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Pricing an entry-level SaaS product can feel like a shot in the dark for many early-stage founders. Charge too much, and you risk scaring away potential customers; charge too little, and you leave money on the table (or worse, signal that your product isn’t valuable). The truth is, pricing is not just slapping a number on your software - it’s a strategic exercise that impacts your product's adoption, revenue growth, and overall trajectory.
For early-stage SaaS products, getting pricing “right enough” early on can prevent costly overhauls later. Many high-growth startups face disruptive pricing model changes because their initial approach wasn’t sustainable.
The good news is that with structured thinking, you can avoid common pitfalls and set a strong foundation. Below is a practical, step-by-step approach to pricing an entry-level SaaS product. This framework focuses on actionable guidance grounded in real-world expertise, covering how to align pricing with business goals, understand customer segments, design effective packages, choose the right pricing metric, set price points, and implement changes smoothly. Let’s dive in.
1. Align Pricing with Your Business Goals and Target Customers
Start with the basics: what are you trying to achieve, and who are you serving? The best pricing strategy for your product depends on your business objectives and your target market. Before crunching numbers, get crystal clear on these fundamentals:
- Define your business goals for pricing: Are you aiming to maximize short-term revenue, or is your priority to grow your user base and win market share? An early-stage startup looking to capture market share might price more aggressively (even offering a free tier or heavy discounts) to drive adoption. In contrast, a startup prioritizing revenue and sustainability might set higher price points or limit discounts to ensure each sale is profitable. You don’t have to choose one extreme or the other, but clarifying your primary goal will guide all other pricing decisions. Misalignment on goals within a founding team can lead to chaotic pricing moves, so make sure everyone agrees on the strategy (e.g. “We want to land a lot of small customers quickly” vs. “We want to position it as a premium solution for a niche”).
- Identify your target customer segment(s): Who is your entry-level product built for? The needs of a 10-person startup differ from those of a 1000-person enterprise. Segment your potential customers into groups that share similar characteristics and needs, then decide which segment you’re focusing on first. For example, you might target small-to-mid-sized businesses that value ease of use and affordability, or go after enterprise early adopters willing to pay more for advanced features and support. This choice will heavily influence your pricing. Early-stage companies often start with SMB or mid-market segments because those customers tend to prefer simple, lower-cost solutions and faster sales cycles. Enterprises might be willing to pay more, but selling to them requires robust features, compliance, and longer sales processes - which your product and team may not be ready for yet. Be realistic about who your product best serves right now.
- Align internally on strategy: Once you have clear goals and a defined target segment, ensure your team is on the same page. Many pricing problems actually stem from internal misalignment rather than the price number itself. If the CEO wants to offer a freemium model to drive user growth, but the head of sales prefers high prices to maximize ACV (Annual Contract Value), you’ve got a conflict that will result in a muddled pricing approach. Resolve these differences early by reviewing your company’s go-to-market strategy and ideal customer profile together. When everyone agrees on “success” metrics (e.g. 1000 signups vs. $1M ARR in the first year) and the target customer, your pricing decisions will be much more coherent and easier to make.
Why this matters: Pricing without clear goals or customer focus is like sailing without a compass. By starting with goals and segmentation, you ensure your pricing strategy actively supports your business outcomes. There’s no one-size-fits-all, but there is a best fit for your situation. By clarifying what you want to achieve and with whom, you set the stage for all the decisions that follow.
2. Design Simple Packages That Match Customer Needs
Once you know your target segment and goals, the next step is to decide how you’ll package your product offerings. Packaging means how you bundle features and define your tiers or plans. For an entry-level SaaS product, simpler is usually better - but you also want to ensure your offering reflects real customer needs and sets up expansion potential.
Key considerations for packaging an early-stage SaaS product:
- Keep it simple (especially at the start): Resist the urge to launch with a fully complicated tiered pricing matrix if you don’t need it yet. Many early-stage SaaS companies start with either a single paid plan or a simple “two-tier” approach (e.g. Basic and Pro). The reason is that with a new product, you’re likely still learning what features different customers truly value. Starting simple makes it easier to adjust as you gather feedback. It also reduces decision paralysis for potential buyers - too many options can confuse customers. For example, if your product has a core feature set and a handful of advanced features, you might begin by offering one plan that includes everything for one price. As you learn more about usage patterns and customer types, you can split that into a lower-tier and higher-tier later. The goal initially is to make it easy for early customers to say “yes”. As one venture capitalist observed, “don’t be too hard to buy” - especially early on, you want a frictionless purchase process.
