Reference

B2B SaaS Pricing Glossary

Clear definitions of the pricing terms, models, and strategies that matter for B2B SaaS. Built from working with 400+ SaaS companies.

Pricing Models

Value-Based Pricing

Value-based pricing is a strategy where prices are set based on how much value customers perceive they receive, rather than on cost to deliver or competitor pricing.

Usage-Based Pricing

Usage-based pricing charges customers based on how much they consume or use a product, rather than a fixed subscription fee. Common metrics include API calls, data processed, messages sent, or storage used.

Tiered Pricing

Tiered pricing offers multiple plan levels (typically 3-4) at different price points, with each tier including progressively more features, capacity, or support.

Seat-Based Pricing

Seat-based pricing charges a per-user fee for each person who accesses the product. It's one of the most common B2B SaaS pricing models, offering simplicity and predictability for both vendor and buyer.

Freemium

Freemium is a pricing strategy where a basic version of a product is offered for free, with premium features, higher limits, or better support available in paid tiers.

Consumption-Based Pricing

Consumption-based pricing charges customers based on the actual resources, capacity, or transactions they consume. It's closely related to usage-based pricing but emphasizes infrastructure-level metering.

Hybrid Pricing

Hybrid pricing combines two or more pricing models — typically a base subscription fee plus usage-based or seat-based components — to balance revenue predictability with value alignment.

Pricing Strategy

Value Metric

A value metric is the unit of measurement that determines how a customer is charged. It's the axis along which price scales — such as users, contacts, API calls, revenue managed, or storage.

Pricing Power

Pricing power is a company's ability to raise prices without significantly losing customers. It reflects how deeply customers value the product relative to alternatives.

Price Increase Strategy

A price increase strategy is a planned approach to raising prices for existing customers, including the timing, magnitude, communication, and migration path.

Penetration Pricing

Penetration pricing is a strategy of setting an initially low price to quickly gain market share, with the intention of raising prices once a customer base is established.

Competitive Pricing

Competitive pricing sets prices relative to competitors — matching, undercutting, or positioning at a premium based on how your product compares to alternatives in the market.

Monetization Strategy

A monetization strategy is the overall plan for how a company generates revenue from its product — encompassing pricing model, packaging, value metrics, expansion mechanisms, and go-to-market approach.

Packaging

Good-Better-Best Packaging

Good-better-best (GBB) is a packaging framework that offers three tiers at ascending price points, each designed for a distinct customer segment with different needs and budgets.

Feature Gating

Feature gating is the practice of restricting access to specific product features based on a customer's pricing tier or plan level.

Go-to-Market

Pricing Page

A pricing page is the web page where a SaaS company presents its plans, prices, and packaging to prospective buyers. It's typically one of the highest-traffic and highest-conversion-impact pages on a SaaS website.

Pricing Migration Strategy

A pricing migration strategy is the plan for transitioning existing customers from old pricing to new pricing — including timing, communication, grandfathering policies, and customer segmentation.

Price Anchoring

Price anchoring is a psychological pricing technique where a higher reference price is presented first to make subsequent prices feel more reasonable by comparison.

Customer Research

Willingness-to-Pay

Willingness-to-pay (WTP) is the maximum amount a customer would pay for a product or feature. In B2B SaaS, WTP research helps set price points that capture value without exceeding what customers find acceptable.

Van Westendorp Price Sensitivity Analysis

Van Westendorp is a survey-based research technique that identifies the acceptable price range for a product by asking four questions about pricing thresholds: too cheap, a bargain, getting expensive, and too expensive.

Purchase Simulation

A purchase simulation is a research method where potential buyers walk through a realistic buying scenario with proposed pricing, tiers, and packaging — allowing you to observe their decision-making process and validate your pricing before launch.

Metrics

Net Revenue Retention

Net revenue retention (NRR) measures the percentage of recurring revenue retained from existing customers over a period, including expansion, contraction, and churn. An NRR above 100% means existing customers are spending more over time.

Expansion Revenue

Expansion revenue is additional recurring revenue generated from existing customers through upsells, cross-sells, seat additions, increased usage, or tier upgrades.

Churn Rate

Churn rate measures the percentage of customers or revenue lost over a given period. Customer churn counts lost accounts; revenue churn measures lost recurring revenue.

Annual Contract Value

Annual contract value (ACV) is the average annualized revenue per customer contract. It's calculated by dividing total contract value by the contract term in years, or by taking the average annual spend across all customers.

ARPU

Average revenue per user (ARPU) measures the average monthly or annual revenue generated per user or account. In B2B SaaS, it's typically calculated as total recurring revenue divided by total number of customers.

Frequently Asked Questions

What is B2B SaaS pricing strategy?

B2B SaaS pricing strategy is the plan for how a software-as-a-service company sets prices, designs packaging, and captures value from business customers. It encompasses pricing model selection (subscription, usage-based, hybrid), packaging and tier design, value metric identification, and go-to-market pricing decisions.

What are the most common SaaS pricing models?

The most common SaaS pricing models are tiered subscription pricing (good-better-best), seat-based pricing (per-user fees), usage-based pricing (pay for what you consume), and hybrid models that combine subscription with usage-based components. Most B2B SaaS companies use some form of tiered pricing with additional scaling mechanisms.

How do you choose the right pricing model for a SaaS product?

Start with customer research to understand how different segments derive value from your product. Choose a pricing model whose value metric scales with the value customers receive. Test candidates against three criteria: is it easy for customers to understand, can they predict their costs, and does it grow as they succeed with your product?