How We Do Enterprise SaaS Pricing To Boost Profit Without Losing Users
Denis Shatalin
Founder of SaaS Camp
When I started selling my own products, I was terrified to ask for money.
I’d offer rock-bottom prices in an attempt to get users through the door, and slash them even further with lifetime discounts when that didn’t work. It was entirely based on gut feelings and a fear of asking for too much.
Over the years, I’ve learned the ins and outs of effective SaaS pricing, and I’ve seen what works for different types of businesses. In this guide, I’m going to share a bunch of the pricing insights and strategies that have worked for my SaaS Camp clients.
The goal here is to help you raise your prices without alienating existing (or potential) customers and losing them to competitors.
I’d offer rock-bottom prices in an attempt to get users through the door, and slash them even further with lifetime discounts when that didn’t work. It was entirely based on gut feelings and a fear of asking for too much.
Over the years, I’ve learned the ins and outs of effective SaaS pricing, and I’ve seen what works for different types of businesses. In this guide, I’m going to share a bunch of the pricing insights and strategies that have worked for my SaaS Camp clients.
The goal here is to help you raise your prices without alienating existing (or potential) customers and losing them to competitors.
The Basics of B2B SaaS Pricing
Pricing models and prices are very different things. Prices are the actual amounts you charge, pricing models are how you charge them. You need to choose a pricing model before you can set your prices because the model will determine how those prices are packaged.
There are four main pricing models for enterprise SaaS:
There are four main pricing models for enterprise SaaS:
1. Subscription-Based Pricing
A fixed rate charged regularly (monthly or annually) for access to a service over time.
You can either offer product tiers with limitations that let users self-select, or offer bespoke plans based on what a specific user needs. Both approaches work for enterprise SaaS, but a set-in-stone enterprise plan is only going to work for relatively simple tools.
Most enterprise customers will want to customize.
You can either offer product tiers with limitations that let users self-select, or offer bespoke plans based on what a specific user needs. Both approaches work for enterprise SaaS, but a set-in-stone enterprise plan is only going to work for relatively simple tools.
Most enterprise customers will want to customize.
2. Pay-As-You-Go or Usage-Based Pricing
A variable rate charged based on usage. If a customer’s usage increases, they pay more — if it decreases, they pay less.
This is less common with enterprise SaaS than subscription-based models. As a rule of thumb, you should only consider this option if the core value of your product is delivered every time a customer does something.
For example, if your tool generates summaries of financial reports, you could consider charging per summary generated.
This is less common with enterprise SaaS than subscription-based models. As a rule of thumb, you should only consider this option if the core value of your product is delivered every time a customer does something.
For example, if your tool generates summaries of financial reports, you could consider charging per summary generated.
3. Tier-Based Pricing
Tier-based pricing usually goes hand-in-hand with subscription-based pricing in the context of SaaS. It works by dividing product access into different “tiers,” each with a unique set of features and limitations at each price point.
This allows you to cater to the needs of larger enterprises and mid-market companies without having to offer them a bespoke solution. For example, if your product is an email marketing automation tool, you could have tiers based on the number of emails sent or subscribers managed.
This allows you to cater to the needs of larger enterprises and mid-market companies without having to offer them a bespoke solution. For example, if your product is an email marketing automation tool, you could have tiers based on the number of emails sent or subscribers managed.
4. Enterprise Agreement (EA)
For very large businesses, you may want to consider offering an enterprise agreement instead of traditional subscription-based pricing.
I don’t blame you if you’ve never heard of an EA. It’s a contract between two parties, usually in the form of a one-time payment, that locks in your prices and services for a predetermined period.
Because EAs involve long-term commitments, they can provide much greater certainty around revenue and cash flow. However, you need to be certain you have the resources to deliver on all the promises you make in the agreement.
I don’t blame you if you’ve never heard of an EA. It’s a contract between two parties, usually in the form of a one-time payment, that locks in your prices and services for a predetermined period.
Because EAs involve long-term commitments, they can provide much greater certainty around revenue and cash flow. However, you need to be certain you have the resources to deliver on all the promises you make in the agreement.
How to Set a Fair Price For Your SaaS
Setting a price should never involve guesswork. Trial and error is okay, but it needs to start with a hypothesis that’s based on real-world data.
To help you take a more scientific approach to pricing, here are some steps you can take:
Related:
To help you take a more scientific approach to pricing, here are some steps you can take:
Related:
1. Solve a Big, Costly Problem
Solving a big problem is an easy way to drive up your value. Big problems cost a lot of money to solve, and when you can solve them quickly, it's worth investing in.
