Want to differentiate your brand and increase your enterprise’s appeal? If so, there is no faster way than by disrupting the status-quo enterprise pricing models of your industry. Before diving in, let’s look at pricing strategies versus pricing models. While these terms may be used interchangeably and are invaluable for the profitability of your software-as-a-service (SaaS) enterprise, there are distinct differences.
Pricing Models vs. Monetization Models
When SaaS executives talk about pricing, terms like “pricing strategy,” “pricing model,” and “monetization model” are often blurred. Yet separating them is essential for clarity and long-term success. Misunderstanding these concepts can leave even promising businesses with muddled offerings, misaligned customer expectations, and stalled growth.
A pricing strategy is the methodology behind how prices are determined. It provides the rationale for why a SaaS company charges what it does. Some of the most common strategies include value-based pricing, competitor benchmarking, cost-plus formulas, dynamic adjustments, and penetration approaches.
For example, value-based strategies align price with perceived benefits, while penetration strategies deliberately set a lower price to gain quick market share. Strategy is the “why” behind the number – it’s about positioning in the market and appealing to customer needs.
Monetization Model
A monetization model is the overarching structure that defines how a company captures revenue. This represents the big-picture revenue engine: subscription fees, one-time licenses, freemium model offerings, or pay-per-use setups. A monetization model answers the question of “how do we structure revenue collection as a whole?”
For instance, a SaaS platform targeting small businesses might adopt subscriptions for predictability as part of their SaaS monetization strategy, while a data-heavy analytics firm could prefer pay-per-use billing tied directly to consumption.
Pricing Model
A pricing model operates at the tactical level. It takes the monetization structure and decides how to package, bill, and scale it. Pricing models can include per-user charges, feature-based tiers, or frameworks like consumption-based pricing. While monetization is the playbook, pricing models are the plays that bring the structure to life.
An example of this is a freemium monetization model that relies on a tiered pricing framework to drive upgrades, while a pay-per-use model applies pricing thresholds to balance flexibility with profitability.
Why is this distinction important? Because failing to separate these layers often leads to misalignment. A service pricing model that doesn’t reflect the broader monetization structure can alienate prospects or limit revenue growth. Likewise, a strategy without a clear model underneath may look good on paper but prove impossible to operationalize.
By treating strategy as the “why,” monetization as the “structure,” and different pricing models as the “how,” organizations create alignment across departments and markets.
The danger of ignoring these distinctions is clear in research: SaaS businesses spend an average of just six total hours defining, testing, and optimizing their pricing models. For something that touches adoption, retention, and profitability, six hours is shockingly little.
Competitive pricing is not simply a box to check – it is a dynamic process that underpins long-term success. Companies that invest time here gain a competitive edge, while those that don’t are often left to wonder why their offerings fail to resonate with enterprise customers.
Enterprise Pricing Models
There are certainly plenty of enterprise pricing models to choose from, each with its own advantages and disadvantages. Let’s look at some SaaS pricing models, their descriptions, advantages and disadvantages.
Flat-rate pricing model
The least complicated of all enterprise pricing models, it provides for a single product and a predetermined set of features offered at a set price.
Advantages:
- Its simplicity makes it easy to explain and for customers to understand.
- By clearly defining the product, features, and price it easy to market and sell.
- Provides for easier and more accurate revenue forecasting.
Disadvantages:
- Without an upgrade path, you forfeit upsell/cross-sell opportunities.
- Since the charge is the same regardless of whether the customer is a small business or large enterprise, you lose the ability to extract additional revenue from heavy software users.
- This pricing model eliminates your ability to sell to customers that require custom packages and pricing.
Usage-based pricing model
Provides the flexibility to bill and rate on a variety of aspects such as clicks, API calls, downloads, transactions, seats, text messages, minutes, bandwidth – virtually anything you can think of. The usage-based pricing model consists of numerous variations, including:
1) Pay-as-you-go pricing model: Charges are based on exact usage of your products and services.
- Advantages:
- Pricing scales alongside usage, providing customers with more transparency.
- Has wide customer appeal because they can control their spend.
- This pricing model is easily adaptable to fluctuating usage.
- Disadvantages:
- Pricing may not accurately convey the true value of your products and services.
- Revenue prediction is more problematic since you can’t be sure of future usage.
2) Tiered pricing model: Provides for pricing packages that contain different combinations of features, usage parameters, number of users, number of active users, etc. Customers pay a set amount based on the tier purchased.
- Advantages:
- Provides for upsell opportunities to the next tier.
