10 SaaS revenue models and strategies with examples

Curious about which SaaS revenue models would best fit your business? In this primer, we’ll explore ten SaaS revenue models for businesses, why they are useful, and their key benefits.

First, we’ll kick things off by explaining what SaaS revenue models are and why they’re so important.

What is a SaaS revenue model?

In the business of SaaS, it's not just about building a great product. You want to make sure you’re monetizing effectively, as well That's where a knowledge of the various SaaS revenue modelscomes in. It's your revenue engine blueprint.

Think of it like this: It determines how you'll price your product, who you'll target, and how you'll approach the market. Choosing the right model is critical for your company's growth and long-term success.

Why does it matter so much?

A well-designed revenue model does a few key things:

• Creates predictable revenue: One of the appeals of SaaS is recurring revenue. A solid model ensures a steady stream of revenue, making it easier to forecast and plan for the future.
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• Attracts the right customers: Different models appeal to different customers. A carefully chosen model will help you zero in on your ideal audience and tailor your marketing efforts.
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• Maximizes profitability: At the end of the day, you want to be as profitable as possible. The right model will help you optimize your pricing and boost your bottom line.

Top 10 SaaS revenue models

1. Subscription-based model

The cornerstone of the SaaS industry, this model involves customers paying a recurring fee to access the software.

It's a reliable and predictable revenue stream for SaaS companies, much like a gym membership for software. This model fosters customer loyalty and engagement. This happens because users continually derive value from the ongoing access and updates.

A classic example is Microsoft 365, where subscribers pay a monthly or annual fee to access a suite of productivity tools, including Word, Excel, PowerPoint, and OneDrive. This recurring revenue allows Microsoft to update its software, add new features, and maintain high customer satisfaction.

Benefits

• It provides a predictable revenue stream.
• It fosters customer retention.
• It's easier to forecast and plan for the future.
• It can create a sense of commitment from customers.
• It can encourage customers to use your software more often.

2. Usage-based model

In this model, customers are charged based on their actual consumption of the service, much like paying for storage space on the cloud.

This model is often favored by infrastructure providers like Amazon Web Services (AWS). With AWS, customers are billed based on the computing resources, storage, and data transfer they consume.

This model's inherent scalability is its key advantage, as businesses only pay for what they use. It makes this model a cost-effective option for companies with fluctuating needs. It also incentivizes efficient resource use, as customers tend to optimize their usage to control costs.

Benefits

• It is highly scalable.
• It aligns cost directly with the value the customer receives.
• It can be a good option for businesses with unpredictable usage needs.
• It can encourage customers to optimize their usage of your software.

3. Freemium model

The freemium model offers a basic version of the software for free, while advanced features require a paid subscription.

This approach allows users to experience the value of the product before committing financially. It's similar to a "Try before you buy" approach.

Dropbox, the popular cloud storage provider, exemplifies this model. It offers limited free storage and charging for extra space and functionalities. This model's strength lies in its ability to attract a large user base quickly. The end goal is to then convert some of those users into paying customers as their needs grow.

Benefits

• It allows for a large user base.
• It presents the opportunity to convert free users to paid plans.
• It can be an effective way to acquire new customers.
• It can be a good way to upsell customers to premium features.

4. Tiered pricing model

This model presents customers with distinct pricing tiers. Each offers a different set of features or usage allowances.

HubSpot, the marketing platform, exemplifies this model clearly. Its pricing tiers cater to various business sizes.

Tiered pricing is about targeting different customer segments and creating upselling opportunities. It allows businesses to appeal to a wider range of customers by offering options tailored to their budgets and requirements.

Benefits

• It captures multiple customer segments.
• It provides upselling opportunities.
• It can be a good way to cater to diverse budgets and needs.
• It can create a sense of value for each tier.

5. Per-user pricing model

Simplicity defines the per-user pricing model, where each user is charged a fixed fee for access to the software.

Slack, the team communication tool, charges per active user, allowing businesses to easily budget based on their team size.

This model makes it easy for customers to understand the pricing structure and for businesses to calculate revenue. However, it might not be the most cost-effective option for larger organizations with many users.

Benefits

• It is simple and easy to understand.
• It is easy to calculate revenue.
• It can be a good option for businesses with a fixed number of users.

6. Per-feature pricing model

This model allows customers to cherry-pick and pay for only the specific features they need. It's like ordering à la carte at a restaurant — you only pay for what you'll actually consume.

Zendesk, a customer service platform, offers various modules that businesses can select based on their needs.

This model's strength lies in its granularity and alignment with individual customer needs. It allows businesses to create customized plans, ensuring they only pay for the tools that are relevant to their operations. However, this model might lead to longer sales cycles as customers carefully evaluate which features they truly need.

Benefits

• It allows for highly customizable plans.
• It aligns costs directly with the specific needs of each customer.
• It can be a good option for businesses with unique or specialized requirements.
• It can encourage customers to explore and adopt additional features over time.

7. Flat-rate pricing model

In this model, all users pay the same price, regardless of usage or features. It's like a buffet where everyone pays the same entry fee, regardless of how much they eat.

Basecamp, a project management tool, champions this model, charging a flat monthly fee for unlimited users and projects.

This model's appeal lies in its ease of budgeting for customers. However, it might not be the most equitable for businesses with varying usage patterns. Why? Because lighter users might feel they're overpaying.