Focus on solving a problem that needs to be solved—one with an urgent business impact. It could be increasing customer satisfaction, cutting costs, or improving the bottom line. When you have a solution for these problems, people will pay top dollar for your services.
In my experience, the best big problems to solve fall into on (or more) of these categories:
For example, lots of e-commerce businesses lose tens of thousands of dollars per month to chargebacks—a huge problem. When a problem’s literal or metaphorical price tag is that high, doing noting isn’t really an option.
This is called a high cost of inaction.
In our chargeback example, doing nothing means losing revenue due to chargebacks and potentially running into fees or blacklists with payment processors. Businesses that face this problem need a solution.
You can learn more about this idea in my YouTube guide to finding profitable SaaS ideas.
Focus on solving a problem that needs to be solved—one with an urgent business impact. It could be increasing customer satisfaction, cutting costs, or improving the bottom line. When you have a solution for these problems, people will pay top dollar for your services.
In my experience, the best big problems to solve fall into on (or more) of these categories:
- Revenue (not earning enough or losing too much)
- Time and Effort
- Risk
For example, lots of e-commerce businesses lose tens of thousands of dollars per month to chargebacks—a huge problem. When a problem’s literal or metaphorical price tag is that high, doing noting isn’t really an option.
This is called a high cost of inaction.
In our chargeback example, doing nothing means losing revenue due to chargebacks and potentially running into fees or blacklists with payment processors. Businesses that face this problem need a solution.
You can learn more about this idea in my YouTube guide to finding profitable SaaS ideas.
2. Solve That Problem for a Wealthy Audience
You have a problem that needs to be solved (or else the business will suffer). You now need to solve it for a market that can afford to pay a lot for a solution.
By targeting enterprise users, you’re already thinking along the right lines. But not all industries, or even all companies in a single industry, share the same willingness to pay.
This is where research comes into play.
Who are the biggest players that can afford high-end solutions? Who is currently suffering the biggest losses due to the problem? This is the audience you’ll want to focus on—they’re more likely to pull out their wallets and pay for your product.
This is often a matter of making slight adjustments to your messaging.
Once, I had a chat with my friend Farouk—he's fantastic at making SaaS videos. During our conversation, I realized he might not be targeting the most profitable audience. I shared some ideas about adjusting the problem he solves, the business model, and the way he talks about it.
Soon, he was making sales at much better margins. So remember—your ICP is someone who loves your product and is willing to pay you fairly for it.
Don’t settle!
By targeting enterprise users, you’re already thinking along the right lines. But not all industries, or even all companies in a single industry, share the same willingness to pay.
This is where research comes into play.
Who are the biggest players that can afford high-end solutions? Who is currently suffering the biggest losses due to the problem? This is the audience you’ll want to focus on—they’re more likely to pull out their wallets and pay for your product.
This is often a matter of making slight adjustments to your messaging.
Once, I had a chat with my friend Farouk—he's fantastic at making SaaS videos. During our conversation, I realized he might not be targeting the most profitable audience. I shared some ideas about adjusting the problem he solves, the business model, and the way he talks about it.
Soon, he was making sales at much better margins. So remember—your ICP is someone who loves your product and is willing to pay you fairly for it.
Don’t settle!
3. (Only) Talk to Your ICP
I’ve seen tons of founders get led astray by bad data. Usually, it looks something like this:
The only way to avoid this is by establishing a clear ICP and connecting with them before you start fine-tuning your pricing. That way, you don’t need to worry about whether you’re getting bad data from prospects outside your target market.
- The founder hops onto a call with a prospect who doesn’t fit their ICP.
- The prospect tells them that their price is way off—almost always too high.
- The founder reacts by slashing their prices.
The only way to avoid this is by establishing a clear ICP and connecting with them before you start fine-tuning your pricing. That way, you don’t need to worry about whether you’re getting bad data from prospects outside your target market.
4. Communicate Your Solution in Terms of Value
Features, UX, UI—all of these things can be nice. But at the end of the day, if your ICP had the choice, they would be perfectly happy to wish their dream outcome into existence and never interact with your product.
My point? Your product is a means to an end. Sure, it might be beautiful, but that’s not why enterprises are using it. They’re using it because they want to solve a problem.
So when you communicate your product, be sure to focus on the value it provides and frame it in terms of solving an ICP's real-world issue. Connecting with them emotionally is a great way to get started, but that doesn’t mean you should forget to showcase how your solution works.
This strategy helped Dividend Compass go from 5 to 150 signups during their time with SaaS Camp.
My point? Your product is a means to an end. Sure, it might be beautiful, but that’s not why enterprises are using it. They’re using it because they want to solve a problem.