- Has wide customer appeal as you are able to tailor packages to meet a variety of buyer personas.
- Empowers customers to select the tier that best meets their needs.
- Disadvantages:
- Since this pricing model can quickly become difficult to explain and understand, it is recommended that no more than five tiers are created.
- Revenue prediction can be more complex since it’s hard to predict tier upgrades and downgrades.
3) Volume pricing model: Customers are provided pricing discounts based on quantities purchased, and pricing is based on the highest tier the customer reaches during the billing cycle.
- Advantages:
- Incentivizes customers to purchase more.
- Pricing strategy is easy to explain and for customers to understand.
- Volume discounts can be used to attract new customers.
- Disadvantages:
- Lower prices for volume sales reduces the profitability of a single product.
- Has the potential to decrease brand value.
4) Per-user-based pricing model: A fixed monthly or annual amount is charged for each person using the product or service.
- Advantages:
- This pricing model is easy for customers to understand.
- Promotes product adoption across the buyer’s organization.
- Future revenue is easy to predicts
- Disadvantages:
- Multiple individuals can use a single login, resulting in decreased profitability.
- The customer can limit the number of users.
- Pricing may not accurately convey the true value of your products and services.
Freemium pricing model
This enterprise pricing model provides access to a specific set of functionality for free, and access to additional features and functionality incurs a cost.
Advantages:
- Opens the door to a larger prospect pool by allowing them to try the product or service for free.
- Drives faster product adoption and is more cost-effective than other pricing models.
- Can be used to test the acceptance of new products and services.
Disadvantages:
- High operational costs are a possibility if freemium users place a disproportionate burden on your resources.
- Can result in low conversion rates which will affect profitability.
- Has the potential to decrease brand value.
Although these are some of the most common SaaS enterprise pricing models, there are others such as per-active user, per-feature, per-asset, etc.,
How to Know Which Pricing Model is Right for Your Enterprise
Did you know that even small variations in pricing can increase or decrease your revenue by as much as 50%? Despite this sizeable variation, fewer than 5% of enterprises have an internal team dedicated to enterprise pricing models, and most organizations treat pricing models as an event rather than a process.
Knowing which enterprise pricing models are right for you takes consideration and research. Here are a few pointers to help you get started.
- Conduct a competitive analysis to determine what comparable enterprises are charging for their products and services. Gain an understanding of your competitor’s strengths and weaknesses and benchmark your offerings against the competition.
- Have a clear understanding of the costs of your products and services, including product development, manufacturing, supply, service delivery, etc.
- Understand your customers, their needs, and willingness/ability to pay.
- Know your customer lifetime value and customer acquisition cost (LTV:CAC).
- Involve other departments such as product development, marketing, sales, product management, etc. for insights into buyer personas, target markets, positioning, and packaging.
- Test the agreed-upon enterprise pricing models and adjust until you reach your predetermined goals.
It’s important to remember that this isn’t a one-and-done activity but rather an ongoing process that requires continual analysis of your product and services usability and profitability.
When It’s Time to Rethink Your Pricing Model
Selecting the right pricing model is one challenge. Knowing when to replace or evolve it is another. Pricing success is never permanent – markets shift, products expand, and customer expectations evolve.
There are several common warning signs that your framework is no longer working. High churn within a particular segment is a red flag, suggesting that customers don’t see value relative to price. Declining upsells are another signal – if users aren’t upgrading, your tiers or add-ons may not reflect true demand. New product launches often create friction too, especially if they don’t fit into existing models. Consider a company using per-user charges – it may struggle to monetize an API-heavy tool, making a transition to hybrid or usage-based pricing necessary.
External changes matter as well. Competitors may introduce more agile frameworks, pushing you to reassess your position. New buyer personas can emerge – some prioritizing simplicity, others demanding flexibility. Direct customer feedback often highlights frustrations with a rigid pricing structure, and ignoring these signals risks alienating audiences and weakening retention.
For growth-stage companies, change is not only normal but necessary. Businesses often start with basic enterprise SaaS pricing models for simplicity, then evolve as offerings expand. A startup may rely on flat-rate billing to gain traction, only to outgrow it as usage diversifies. Rather than seeing change as a failure, treat it as part of maturity. Pricing should evolve alongside the business – it’s a living system, not a one-time decision.
Ultimately, regularly reevaluating your framework is one of the most reliable ways to support revenue growth and keep up with shifting buyer behavior. Organizations that embrace this mindset are better equipped to thrive in competitive SaaS markets.
