Chartsy
Serena Prifti is the founder of Chartsy and writes about analytics, growth, and subscription metrics. She focuses on helping founders and operators turn raw data into clear insights that drive better decisions.
Serena PriftiSee whether your price change worked
Chartsy shows MRR, churn, ARPU and trial-to-paid from your Stripe or Paddle data (Polar, Lemon Squeezy, Creem and Freemius work too), so you can see whether a price change worked - broken down by plan, without a spreadsheet.