So when you communicate your product, be sure to focus on the value it provides and frame it in terms of solving an ICP's real-world issue. Connecting with them emotionally is a great way to get started, but that doesn’t mean you should forget to showcase how your solution works.
This strategy helped Dividend Compass go from 5 to 150 signups during their time with SaaS Camp.
2 Pricing Strategies to Increase Profit Margins
1. Value-Based Pricing
Value-based pricing is my favorite approach to pricing. It’s intuitive, easy to pitch, and generally leads to the highest profit margins.
So, what is value-based pricing?
It involves charging users a percentage of what they’re spending to solve their problem without you. You do this by calculating (as exactly as possible) the cost of the problem —including things like:
Add all these together with any context dependent costs (fees, taxes, etc.). Then determine a percent of that cost you’d like to charge—I usually recommend 10% to 50% to start with. This is the price you offer your customer, fine-tuning as you get feedback from your ICP.
Example:
Allow me to share a story to help you understand the potential here.
I once worked with this startup in the UK that offered a software for biotech companies. They were charging over $100,000 for an annual license, but something didn't quite add up. These guys were helping pharmaceutical companies speed up the drug approval process, after all.
We began calculating the costs these pharma giants incurred without the startup's software. We considered everything—salaries of doctors and researchers, facility expenses, equipment costs, and more.
When we tallied it all up, we saw the bigger picture—if these companies switched to the startup's software, they could save a staggering $6 to $12 million per year. That's a lot more than what they were charging…
So, what is value-based pricing?
It involves charging users a percentage of what they’re spending to solve their problem without you. You do this by calculating (as exactly as possible) the cost of the problem —including things like:
- Labor
- Software
- Lost revenue
- Time spent on a task
Add all these together with any context dependent costs (fees, taxes, etc.). Then determine a percent of that cost you’d like to charge—I usually recommend 10% to 50% to start with. This is the price you offer your customer, fine-tuning as you get feedback from your ICP.
Example:
Allow me to share a story to help you understand the potential here.
I once worked with this startup in the UK that offered a software for biotech companies. They were charging over $100,000 for an annual license, but something didn't quite add up. These guys were helping pharmaceutical companies speed up the drug approval process, after all.
We began calculating the costs these pharma giants incurred without the startup's software. We considered everything—salaries of doctors and researchers, facility expenses, equipment costs, and more.
When we tallied it all up, we saw the bigger picture—if these companies switched to the startup's software, they could save a staggering $6 to $12 million per year. That's a lot more than what they were charging…
2. Competitive Pricing
Value-based pricing works best when you’re the only real solution to a problem. How do you become the only solution? Read my market positioning strategy guide for more info.
But what do you do if you have competition and can’t escape it? You can’t be an outlier in terms of price. You’ve got to be competitive—and this is where competitive pricing comes in.
Competitive pricing is a pretty complicated process that involves understanding where you fit into the competitive landscape. For that reason, it’s helpful to list your competitors and rank them in terms of relevant factors, like:
Then do the same for yourself and compare. Areas where your product is superior are a sign that your product should be priced higher than competitors and vice versa.
But what do you do if you have competition and can’t escape it? You can’t be an outlier in terms of price. You’ve got to be competitive—and this is where competitive pricing comes in.
Competitive pricing is a pretty complicated process that involves understanding where you fit into the competitive landscape. For that reason, it’s helpful to list your competitors and rank them in terms of relevant factors, like:
- Feature scope
- Overall quality
- User satisfaction
Then do the same for yourself and compare. Areas where your product is superior are a sign that your product should be priced higher than competitors and vice versa.
Pricing Psychology Techniques for Enterprise SaaS Pricing
1. Price Anchoring With Multiple Tiers
Price anchoring is a psychological technique you can use to make a certain price seem more attractive.
They way this works is pretty simple—when you have lower tiers that offer less value and higher tiers that offer high value, customers have clear reference points for “low” and “high” value in the context of your product. This gets them thinking less about the actual price tag, and more about what options fall between those two extremes.
In other words, this tactic pushes people towards the mid-level options, which you can price in a way that nets you a decent profit.
They way this works is pretty simple—when you have lower tiers that offer less value and higher tiers that offer high value, customers have clear reference points for “low” and “high” value in the context of your product. This gets them thinking less about the actual price tag, and more about what options fall between those two extremes.
In other words, this tactic pushes people towards the mid-level options, which you can price in a way that nets you a decent profit.
2. Paywall Key Features
When you get to know your ICP, you start to understand the features that have enough pull to win upgrades.
This is where you can leverage your anchoring technique—you want to make sure your upgrade options carry the most important features that would encourage people to pay. These are the “paywall” features, which should be placed in a higher tier and clearly outlined, so people understand what they get for their money.
