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Designed to Sell: Part 2/8
Core Pricing Strategies for B2B SaaS

Core Pricing Strategies for B2B SaaS
Let's explore key pricing strategies and models relevant to B2B SaaS businesses. As a founder, mastering these concepts will help you craft a pricing approach that aligns with your product and target market. We’ll compare value-based pricing and cost-plus pricing, examine tiered pricing models (a cornerstone in SaaS), and discuss how to align pricing with customer value perception. Simplicity and a focus on value will remain central themes throughout, as these principles often lead to better sales outcomes.
Value-Based Pricing vs. Cost-Plus Pricing
Cost-Plus Pricing
Cost-plus pricing is one of the simplest models: you calculate the cost of delivering your service (e.g., development, infrastructure, support) and add a markup to ensure profitability. While this guarantees your costs are covered, it has a major drawback—it’s completely inward-focused. This model ignores the customer’s perspective and their willingness to pay. As a result, you may set prices that are either far below what customers are willing to pay or far above market expectations, depending on how your costs relate to the perceived value of your product.
Cost-plus pricing can work in industries where customers understand costs well and products are commoditized, but this is rarely the case in SaaS.
Value-Based Pricing
Value-based pricing, in contrast, starts with the customer. It asks: What value (e.g., financial gain, productivity improvement, risk reduction) does the customer derive from our product? Based on this value, you set your price as a fraction of the benefits your product delivers.
This approach forces you to understand your customers’ needs deeply, the ROI your solution provides, and the pain points it alleviates. It’s widely considered the “gold standard” of pricing strategies because it aligns your interests with your customers—the more value you deliver, the more you can charge (within reason).
For instance, if your SaaS solution saves a customer $100,000 annually in manual work, pricing it at $10,000 or $20,000 per year (10–20% of the savings) could be perceived as a great deal while remaining highly profitable. However, value-based pricing requires effort. You’ll need to conduct customer research, surveys, or market analysis to understand willingness to pay. This upfront investment often yields pricing that customers find fair and directly tied to the value they receive.
Transitioning to Value-Based Pricing
Many SaaS startups begin with cost-plus or competitor-based pricing but later shift toward value-based pricing as they mature. Early on, you might guess your price or mimic a competitor to attract initial customers. Over time, you can refine your pricing to reflect customer value as you collect data on how customers use your product, which features they value most, and the ROI they achieve.
It’s essential to remember that customers care about their own outcomes, not your costs. As one pricing expert put it: “Customers don’t care how much it cost you to build your product; they care about the value they’re getting for the price they pay.” If your SaaS solution saves a customer an hour each day, they’ll compare your price to the monetary value of that saved time—not your AWS expenses or developer salaries.
Value-based pricing also strengthens your sales messaging by encouraging you to quantify and articulate the value your product delivers. For example, instead of pricing based on a 100% markup over costs, an analytics tool that drives $10,000 in monthly sales for customers could justify pricing at $500/month (5% of the benefit).
While value-based pricing is more challenging to implement, it typically outperforms rigid cost-plus strategies, especially for innovative SaaS products. By focusing on what the market is willing to pay for your benefits, you unlock greater revenue potential while meeting customer expectations.
Tiered Pricing Models and Their Benefits
A common feature across SaaS pricing pages is the tiered pricing model, often labeled Basic, Pro, Enterprise or Bronze, Silver, or Gold. Tiered pricing offers predefined feature packages at different price points, allowing customers to choose the option that best suits their needs and budget. Let’s explore why this model is so popular and how to implement it effectively.
What is Tiered Pricing?
Tiered pricing involves offering multiple plans, each with a specific set of features (or usage limits) and a corresponding price. A popular structure is the three-tier “Good-Better-Best” approach:
A low-cost entry-level plan for smaller customers or teams.
A mid-tier plan with additional features, often positioned as the best value.
A high-end plan with premium features or services for enterprise customers.
This model strikes a balance by giving customers flexibility without overwhelming them with too many options.
Benefits of Tiered Pricing
Lower Barrier to Entry
A basic, lower-priced tier makes your product accessible to smaller customers or those with limited budgets. Without an affordable entry point, these prospects might avoid purchasing altogether. A low-end tier captures these users, converting “no customers” into paying customers and opening the door for future growth.Built-in Upsell Opportunities
Tiered pricing enables a natural land-and-expand strategy. Customers can start with a basic plan and upgrade as their needs grow or as they see more value in your product. For example, a customer might start with a small plan but later upgrade to unlock advanced features as they scale. Without higher tiers, customers might outgrow your service and turn to competitors.Maximized Market Coverage
A tiered structure allows you to target multiple customer segments with varying budgets. Low tiers attract startups or small businesses, mid-tiers appeal to mid-market customers, and high tiers cater to enterprises. This approach helps you expand your total addressable market and ensures you’re not leaving money on the table—customers with larger budgets can pay for premium plans, while budget-conscious users can opt for lower tiers.Clear Value Differentiation
Tiers allow you to segment features logically. For example, your basic tier might include essential features, while higher tiers add advanced capabilities or services. This setup helps customers perceive the value of upgrading. Instead of fixating on individual feature costs, customers evaluate the overall value of a plan. Bundling features into tiers also shifts the focus from pricing individual features to the broader benefits of a package.
Best Practices for Tiered Pricing
Keep Tiers Distinct and Intuitive: Each tier should offer clear, meaningful value increases for a reasonable price increment. A common tactic is to label the middle tier as “Most Popular” to guide customer decisions.
Limit the Number of Tiers: Offering three to four tiers is usually ideal. Too many options can overwhelm customers, reducing conversions.
Align Features with Customer Needs: Ensure small customers get essential features in the basic tier, while advanced features (e.g., admin controls, integrations) are reserved for higher tiers. Misalignment can frustrate customers and lead to churn.
Remember, tiered pricing isn’t static. As your product evolves, you may need to adjust tiers or add new ones, but do so carefully to avoid confusing customers. When well-designed, tiered pricing provides a scalable, easy-to-navigate structure that accommodates a wide range of customer needs.
Aligning Pricing with Customer Value Perception
Regardless of the pricing model you choose—whether flat, tiered, or usage-based—success hinges on aligning your pricing with how customers perceive the value of your product. Misalignment here can quietly undermine sales, as customers may hesitate to buy or renew if they feel the price doesn’t match the value.
Identifying Your Value Metric
Your value metric is what you charge for, such as, per user, per GB of data, per project, or per API call. The right metric ties your pricing to the customer’s usage or outcomes. For example:
A CRM might charge per user, as increased user adoption correlates with greater value.
A cloud storage service might charge per GB stored, reflecting usage.
The key is to select a metric that grows with the value customers receive. This ensures that customers pay more only when they derive more benefits.
Avoid Internal Metrics
Avoid basing your pricing on internal metrics that customers don’t understand or care about. For instance, a database service might track internal costs based on “queries per second,” but customers may value “number of records managed” more. Misaligned metrics can confuse customers and lead to pricing disputes.
Communicate Value Clearly
To ensure customers see the connection between price and value, clearly articulate the benefits of each pricing tier. For example: “Our Pro plan saves teams 50+ hours monthly, delivering $5,000 in productivity gains for just $200/month.” This framing reinforces the ROI customers can expect.
Iterate and Refine
As your product evolves, regularly assess whether your pricing still reflects the value customers derive. Customer feedback, usage data, and market research can reveal opportunities to improve pricing alignment.
In summary, aligning pricing with customer value perception ensures customers feel your pricing is fair and logical. This reduces objections, simplifies sales conversations, and fosters a virtuous cycle where delivering more value drives increased usage and revenue.