Benefits

• It offers a simple, transparent pricing structure.
• It allows for easy budgeting for customers.
• It can be a good option for businesses with a fixed budget.
• It can be an effective way to attract new customers who value simplicity.

8. Hybrid model

The hybrid model combines different pricing strategies. They often blend elements of subscription, usage-based, and per-feature models. This approach offers the flexibility to cover a wider range of potential users.

Adobe Creative Cloud is a good example of this model. It offers a subscription base with usage-based pricing for certain services like cloud storage or stock images. While hybrid models can be more complex to manage, their potential for a larger revenue pool makes them an attractive option.

Benefits

• It offers greater flexibility than single-model approaches.
• It maximizes revenue potential by combining different strategies.
• It can be a good option for businesses with complex or evolving needs.
• It caters to a wider range of customer preferences and budgets.

9. Outcome-based pricing model

This performance-driven model ties pricing directly to the results or value delivered to the customer.

Zapier uses a performance-driven model where customers are charged based on the successful execution of automations or "Zaps." This approach aligns the cost directly with the value delivered to the customer, making it a true outcome-based pricing model​.

The outcome-based model creates an alignment between the provider and the customer's success. Both parties are invested in achieving the desired results. However, it requires clear metrics and agreements to measure outcomes effectively.

Benefits

• It aligns pricing with performance and results.
• It leads to high customer satisfaction due to shared success.
• It's a good option for businesses that can confidently deliver measurable outcomes.
• It creates a strong sense of partnership and shared goals with customers.

10. Value-based pricing model

This model focuses on the perceived value of the product to the customer rather than solely on production costs.

Salesforce, a leading CRM provider, is known for its value-based pricing. Customers pay a premium for the perceived benefits and competitive advantage Salesforce provides.

This model can maximize revenue, but it requires a deep understanding of customer needs. It helps establish a strong brand reputation and a compelling value proposition that justifies the price.

Benefits

• It allows for maximizing revenue by capturing the full value customers perceive.
• It closely aligns with customer success. Customers invest in solutions they believe will significantly benefit them.
• It's well-suited for businesses with a strong brand and a unique value proposition.
• It can create a sense of exclusivity and premium positioning for the product.

Strategies for maximizing SaaS revenue

Choosing the right revenue model is a crucial first step, but it's just the beginning. Let's explore some key strategies to boost your SaaS revenue growth:

Customer retention

Retaining customers is about turning a trickle of income into a flowing river. Your existing customers are your most valuable asset, and keeping them happy should be your top priority.

How do you do that?

• Delight them with regular updates: Show your customers you're invested in their success. Do this by continuously improving your product. Add new features, fix bugs, and keep things fresh.
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• Offer exceptional customer support: Be there when they need you. Whether it's through a knowledge base, live chat, or a dedicated account manager, make sure your customers feel heard and supported.

Upselling and cross-selling

Think of upselling and cross-selling as offering your customers a VIP upgrade.It's about showcasing extra features that complement their current plan.

Maybe it's a more advanced tier of your software, or perhaps it's a complementary product that solves a related problem. The goal is to increase the average revenue per user (ARPU) without alienating your existing customer base.

Expansion revenue

As your customers' businesses grow, so should your revenue from them. That's the idea behind expansion revenue. It's about identifying opportunities to increase the value you provide and, in turn, the amount they pay.

This can take many forms:

• Usage-based expansions: As your customers use your product more, they might naturally need to upgrade to a higher usage tier.
• Additional seats or licenses: If their team grows, they'll need more licenses to accommodate new users.
• New products or services: If you launch a new product that complements their existing plan, it's a prime opportunity to cross-sell.

Expansion revenue is about fostering a mutually beneficial relationship. It's a relationship where your success is intertwined with your customers' growth.

Pricing optimization

Pricing isn't set in stone. It's a dynamic process that requires regular review and adjustment. What might have been the perfect price point a year ago might not be optimal today.

Experiment with different pricing strategies and see what resonates with your target market. Consider A/B testing price points or offering promotional discounts to attract new customers.

The goal is to find the sweet spot where you maximize revenue without sacrificing customer acquisition or retention.

Next steps

We've journeyed through the landscape of SaaS revenue models. Each has its unique potential for maximizing your earnings. But remember, a successful revenue model is only as good as its implementation. That's where a top-notch billing system comes into play.

Orb is a done-for-you billing platform designed to address the unique challenges of SaaS business models. Our goal is to empower you to unlock the full potential of your chosen revenue model.

Here's how Orb can bolster your revenue efficiency:

• Seamless integration: Orb weaves into your existing infrastructure. We do so through popular data sources like S3 and Segment or our adaptable REST API. This enables you to track usage data and generate invoices without disrupting your operations.
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• Tailored usage tracking: Orb lets you define and track the specific usage metrics. Whether it's API calls, data storage, or feature usage, Orb provides the flexibility to monitor what matters most to you.
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• Pricing agility: Orb embraces a wide range of pricing models. It covers everything from granular per-unit charges to tiered pricing based on usage levels. Our Plan Builder lets you design and implement these models easily. No technical expertise is needed.
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• Automated billing: Orb takes the manual effort out of billing. From usage tracking and calculations to invoicing, and payments, Orb automates the entire workflow. This saves you time and resources and reduces the risk of costly errors too.

Ready to transform your billing process? Discover how Orb can simplify your operations and help you establish a hassle-free billing model.