Pricing for enterprise SaaS products is complex. It’s not just about deciding on a price point; it’s about building a system that aligns with customer needs, addresses pain points, and evolves with the product lifecycle. For enterprise companies, pricing directly impacts customer acquisition, retention, and profitability.
A Mckinsey study found that Last year, 84% of publicly listed software companies saw their valuations fall, with over 25% dropping by more than half.
The market’s message is clear: growth at all costs is no longer enough. Investors now prioritize efficient growth—revenue and margin expansion must go hand in hand.
While 85% of software companies plan to adjust pricing to drive value in the next two years, most lack the infrastructure to make these changes stick. Many also lack the tools needed to build a strong foundation for sustainable pricing strategies.
That’s the reason why many companies don’t change their pricing models and stick with what they have even if it's not sustainable. In this blog we’ll dive into the challenges of enterprise SaaS pricing, and strategies for creating effective pricing models
Challenges in Enterprise SaaS Pricing
Enterprise SaaS pricing comes with unique challenges, especially when targeting large-scale organizations with diverse customer needs. Here’s a breakdown of common hurdles:
Adapting to Usage Trends
As SaaS companies adopt pay-as-you-go or usage-based pricing models, tracking metrics like active users or usage volume becomes crucial. Enterprise SaaS providers must have systems to ensure accurate billing.
Source: mckinsey.com
The Mckinsey study further delves into why seat based pricing isn’t suitable for enterprises.
Though seat-based pricing, used by around 40% of software companies, remains a popular choice due to its simplicity and ease of adoption, especially for startups aiming to accelerate sales. It’s not always auditable, such as in cases of shared licenses, and it may not align directly with the value delivered.
Recognizing these limitations, 97% of higher-growth software companies plan to evolve their pricing metrics. A growing trend is the shift toward usage-based pricing, fueled by the rise of product-led growth and its potential is ushering in a new era forcing companies to rethink their pricing.
2. Internal Resistance to Pricing Changes
Implementing pricing changes often requires alignment across multiple teams, including product, finance, and sales. Internal stakeholders may resist change due to concerns over customer churn, sales complexity, or operational disruptions.
3. Managing Customer Expectations
Enterprise customers are accustomed to consistent pricing structures. Introducing changes—such as new pricing tiers or usage-based billing—can lead to pushback from customers who may not immediately see the value in the new structure. Transparent communication and clear messaging are essential.
Strategies for Developing an Effective Enterprise SaaS Pricing Model
1. Market Research
Start by analyzing competitors' pricing strategies. Tools like Salesforce and Microsoft cater to customers with flexible plans, showing the importance of understanding customer expectations.
Conduct market research to identify competitors’ pricing structures, tiers, and target customer base. This helps position your product effectively while highlighting its unique value proposition.
2. Value-Based Pricing
Value-based pricing ties pricing directly to the perceived value of your SaaS product. It’s particularly effective for enterprise software where the value delivered varies across customer segments.
For example, if your software integrates workflows and reduces operational costs for enterprise clients, pricing should reflect this value.
3. Customer Segmentation
Segment your customer base into distinct groups. For example:
1. Small teams: May prefer flat-rate pricing or low-cost plans.
2. Large enterprises: Likely to need custom plans with usage-based billing or tiered pricing models.
By tailoring pricing options to different segments, you address diverse customer needs effectively.
4. Usage-Based Pricing
Usage-based pricing is gaining traction among SaaS businesses. By charging per user or per feature, businesses can align their pricing with the customer’s actual usage.
For instance, AWS charges based on metrics like compute usage or storage, ensuring enterprises pay only for what they use.
5. Tiered Pricing
A tiered pricing model offers multiple plans, each with a set of features designed for specific customer needs. For instance:
1. Basic Plan: For startups or small businesses with limited functionality.
2. Enterprise Plan: Includes advanced features like custom integrations and detailed analytics.
Carefully designing pricing tiers allows SaaS companies to target a wide range of customers while maximizing upsell opportunities.
6. Lifetime Value and Customer Success
Enterprise SaaS pricing should focus on maximizing lifetime value (LTV). This involves retaining customers through ongoing value delivery and aligning pricing plans with long-term success metrics.
Best Practices for Enterprise SaaS Pricing
Use Clear Messaging
Your pricing page should clearly communicate the value each pricing plan delivers. Avoid vague descriptions and focus on outcomes your product provides. In one of our blogs we see how Clay, a smaller company has communicated its pricing. Maybe you can take a leaf out of their book?
Offer Free Plans or Trials
Free plans or trials lower the barrier to entry for potential customers. Many SaaS companies, like HubSpot, use freemium pricing models to attract startups and small teams while upselling advanced plans later.
Best example would be Canva and Figma. They work on the Freemium Business model analogy where they provide an array of features at no cost and some available only after an upgrade. This ensures that once someone starts using the tool, they would need more to complete their work thereby upgrading to a higher plan.
Monitor Metrics and Iterate
Track key metrics like churn, customer acquisition cost (CAC), and active users. Regularly refine your pricing structure based on these insights to ensure alignment with customer behavior and market trends.
Align Pricing with Product Value
Introduce pricing changes alongside new features or functionality to justify price increases. This approach ensures customers see the added value in your product.
Provide Flexible Add-Ons
Offer add-ons for additional features or usage beyond standard tiers. This ensures customers can scale their plans without switching to entirely new pricing tiers.
For instance Notion though hasn’t increased their pricing, but added a small tweak to their page. They kept a toggle option for Notion AI.
Source: notion.com
If you enable the Toggle you can see the pricing increase , making their AI features an add-on.
To make all these billing changes you need a flexible billing tool that will integrate seamlessly with your product allowing you to make iterations.
Scale Your Enterprise Pricing with Togai
1. Advanced Pricing Configurations: Togai supports over 107+ pricing models including tiered, volume-based, and usage-based billing, for businesses scaling with complex requirements.
2. Real-Time Metering and Tracking: Togai’s advanced metering engine captures real-time usage data down to the last unit, enabling accurate billing without manual intervention or developer dependency.
3. Flexible Subscription Management: Manage subscription plans, entitlements, and feature gating. Togai supports dynamic plan upgrades, downgrades, and custom rules to ensure a seamless billing experience.
4. Reduced Churn and Improved Insights: Togai helps businesses optimize their pricing strategies, reduce churn, and improve customer retention with real-time analytics and actionable insights.
5. Seamless Integrations: Togai offers robust API support, enabling integration with CRMs, payment platforms, and other tools to streamline operations.
6. Native Wallets: Issue credits, refunds, and balance management without relying on third-party tools.
Your billing tool should never hinder your growth—it should be a driver of it. Billing is a critical growth enabler, ensuring that whatever direction your product evolves in, your billing system can keep up. Whether it’s monetizing new features, rolling out updated pricing plans, tracking usage, or integrating multiple pricing models to create hybrid plans, your billing tool should adapt to support your business needs seamlessly.
Togai provides everything you need to simplify billing, optimize revenue, and scale effortlessly.
Contact Sales today to see how Togai can support your business growth.