- If you use tiers, align each package to a segment or use case: It’s common in SaaS to eventually have a “Good-Better-Best” tiered pricing (e.g. Basic, Professional, Enterprise). In fact, about 70% of SaaS companies (Slack included) use a Good-Better-Best model, because it provides different options for different customer sizes or needs. However, don’t create tiers just for the sake of it at launch. Each tier should map to a distinct set of customer needs or willingness-to-pay. For instance, you might have a Startup plan for small teams and a Growth plan for mid-sized companies with more advanced needs. Make sure the feature differences are meaningful: the higher package should include things that a larger or more sophisticated customer truly values (e.g. advanced analytics, permissions, premium support), not just random extras. A common mistake is to arbitrarily slot features into tiers without understanding if customers care about them - this can backfire. If an important feature for a small customer accidentally lands in a high-priced tier, you’ll either lose that sale or face pressure to discount. Conversely, if you give away too much in the low tier, bigger customers will just buy the cheap plan and you’ll struggle to upsell. Design your packages based on real customer value.
- Don’t purely differentiate tiers by usage limits: One subtle but important point: differentiate your packages by the capabilities and value they offer, more than by usage volume. For example, it’s better to say “Pro plan includes advanced reporting and priority support” (capabilities) rather than only “Pro plan lets you have 1000 records vs. 100 in Basic” (usage limit). Usage or quantity limits often do come into play (perhaps the Basic plan has up to 5 users, Pro allows 20, etc.), but if the only difference between tiers is quantity, you’re basically just charging larger customers more for the same product, without tailoring the product to them. That sends a signal that you’re penalizing growth and it might push customers to game the system or feel frustrated. Instead, first figure out packaging in terms of feature set and user needs, then layer on reasonable usage thresholds if needed. The mindset should be: “The higher tier offers more value through additional capabilities; oh and it also accommodates larger usage.” This way, you’re segmenting by customer profile (and their needs), not just their size.
- Consider a free tier or free trial (but choose carefully): A major packaging decision for an entry-level product is whether to have a free offering. Many product-led growth (PLG) companies use a free tier (freemium) to attract a large user base quickly. This can be powerful - for example, Citrix saw almost double the number of new users when they introduced a freemium version of their product. A free plan lowers the barrier to trying your product, which is great for awareness and onboarding. However, freemium comes with trade-offs: it can lengthen the sales funnel and require significant support for free users who may never convert. For an early-stage startup with limited resources, supporting a flood of free users could strain your team. The alternative is a free trial (time-limited access to the full product) or even a money-back guarantee. Free trials give customers a taste of the value but create urgency to convert when the trial ends, and they tend to attract more serious buyers compared to open-ended free plans. In short, choose a free tier if your strategy is all about rapid adoption and you have a clear plan to convert free users to paid. Otherwise, a 14-30 day free trial might be a better way to let customers experience the product without giving it away indefinitely. And of course, you can choose to have no free option at all - some B2B products sell just fine via demos and paid pilots. Just make sure this fits your target customers’ expectations. (For instance, developers might expect a free tier for a developer tool to tinker with, whereas a financial enterprise software can be sold via sales meetings without a self-service free trial.)
- Provide a clear upgrade path: Even at entry-level, think about the future. As customers get value from your product, how can they grow with you? If you start with a single plan, what happens when a customer wants more? You might plan to introduce a higher-priced tier or add-on features later. It’s good to design your initial packaging with expansion in mind. Perhaps you enable add-ons (e.g. buying extra users or extra capacity) or at least have an internal idea of what a “bigger” customer could pay for in the future (more features, seats, modules, etc.). This “upsell path” is crucial for driving net negative churn (where expansion revenue outpaces churn). Many successful SaaS businesses land small and expand big. Make sure your pricing structure can accommodate that journey. For example, your Basic plan might have all core features but no priority support and limits on usage - power users who hit those limits will naturally consider upgrading to a higher plan that you can introduce as your product matures. Designing with this in mind ensures you’re not stuck when a customer outgrows your entry offering.