It’s also important to maintain value across each of your tiers.
All of the lower-priced options should provide slightly less value than the one above it, while still offering enough to keep them engaged with your product or service. By doing this, customers have clear points of reference as they make their decision on what level of purchase makes sense for them.
This is where you can leverage your anchoring technique—you want to make sure your upgrade options carry the most important features that would encourage people to pay. These are the “paywall” features, which should be placed in a higher tier and clearly outlined, so people understand what they get for their money.
It’s also important to maintain value across each of your tiers.
All of the lower-priced options should provide slightly less value than the one above it, while still offering enough to keep them engaged with your product or service. By doing this, customers have clear points of reference as they make their decision on what level of purchase makes sense for them.
3. Use Psychology to Your Advantage
There are all kinds of psychological elements you can use when pricing your product.
One that comes up quite often when talking about SaaS is “decoy tiers”. These are tiers that exist only to make your anchor tiers look more appealing.
For example, say you have a “basic” plan that costs $100/month and a “business” plan that costs $200/month. You could make the pricing structure look even better by adding a third tier—something like “ultimate”—for $250/month.
You would deliberately make the ultimate plan overpriced for the value it offers, so that customers are more likely to go for the business plan than the basic one.
One that comes up quite often when talking about SaaS is “decoy tiers”. These are tiers that exist only to make your anchor tiers look more appealing.
For example, say you have a “basic” plan that costs $100/month and a “business” plan that costs $200/month. You could make the pricing structure look even better by adding a third tier—something like “ultimate”—for $250/month.
You would deliberately make the ultimate plan overpriced for the value it offers, so that customers are more likely to go for the business plan than the basic one.
How to Tailor Value for Every Customer to Boost Profitability
Choosing Pricing Tiers
I’ve talked about pricing tiers quite a bit so far, but I haven’t actually offered any advice on choosing those tiers. Basically, you want to create tiers that offer different levels of value for different types of customers.
You do this by creating segments.
Start by making a list of the features your product offers. Then, group those features into categories and determine which ones are essential for basic users, intermediate users, and so on. Based on that information, you can create pricing tiers that target each user segment.
For example, let’s say you target two groups of users—agencies with 100-200 employees and agencies with 500-1,000 employees. Figure out what limits each segment would need and create a pricing plan accordingly.
You do this by creating segments.
Start by making a list of the features your product offers. Then, group those features into categories and determine which ones are essential for basic users, intermediate users, and so on. Based on that information, you can create pricing tiers that target each user segment.
For example, let’s say you target two groups of users—agencies with 100-200 employees and agencies with 500-1,000 employees. Figure out what limits each segment would need and create a pricing plan accordingly.
Using Add-ons
Add-ons are a great way to let users self-select their level of service.
If a specific user wants to skip out on a non-essential feature, they can do that. On the other hand, if another user wants to pay extra for more features or services, they can opt in for those add-ons without having to pay a higher base price.
This is a way to offer a seemingly tailored pricing service without the work involved with bespoke pricing.
If a specific user wants to skip out on a non-essential feature, they can do that. On the other hand, if another user wants to pay extra for more features or services, they can opt in for those add-ons without having to pay a higher base price.
This is a way to offer a seemingly tailored pricing service without the work involved with bespoke pricing.
Bundling Features
Finally, you can also use feature bundling to offer tailored pricing plans. By creating bundles of features, users can choose the plan that’s closest to what they need and pay accordingly.
This is a great way to get users into your product quickly with competitive pricing while still offering those who want more something that fits their needs.
This is a great way to get users into your product quickly with competitive pricing while still offering those who want more something that fits their needs.
Ready to Increase Profit Without Losing Users?
Learning to price your product can be painful. And without the right guidance, it can lead to a lot of lost revenue and missed opportunities before you get it right. I’ve been there myself. Hopefully, this guide has given you something to think about when it comes to pricing your product. You probably won’t get it right the first time, but the closer your starting point, the easier it is to adjust.
Looking for more personalized pricing advice?
Through my performance-based accelerator SaaS Camp, I work with startups to find message-market fit, develop systems for lead generation, and nail down a price that works for their business.
Book a strategy call with me and let's see how I can help you maximize your profitability.
Looking for more personalized pricing advice?
Through my performance-based accelerator SaaS Camp, I work with startups to find message-market fit, develop systems for lead generation, and nail down a price that works for their business.
Book a strategy call with me and let's see how I can help you maximize your profitability.
+240K ARR Playbook
How you can add $240K ARR to your B2B SaaS in less than 6 months using a Hybrid Customer Acquisition System (without increasing your marketing budget)
*Currently still available for download; file access may be restricted at any time
