In this model, there is only a single plan which offers all the features and benefits for a single price. It is one of the simplest models available.
Potential customers know the price they're going to pay.
By laying out all the pricing factors, customers are sure of what they are getting into.
No matter the customer's circumstances, you know how much money you are going to make.
With just one plan, customers might be left wanting more choices.
Some customers might not want the whole package you’re offering.
In a tiered pricing model you provide different price points for your product or service. This is one of the most widely used pricing models among SaaS businesses.
With multiple pricing plans, you can drastically increase your potential audience.
Appealing to a wider audience means more revenue.
For a potential customer, there are multiple options to choose from while evaluating your offering.
When customers pick a plan themselves, they feel they are getting more value for the money.
If you provide too many options, potential customers might not be able to zero in on one. According to a survey, the average number of pricing plans stands at 3.5.
The urge to have the right price points might lead you to try attracting a crowd you can’t handle.
The freemium model provides a chunk of your software's features for free for an unlimited period. It's usually accompanied by more feature-rich paid plans.
Having a freemium model ensures customers have an entry-level choice.
You will have a readily available set of leads to convert into paying customers.
Freemium users can serve as testers of your software and the risk involved is minimal as they don't directly contribute to revenue.
Since customers can get your offering for free, they will recommend it to others if they like it and help you go viral.
Since you are providing the software for free, there is no possibility of acquiring direct returns on your investments.
Freemium users might develop the throwaway mentality, i.e., they might use it for a while and then move on.
By offering a freemium plan, you might run the risk of users becoming reluctant to pay for it.
The usage based pricing model is where customers pay for whatever they use and not a flat rate. It essentially means that if customers use more, they pay more.
Customers pay for what they use and not a flat rate, even if they haven't used your product much.
With a usage-based plan, you do away with the risk of a customer using the product extensively but paying only a flat rate and thereby save .
With an irregular flow of revenue, it might be difficult to predict what you are going to get.
Due to varied usage, it might be hard for you to predict the costs involved in providing the service.
Some users might not really care about their usage and might be comfortable with paying a flat rate.
In a user based pricing model, customers are charged based on the number of users that use your SaaS offering.
User based model fits the spectrum of customers, from startups to enterprises.
Businesses that have the potential to scale over a period are more likely to choose this model.
As a company scales higher, so will the revenue coming from them for your service.
As you will know the number of users using your product, it is easier to predict revenue.
With a per-user pricing, there are chances that users might share their credentials to avoid paying for more people.
If users adopt malpractices as mentioned, your revenue might take a hit.
In this model, you offer different price points based on the features or functionalities you offer. You offer a basic set of features for a price, add some more functionalities for a higher price, and so on.
Customers know up front what they are getting.
With added features with each pricing plan, users are more likely to upgrade as they scale and use your product more.
You can even out the resource allocation by providing the high profile features in your higher plans.
With your price point hinging on features, you will have to strike the perfect balance between each plan.
Sometimes customers might feel dissatisfied with the features on offer for the price quoted.
Then, say hello to Zoho Subscriptions, the comprehensive recurring billing and subscription management solution to help you manage pricing models for your SaaS business.
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Zoho is a software company that ships 45+ products globally. Operating on a subscription pricing model for more than 20 years has given us the opportunity to face and overcome the practical pain points of subscription businesses. Let us solve your subscription billing challenges, together.