Why this matters: Packaging translates product value into a purchasable form. Done right, it removes friction and drives revenue. Done poorly, it causes confusion, weakens positioning, and slows sales.
3. Choose the Right Pricing Metric (Your “Unit of Value”)
The pricing metric (also known as the value metric) is what you charge for - the unit by which the customer pays. In SaaS, common pricing metrics include per user, per seat, per gigabyte of data, per 1,000 API calls, per project, per host, etc. Choosing the right metric is crucial for entry-level products because it defines how your revenue scales as customers use your service more. The right metric aligns with the customer’s notion of value and your company’s revenue growth.
Here’s how to approach your pricing metric:
- Align the metric with customer value: Ask yourself, “What usage of my product actually reflects the value the customer gets?” Ideally, the more of that unit the customer uses, the more value they're getting and the more they pay you - a win-win. For many collaboration or B2B workflow tools, “per user” or “per seat” is popular because each additional user typically gets utility and contributes to the account’s value. This metric is also easily understood and predictable, which customers appreciate. In other cases, a usage-based metric might make more sense. For example, a cloud storage service might charge per GB stored, or an email marketing platform might charge per number of emails sent, since those correlate with the scale of usage. The key is that the customer should feel your pricing grows in a fair relation to the benefit they receive. If your metric is misaligned - say you charge per user but the real value is in the number of projects completed - customers will perceive a mismatch (they might say “I hardly add new users, but I keep paying more for reasons unrelated to the value I get”). Get this right early to avoid having to re-engineer it later.
- Consider simplicity and predictability: Especially for an entry-level offering, simpler metrics can build trust. A flat monthly subscription (fixed price for a bundle of features) or a straightforward per-user per-month fee is easy to understand and budget for. Many successful SaaS start this way. On the other hand, a pure usage-based model (pay-as-you-go) can lower the barrier to entry since customers pay only for what they use. This is attractive to new users and can drive adoption because there’s little upfront commitment. For instance, a startup API service might let developers pay per API call so that a new user can start for just pennies. The trade-off: usage pricing can lead to unpredictable bills, which some customers (and especially finance teams) dislike. It can also make your revenue lumpy or seasonal. A hybrid approach is common too - e.g. a base subscription + overage (customers pay a base fee for a certain amount of usage/users, and extra if they go beyond). For early-stage products, lean toward a metric that keeps things predictable for both you and the customer, unless a pure usage model is standard in your domain (e.g. cloud infrastructure).
- Make sure you can measure it: This sounds obvious, but it’s often overlooked in the excitement of choosing a metric. Can your systems accurately track the metric for billing? If you decide to charge per active user or per gigabyte, you must have a way in your product to count active users or data usage reliably. If not, you’ll be stuck in spreadsheets or, worse, incorrectly charging customers. Early on, you might track things manually, but as you scale, you’ll need to instrument the product and possibly integrate with billing systems to automate this. For example, usage-based pricing requires robust metering and billing integration - something that can take months of engineering to set up correctly. Don’t choose a fancy metric that you can’t operationalize from the start. (We’ll talk more about operations in a later section.)
- Learn from industry norms, but don’t be afraid to break them (carefully): It helps to look at how similar products charge. If all your competitors charge per seat, there might be a good reason - customers likely find that logical. On the other hand, differentiating on metric can be a competitive advantage. For instance, Mixpanel (an analytics SaaS) historically charged per data point (“event”) tracked. They discovered this model deterred customers from fully using the product, because heavy users generated millions of events and faced very high bills. So in 2019, Mixpanel switched to a different metric: Monthly Tracked Users (MTUs) - essentially charging by the number of users whose behavior is analyzed, rather than raw events. This aligned pricing with a more understandable value metric (companies want to analyze more users, not worry about each click as a cost) and made costs more predictable for customers. The change was significant; it involved overhauling packaging and price levels, but it ultimately helped Mixpanel better match their pricing to customer value. The takeaway for an early startup: try to choose a metric you won’t regret later. If you think a creative metric could set you apart, test the waters in conversations with beta users. Make sure customers see it as fair and tied to outcomes, not a gimmick. And if your industry is moving toward usage-based pricing (a growing trend in SaaS), consider if that model truly benefits your customer and you. Usage-based pricing is not a panacea - it can introduce complexity in sales and billing - so use it only if it is really needed.