Key Questions to Guide Your Pricing Model Choice
Deciding on a new model – or refining the current one – requires structured reflection. Here are key diagnostic questions every team should ask:
- Are your customers primarily cost-sensitive, or do they respond better to models rooted in perceived value?
A segment that prioritizes low cost may lean toward simple bundles, while those who value premium features may align better with enterprise software pricing models based on outcomes. - How variable is usage across your base?
If consumption spikes, flexible frameworks may be needed. In contrast, consistent use patterns often make subscriptions more effective. - Do your operations support complexity?
Sophisticated approaches like hybrid billing only work if systems can deliver them accurately. A model that can’t be billed correctly risks undermining trust. - What business outcome are you prioritizing – adoption, retention, or expansion?
Each goal points toward different approaches. For instance, expansion-driven growth may benefit from premium bundles supported by enterprise software pricing examples.
Cross-functional collaboration is essential. Finance teams validate profitability, product managers map features to price points, sales provides frontline input, and marketing aligns messaging with market positioning. Asking “what is enterprise pricing in our industry?” clarifies benchmarks, while reviewing how to price enterprise software in practice helps ground decisions.
These questions provide clarity when navigating the complex balance between internal costs, external expectations, and scalability. Without them, companies risk guessing – a dangerous move in a competitive market.
Common Pitfalls in Enterprise Pricing (And How to Avoid Them)
Even with preparation, organizations fall into predictable traps. A frequent misstep is creating too many tiers. While variety feels like flexibility, it often overwhelms prospects. Another mistake is pricing based on internal costs rather than customer value, which dilutes competitiveness.
Delayed updates are equally harmful. Companies that fail to revisit their models risk falling behind market trends. A pricing approach that worked three years ago may now seem outdated. A lack of ownership compounds the problem: without a clear leader or council responsible for adjustments, initiatives stall and teams may default to outdated methods.
Avoiding these pitfalls requires discipline. Limit tiers to a manageable number. Anchor decisions in value perception, not just expenses. Treat pricing as a continuous process rather than an event. Assign ownership to a pricing leader or a cross-functional group tasked with quarterly reviews.
Adopting this mindset allows organizations to follow SaaS pricing best practices consistently. It also creates frameworks that resonate more deeply with customer needs, strengthen brand perception, and scale more effectively across diverse markets.
Why You Should Continuously Test Your Pricing Model
Pricing is not static – it’s dynamic by nature. Even a well-designed framework eventually loses alignment with customer expectations and competitive conditions. Continuous testing is the key to staying ahead.
Fortunately, testing doesn’t require risking core revenue. Companies can experiment through A/B testing with subsets of customers, “shadow pricing” to simulate outcomes under alternative structures, or pilot programs limited to specific cohorts. These approaches provide insight without widespread disruption.
Metrics provide the backbone for evaluation. Churn rate by tier, upgrade frequency, CAC, and LTV are essential for determining whether models are working. Tracking these KPIs allows organizations to run structured experiments that tie directly to outcomes.
The benefit is agility. Continuous testing empowers leaders to conduct ongoing pricing model comparison, adjust based on evidence, and refine alignment with market realities. Leveraging structured SaaS price testing strategies gives organizations the tools to experiment responsibly and iterate quickly.
The broader takeaway is cultural. Companies that view pricing as a living discipline – not a one-time setup – create space for adaptability. They refine models with evidence rather than guesswork, supporting adoption, retention, and expansion simultaneously. In crowded markets, this discipline often separates firms that plateau from those that grow.
Is Your Pricing Model Leaving Money on the Table?
Since the right enterprise pricing models depended on your industry, demand for your product and services, competitive positioning, and strategy; you may find that none of the conventional SaaS pricing models are providing the revenue needed to meet your profitability goals. This is where BillingPlatform can help!
BillingPlatform gives you the ability to develop pricing models that meet your specific needs and your customers’ requirements. Let’s look at a couple of pricing models that are beginning to gain traction.
Dynamic pricing model: Enables you to develop innovative pricing models such as formula-based, time-based, demand-based, and event-based. With a dynamic pricing model, you can create pricing based on a combination of factors or by using formulas, enabling you to appeal to a wider target market and improve profitability.
Hybrid pricing model: Allows you to charge for any combination of one-time charges, recurring, subscription, usage, formula, overages, etc. to create the pricing model that best fits your enterprise’s needs. Some hybrid pricing model schemes include subscription + one-time fees, subscription + pay-as-you-go, subscription + overage, and multi-part pricing.
Are you ready to become an industry trailblazer and set yourself apart from the competition? Let BillingPlatform help you along the way.
