Master SaaS Pricing Strategy
Learn how to develop pricing strategies that balance customer affordability with the ROI your product delivers, ensuring sustainable growth and profitability.
Key Pricing Metrics for SaaS
Understanding these fundamental metrics is essential for building a sustainable pricing strategy.
Essential Metrics
LTV (Lifetime Value)
The total revenue a customer is expected to generate over their entire relationship with your business.
CAC (Customer Acquisition Cost)
The average cost to acquire a new customer, calculated across various channels.
MRR/ARR
Monthly/Annual Recurring Revenue - the predictable revenue generated from subscriptions.
COGS (Cost of Goods Sold)
Variable costs associated with delivering your service, including server costs and support.
Industry Benchmarks
LTV/CAC Ratio
Industry Standard: A healthy SaaS business should aim for an LTV/CAC ratio of at least 3:1.
CAC Payback Period
Industry Standard: Aim to recover your CAC within 12 months, with high-growth companies targeting around 6 months.
Popular SaaS Pricing Models
Choose the right pricing model that aligns with your product value and customer preferences.
User-Based Pricing
Pricing varies based on the number of users or seats.
Best for: Products where each user adds direct value
Usage-Based Pricing
Pricing based on consumption (e.g., per gigabyte, per transaction).
Best for: Products where usage drives value
Tiered Pricing
Multiple packages with varying features and price points.
Best for: Capturing different market segments
Freemium
Basic version free with premium features for a fee.
Best for: Driving adoption and viral growth
Value-Based Pricing
Pricing aligned with perceived value and ROI delivered.
Best for: High-value, differentiated products
Flat Rate Pricing
Single price for all features, providing simplicity.
Best for: Simple products with clear value
Unit Economics Example
Monthly Cost Per Customer
Pricing Strategy Considerations
- Cost-plus pricing as baseline
- Value-based pricing for optimization
- Consider future CAC reduction
- Factor in operational efficiency gains
Related GTM Topics
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