- Don’t let the metric do all the segmentation: As noted earlier, avoid making your pricing tiers solely about different quantities of the metric. A healthy approach is: first decide your packages (perhaps a small biz package vs. an enterprise package), then decide if those packages will have different metrics or limits. For example, you might offer unlimited usage in the Enterprise plan but apply usage limits in the SMB plan. That’s fine as long as the core value of each plan is appropriate to the segment. What you want to avoid is something like Gold/Silver/Bronze plans that are literally “up to 100 units, up to 1000 units, up to 10,000 units” with no other distinction. That essentially forces customers to upgrade purely because they grow, not because they need additional value. It can work in some utility-like products, but more often it frustrates users who feel upsold without additional benefit. Instead, if you use a usage metric, consider implementing volume discounts or overage charges for higher usage, while still keeping the tier distinctions based on features or service levels.
Why this matters: A well-chosen pricing metric ensures your growth aligns with customer success. It enables organic expansion and reinforces fairness. The wrong metric can punish usage or create churn, so get this right early to avoid complex fixes later.
4. Set a Value-Based Price Point (Don’t Just Wing the Numbers)
Now comes the part most people think of as “pricing”: deciding the actual price (or prices) you will charge. Notice we tackled this after packaging and value metric. That’s intentional - you should determine “what and how” you’re charging for before “how much.” With your packages and metric in place, you need to set a price that reflects the value of your product to your target customers and meets your business goals.
Guidelines for setting your initial price point:
- Use value-based thinking: The cornerstone of modern pricing advice is to price based on value, not just cost. In practical terms, this means understanding how much your customer stands to gain from using your solution and pricing in line with that. Ask questions like: How much time or money does my product save them? How much could it help them increase their revenue? What alternatives do they have and what do those cost (including the “do nothing” alternative)? For example, if your SaaS saves a business from needing an extra employee, that might be worth tens of thousands of dollars a year. Charging $1000/year for such a product would be an easy decision for the customer - perhaps even too low. On the other hand, if you’re offering a nice-to-have productivity tool that slightly improves a workflow, the perceived value may be only a few dollars per user per month. Anchor your price around the outcome and ROI for the customer. Early on, you can gather this information through customer interviews and feedback. While you might not do a full formal willingness-to-pay study at pre-launch, you can certainly talk to potential customers: describe the value, then frankly ask what range they’d expect a product like that to cost. Combine this qualitative feedback with any data you have (for instance, competitor pricing, or even results from small pilot sales) to gauge a reasonable range.
- Research the market and competitors: Although you shouldn’t simply copy competitors, you absolutely should know the going rates in your space. Your customers will likely compare your offering to either an incumbent competitor or the status quo. If everyone else charges $50/user/month and you come in at $5, customers might question your credibility (“Is it that much worse, or is it not a professional solution?”). Conversely, pricing way above market will require very strong justification in terms of extra value. Look at not just direct competitors but also substitutes. For example, if your SaaS is brand new and there’s no exact competitor, what existing solutions do customers use to solve the problem? How much do those cost? Your price needs to make sense in that context. However, avoid a race to the bottom. You do not have to be the cheapest option - in fact, trying to be cheapest can hurt you because it can signal lower quality and will cut into your margins needlessly. A better strategy is often to be competitive on value: maybe you charge a bit more than the cheapest rival, but you offer better support or a more robust solution, justifying the premium. Remember, in B2B SaaS, buyers are often less price-sensitive than you’d think for a mission-critical product. Many early founders are surprised that customers would pay more - often it’s the founders themselves who are timid. Don’t sell yourself short if you have a strong value proposition.
