paulund/saas-pricing-strategy

Core Workflow

1. Gather context — ask about the product, target market, go-to-market motion (self-serve vs sales-led), current pricing (if any), conversion rate, churn rate, ARPU, and goals.
2. Choose a value metric — identify what unit to charge for. This is the most important pricing decision.
3. Design tier structure — apply the Good-Better-Best framework to define entry, recommended, and premium tiers.
4. Recommend pricing psychology — anchoring, decoy, and charm pricing where appropriate.
5. Address the pricing page — layout, CTA placement, FAQ, annual discount.
6. Load the pricing guide — read references/pricing-guide.md for frameworks and templates.
7. Output the pricing plan — tier structure with feature gating, pricing rationale, and pricing page recommendations.

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The Value Metric Decision

The value metric is what you charge for — the unit that scales with the value the customer receives. Choosing the wrong metric is the most common SaaS pricing mistake.

| Metric | Works well when | Examples | | --- | --- | --- | | Per seat / per user | Value scales with number of people using it | Slack, Figma, Notion | | Per usage | Value comes from consumption | Twilio (per message), AWS (per compute) | | Per contact / record | Value scales with the customer's audience size | Mailchimp (per subscriber), HubSpot (per contact) | | Per feature | Different tiers unlock qualitatively different functionality | Intercom, Canva | | Flat rate | Simple, but does not capture value from power users | Basecamp | | Per transaction | Value tied to customer revenue | Stripe (per transaction), Shopify (per sale) |

The test: As the customer gets more value from your product, does the metric you charge for increase proportionally? If yes, it is a good value metric.

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Good-Better-Best Tier Structure

Most SaaS products should have 3 tiers. More than 4 creates decision paralysis.

| Tier | Goal | Pricing psychology | | --- | --- | --- | | Entry / Free / Starter | Reduce barrier to entry, drive adoption | Lowest friction possible | | Recommended (highlight this) | Where most customers should land | Best value, most features | | Premium / Pro / Business | Capture high-value customers | Higher limits, advanced features, more support |

Differentiators between tiers:

• Feature gating (advanced features in higher tiers)
• Usage limits (storage, seats, API calls)
• Support level (email vs priority vs dedicated)
• Integrations (more available at higher tiers)
• Data retention or history

The recommended tier: Make one tier visually distinct as "most popular" or "best value." Most customers will choose it. Price the entry tier low enough to be accessible, the recommended tier at 3-5x the entry, and the premium tier at 2-3x the recommended.

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Free Tier vs Free Trial

These are different strategies with different outcomes:

| Approach | When to use | Risk | | --- | --- | --- | | Free forever tier | When there is a large enough user base to convert, and free users create value (network effects, referrals, SEO) | Free users never convert | | Time-limited trial | When the product delivers clear value quickly and users need to see it | Trial ends before value is demonstrated | | Feature-limited free | When some features have viral/sharing properties | Free tier cannibalises paid | | No free tier | B2B with a sales motion, or when free users have meaningful infrastructure cost | Higher acquisition friction |

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When to Raise Prices

Market signals suggesting prices are too low:

• No pushback or negotiation from buyers
• Competitors charge significantly more for similar value
• Sales cycle is very short (< 1 week for a significant commitment)

Business signals suggesting prices are too low:

• Conversion rate > 40% (suggests price is not a meaningful filter)
• Churn < 3% (customers are clearly getting value)
• Revenue growth is not matching usage growth

How to raise prices:

1. Grandfather existing customers at the old price for 12 months
2. Announce the increase before it takes effect (30 days minimum)
3. Tie the increase to a new value addition where possible
4. Do not apologise — explain the reason clearly and move on

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Pricing Psychology

Anchoring

Put the most expensive tier first (left to right on a pricing page). This makes the middle tier feel reasonable by comparison.

Decoy pricing

A third tier that makes one of the others look like better value. The professional tier at $49/month looks good when the enterprise tier is $199/month.

Charm pricing vs round pricing

• Charm pricing ($49, $99, $199) — reduces perceived price. Works for consumer products and self-serve SaaS.
• Round pricing ($50, $100, $200) — signals premium and simplicity. Works for enterprise and high-touch sales.

Annual discount

17-20% annual discount is standard. "2 months free" framing performs better than "17% off" even though they are the same number.

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Reference Guide

| Topic | Reference | Load When | | ----- | --------- | --------- | | Pricing Frameworks | references/pricing-guide.md | Always |

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Constraints

MUST DO

• Ask about the product, market, and go-to-market motion before making recommendations
• Recommend a specific value metric with rationale
• Apply the Good-Better-Best framework to tier design
• Present trade-offs for each major decision — there is no universally correct answer
• Tie every pricing recommendation to the value delivered, not to cost of production

MUST NOT DO

• Recommend specific dollar amounts without research or market context
• Design more than 4 pricing tiers
• Recommend a free tier for every product — it is a strategic choice, not a default
• Ignore the go-to-market motion — self-serve pricing is very different from sales-led pricing
• Present pricing as fixed — it should be revisited every 6-12 months as the product and market evolve