7 SaaS Price Scaling Models to Bring Value-Based Price Metrics to Life

Tech leaders, are you ready to elevate your SaaS pricing strategy? You've done the hard work of selecting a price metric that aligns with customer value, but now comes the crucial next step: determining how your prices should scale. Your choice here can make or break your revenue model, impact customer satisfaction, and drive your Net Revenue Retention (NRR) through the roof – or into the ground.

Before we dive in, let's quickly define what we mean by a price metric. In SaaS, a price metric is the unit of value upon which you base your pricing. It's the "per user," "per transaction," or "per gigabyte" in your pricing model. Choosing the right price metric is crucial, but equally important is how you scale your pricing based on that metric.

In this article, we'll explore 7 of the most effective price scaling models in SaaS and when to deploy each one.

While this list covers a wide range of strategies, remember that these models can be customized to suit your unique business needs and customer expectations.

7 Price Scaling Models:

Linear

What is it:

A customer’s price is directly proportional to the price metric (e.g., $10/user for all users)

When would you use it:  

• The value of each unit doesn’t change based on the number of units purchased
• Customers and sales teams highly value simplicity
• Price metric changes are predictable for the customer
• Costs also scale linearly as the metric volume increases

Sliding Scale

What is it:

The price per unit of incremental units of the metric decreases as the customer crosses certain thresholds.

When would you use it:  

• The SaaS company prioritizes a logical progression of price levels over the ease of calculating the total price for a specific metric volume
• The value of additional units of the price metric decreases with higher volume
• Volume discounts incentivize metric growth for customers  
• Larger customers with high metric volumes expect discounts to purchase the product
• Costs to serve per metric unit decrease with higher volume

Sawtooth

What is it:

The total price of all units of a metric decrease at certain metric volume thresholds

When would you use it:  

• You prioritize simple, transparent pricing communication over preventing all downsell scenarios
• You want to create clear incentives for customers to upgrade to higher usage tiers
• Your sales team can leverage price drops at thresholds as upsell opportunities
• Your product has distinct value tiers that align with the pricing "teeth"

2-part Tariff

What is it:

Customers pay a fixed recurring payment with a transactional payment on top. Making a higher commitment for the fixed fee upfront reduces the per unit price of the transactional payment.

When would you use it:  

• Customers have varying tolerances for variable costs, potentially due to selling across multiple industries
• Predictability of the metric can vary significantly for customers
• The SaaS company values predictable revenue streams
• SaaS product has a high upfront cost of provisioning for the customer

Overages

What is it:

The price does not change with Metric until a capacity “limit” is reached, at which point you pay per unit.

When would you use it:  

• Metric is usage-based
• Customers have metric volumes under the capacity “limit”
• Product dependencies exist where using a higher volume than the capacity “limit” will result in poor experience for customers
• The value and willingness to pay of customers increases with higher volume of the metric than the capacity “limit”
• Costs continue to increase with the usage metric above the capacity limit

Capped

What is it:

The price does not change with Metric until a capacity “limit” is reached, at which point you pay per unit.

When would you use it:  

• Metric is usage-based
• Customers have metric volumes under the capacity “limit”
• Product dependencies exist where using a higher volume than the capacity “limit” will result in poor experience for customers
• The value and willingness to pay of customers increases with higher volume of the metric than the capacity “limit”
• Costs continue to increase with the usage metric above the capacity limit

Banded

What is it:

A customer’s price is fixed within a specified volume “band” of the metric

When would you use it:  

• Some predictability on pricing is desired by customers
• The exact metric volume is hard to predict
• Small oscillations in unit volumes do not adjust the value received, but larger “step-size” changes do
• The value of incremental units of the metric decreases as metric volumes increase

Choosing the right pricing scaling model is crucial for SaaS success. It requires balancing your product's value, customer needs, and business objectives. The ideal model aligns pricing with value, satisfies customers, and drives profitability.

Remember, pricing strategy isn't set-and-forget. Regular review and adjustment based on market feedback and performance is essential to stay competitive.

Want to master SaaS pricing architecture?

Join our masterclass, ‘Crafting Scalable Price Architectures Aligned with Value’ for in-depth insights, case studies, and personalized guidance. RSVP at monevate.com/the-cube-rsvp to transform your pricing strategy and boost your bottom line!

‍