- Factor in your costs and growth model (but don’t cost-plus): You should have an idea of your unit economics - for instance, what does it cost you (roughly) to serve one customer? This sets your floor: you obviously can’t sustain a price below your cost to deliver (in the long run) unless your strategy is to aggressively subsidize growth with investor money. On the flip side, your customer’s ROI and competitor prices set a sort of ceiling: it’s unlikely you can charge more than the value you deliver, or so much more than alternatives that you seem unreasonable. In between, you have room to choose a point that fits your strategy. Cost-plus pricing (taking your cost and adding a fixed margin) is rarely the best for SaaS, because your costs don’t directly equate to customer value. For software, once developed, the cost to serve one more user is often low - you’re charging not based on cost, but on the problem you solve. That said, knowing your approximate cost ensures you’re not unknowingly charging below profitability. For example, if you run an AI service that costs you $0.01 per API call in cloud compute, and your pricing metric is per API call, you better charge well above $0.01 (with enough margin to cover overhead and profit). This seems obvious, but some startups, in an effort to be super cheap, have found themselves losing money on each customer - a situation you want to avoid unless it’s a deliberate short-term landgrab.
- Avoid being too cheap, even as a newcomer: It might be tempting to price very low to attract customers when you’re new. Be careful here. While a low price can reduce adoption friction, it can also undermine your perceived value. There’s a common pricing insight: if no prospective customer ever says your price is too high, you’re probably priced too low. Getting some pushback on price is healthy - it means you’re capturing value. Particularly in B2B, buyers expect to pay for quality. One expert insight is that early-stage companies often underprice their product, but B2B buyers are not as price-sensitive as you might fear. If your solution truly delivers business value, many customers will pay a fair price for it. Underpricing can also hurt your ability to invest in the product and support, creating a vicious cycle. So, don’t set the price absurdly low out of fear. If you believe you’re delivering, be confident in asking for a meaningful price. You can always offer promotional discounts or grandfather early adopters at a lower rate if you need to soften the deal - just do it strategically (and communicate it well if you later raise prices on new customers). Remember, it’s usually easier to lower a high price or give discounts than it is to raise a price that was too low initially. Starting a bit higher signals ambition and value; you can adjust with more information.
- Offer discounts strategically, not haphazardly: In early sales, especially if you’re doing enterprise or larger deals, prospective customers might negotiate on price. It’s fine to be somewhat flexible early on (you want those anchor customers), but set some guardrails. For example, you might decide that you’ll give at most a 20% discount for annual commitments or for beta design partners, etc. The reason to be structured is so you don’t end up with a handful of customers all paying wildly different prices with no rationale - that can become a nightmare later (and word can spread, hurting trust). Also, think about contract length vs. price: longer commitments usually justify some discount. If a customer is willing to sign and pay for 12 months upfront, a discount (say, 10-20%) rewards that and helps your cash flow. Just document whatever special deals you make. In the future, you’ll likely formalize discount policies. Even early on, it’s good practice to have an idea of what’s an acceptable deal. If you find yourself needing to give, say, 50% off your list price to close any deal, that’s a red flag that your list price might be too high or the value isn’t clear - use that as feedback.
- Test your pricing in the real world: Once you have an initial price in mind, treat it as a hypothesis. Especially in the very early stages, you have the flexibility to adjust quickly. You might quietly try two different price points on sales calls or explore if customers show hesitation at one price versus another. You can also use a land-and-expand approach - for instance, offer a low entry price for the first team or first module, and plan to charge more as the customer adopts more of your product. The idea is to get data. Pay attention to conversion rates: if lots of people are signing up immediately, you might be priced too low; if almost everyone is saying “too expensive” and walking away, you might be too high (or not communicating value well). Keep notes from sales conversations about price objections. Also, be prepared to do a broader pricing review after you have, say, your first 10 or 20 customers. Pricing is not static - you should evolve it as your company evolves. Many companies do a pricing refresh when they add major new features or when they discover usage patterns that indicate they were charging wrong. The important part is to gather evidence and not be afraid to tweak. The worst case is to set a price at launch and then ignore all signals for a year; by the time you realize it’s wrong, you’ve left a lot on the table. Instead, treat your initial pricing as version 1.0 - good enough to go to market, but subject to improvement.
Why this matters: The price tag you put on your SaaS product will directly influence your revenue, customer acquisition, and even brand positioning. If you set it without a strategy, you might luck into an okay price, but more often you’ll either undersell yourself or price yourself out of contention. Value-based pricing ensures that you are capturing a fair share of the value you create. It helps justify your price to customers because it’s rooted in their reality (e.g. “We charge $200/month, and in return our average customer saves 20 hours of work - which is easily $1000+ of value”). This approach also strengthens your sales and marketing messaging, since you focus on outcomes. Meanwhile, doing your homework on the market prevents unpleasant surprises (like discovering customers think your product is 10x overpriced compared to a well-known competitor). It also helps you avoid being manipulated by what one noisy customer says - data trumps anecdotes.
Finally, setting a price is not a one-and-done deal. Many successful startups incrementally raise their prices as their product matures and value increases. They might start with an entry price to get early users, but as they add features or prove ROI, they charge more to new customers. This is normal. The key is to have a rationale and communicate changes well. For instance, if after 6 months you realize you’re way underpriced, you might announce new pricing for future customers but graciously grandfather your early adopters at the old rate (or give them a slower ramp). This rewards early customers for their trust and keeps them loyal, while allowing you to grow your revenue. In summary: pick a value-aligned price, back it up with reasoning, and be ready to learn and adjust as needed.
5. Prepare to Operationalize and Iterate on Your Pricing
Choosing a pricing model and numbers is only half the battle - you also need to implement it effectively and be ready to iterate. Early-stage companies sometimes overlook the operational side of pricing, which can turn a great strategy into a messy execution. Don’t let that happen. From the moment you start charging customers, ensure you have the tools and processes to support your pricing. And as your product and market evolve, revisit and refine your pricing strategy regularly.
Steps to operationalize and maintain your pricing strategy:
- Make sure your systems can handle the pricing model: If your pricing is simple (e.g. monthly per-user subscriptions), a lot of this can be handled with basic tools (Stripe, billing software, or even manual invoicing for first few clients). But if you have usage-based elements, invest early in the ability to track and report usage accurately. There’s nothing worse than a customer dispute because your counts were off. Instrument your product to collect usage data tied to each customer. You might need to build admin dashboards or use analytics tools to monitor usage. As you grow, consider implementing a lightweight CPQ (Configure Price Quote) tool or at least a structured spreadsheet for custom quotes, so that any salespeople aren’t freestyling pricing. Also, integrate your pricing with your website and signup flow for self-serve models: if you have a pricing page, keep it updated and ensure upgrade/downgrade paths work as intended. Early on, this might be very barebones (even a manual check is fine if you only have a handful of customers), but plan for scale. If you anticipate needing to bill hundreds of customers on usage, start exploring billing systems sooner rather than later. Many companies underestimate how long it takes to set up proper billing and metrics - it can take months or even years if the model is complex. Since you’re entry-level, keep it as simple as you can, but still prepare.
- Enable your team (or yourself) to sell under the new pricing: “Operationalizing” pricing isn’t just tech - it’s also people and processes. Make sure you (and anyone else customer-facing) knows the pricing inside out and is comfortable explaining it. If you have a sales team or even just a couple of co-founders handling sales, create a one-pager or cheat sheet on pricing: what the packages are, what’s included, what the pricing metric is and why, how to calculate a quote, what discount authority they have, etc. This ensures consistency. If a customer talks to two different reps and hears two different explanations or gets two different discounts, you have a problem. Early on, you might also formalize things like a discount policy or process for exception approvals (for instance, if a big customer asks for custom terms, who decides?). These are the beginnings of a “deal desk” or pricing committee in larger companies, but even at startup stage it pays to have some guidelines. It will prevent ad-hoc decisions that could undermine your strategy (like someone panic-discounting 50% off and setting a bad precedent).
- Ensure cross-functional alignment: Changing pricing or introducing a new model (like a freemium tier or usage-based billing) affects multiple teams. Even if your company is small, think in terms of functions: Product/Engineering needs to implement usage tracking or feature gating for tiers; Marketing needs to update website and messaging; Sales/CS need to communicate with customers; Finance needs to handle invoicing and recognize revenue properly. Get everyone on board with the plan and timeline. If you’re introducing something like a free tier, make sure support is ready for a wave of free users, and marketing has a plan to nurture those users into paying conversions. If you’re raising prices or changing packages, customer success should have talking points to handle questions from existing customers. Basically, treat pricing as a mini product launch internally - coordinate it. Many pricing failures are simply due to poor execution or internal resistance. For example, if your sales team doesn’t buy into the new pricing scheme, they might keep selling the old way at heavy discounts, sabotaging your carefully crafted strategy. So take the time to explain the why of the pricing to your team. When everyone understands the goals and is incentivized correctly (e.g. sales comp plans aligned to new pricing), you’ll have a smoother rollout.
- Monitor performance and customer feedback: Once your pricing is live, set up ways to track how it’s doing. This could include metrics like conversion rate (of trial or demo to paid), average deal size/ARPU (average revenue per user), churn rate, and feature usage by tier. For instance, if you have a free trial, what percentage convert to paid? If it’s very low, perhaps the price is too high or the value not clear. If it’s very high, maybe you could even test a slightly higher price. Listen to what customers and prospects say: Are you hearing “it’s too expensive” frequently, or is price rarely the issue and they care more about missing features? Do customers in the low tier keep requesting a feature that’s only in the high tier (maybe indicating you split the packages sub-optimally)? All this information is gold for refining your pricing. Schedule regular check-ins on pricing - say, a quick review each month in the early days, moving to quarterly as things stabilize. This doesn’t mean you’ll change prices that often (you shouldn’t unless something’s clearly off), but you want to consciously evaluate if pricing is helping or hindering your growth.
- Iterate and refine deliberately (but not constantly): As you collect data, be open to adjusting your pricing. This could mean tweaking the price points, altering what features are in each package, introducing a new tier, or even changing your pricing metric if you discover a better approach. However, do this in a controlled way. Constant, erratic pricing changes can confuse customers and your team. It’s usually best to pilot changes or roll them out gradually. For example, you might test a higher price on new sign-ups for a month and see how conversion is affected, before officially raising it for everyone. Or if you decide to add a new middle tier between Basic and Pro, introduce it and perhaps let existing customers stay on their old plan if they want (you can move them over when you prove the new tier is beneficial). One smart strategy is to launch pricing changes with new customers first, while keeping existing customers on their current terms, then later migrating existing users with careful communication. This way you don’t disrupt anyone who has already signed on, and you can get feedback from new customers about the updated pricing. When you iterate, communicate clearly. If you are raising prices or changing how something is charged, let customers know why - ideally framing it in terms of added value (e.g. “We’ve added these major features over the last year, so we’re updating our pricing to continue investing in making the product better for you…”). Customers are more accepting when they aren’t caught off guard and when they understand the rationale.
Why this matters: The most brilliant pricing strategy means nothing if you can’t execute it. Operational considerations might sound boring compared to the strategy bits, but they truly can “make or break the pricing strategy”. Imagine advertising a usage-based plan and then botching the invoicing - you’d anger your early adopters and burn goodwill. Or consider if you intend to rely on upsells for revenue (expansion), but you didn’t set up a way to identify which customers are ready for an upsell - you’ll miss growth opportunities. By paying attention to operations, you ensure the tactical side of pricing supports the strategic side.
Moreover, early-stage SaaS companies that treat pricing as a one-time decision often fall behind. Your product will evolve, your market will shift, and you’ll learn more about willingness-to-pay over time. Pricing must keep up. The data point from OpenView’s study is telling: nearly half of SaaS companies haven’t done proper pricing research and only 8% have done in-depth research. Those that do invest in understanding and refining pricing have an edge. They find the sweet spot that balances value and growth, and they react to changes (like economic shifts or new competitors) proactively. As a founder or product leader, you have many plates spinning, but make pricing a recurring item on your agenda - even if just to say “all good, no changes needed this quarter.” Over time, this habit can unlock significant revenue gains without additional product development, simply by tweaking how you charge for the existing product.
Conclusion
Pricing an entry-level SaaS product is part art, part science. By aligning with your business goals, understanding your customer segments, packaging your offering smartly, choosing the right value metric, and setting a value-based price, you create a strong foundation. Then by operationalizing effectively and treating pricing as an ongoing process, you set yourself up to adapt and succeed as your startup grows.
Remember, the “best” pricing is one that balances what’s right for your customers and what’s right for your business. Finding that balance is an iterative journey - but with this framework, you’re equipped to navigate it with confidence.
And if you need a second set of eyes, our SaaS pricing experts offer a free pricing assessment to help you get started.
