How to Monetize Your SaaS Application: Pricing Models and Strategies for Success



When you create a product, it can have different purposes. For example: create a startup, support an existing project, update something that is outdated, or automate a process, but increasingly products are created with the goal of making money.

Development products can be sites, web applications, programs, games, operating systems, controllers, artificial intelligence, and virtual reality... Cloud software that is created for the purpose of monetization is called a SaaS (Software as a Service) application. However, not all products are created for making money, so let's figure out what is the difference between them.




The difference between a software product and a SaaS

Software product - is a software developed to solve a problem of wide demand and intended to be provided to users. A software product has been developed and maintained to be sold or distributed on a market.

Software as a service (or SaaS) is a way of delivering applications over the Internet - as a service. SaaS applications are also known as a web-based software.

Unlike SaaS, software products are usually installed on the user's equipment (owned or leased). The term of the product license is usually not limited (although there are cases when manufacturers limit the time the product can be used).

An example of a software product would be Microsoft Office, while an example of software as a service would be Google Docs.

So, what are the ways to monetize your SaaS applications? There are pricing models and strategies for success that can help you! 

Pricing Models

Model 1 “Cost-plus pricing”. The most widely used pricing approach involves calculating all expenses, including a reasonable profit margin, and setting prices accordingly. A SaaS firm may factor in costs such as product development, design, their own SaaS providers, and personnel expenses when determining pricing.

Model 2 “Competitor-based pricing” involves setting prices based on what your competitors are already charging. This method is especially beneficial for startups that are uncertain about the value of their product and lack historical sales data to support their decision-making. This is not a perfect model, your competitors shouldn’t be guiding your decisions. We recommend that you decide your own price.

Model 3 “Value-based pricing”. In plain terms, value-based pricing is the sole pricing strategy suitable for your SaaS enterprise. Rather than focusing internally on your firm or externally on your competitors, value-based pricing entails seeking pricing feedback from the individuals who will make decisions based on your prices: your clients.

If you discover that customers are willing to pay, you can commence with a higher price point than your competitors, resulting in more revenue from the outset.

In order for a SaaS project to be successful, it is necessary not only to set the right price but also to choose the best strategy option.


Strategies for Success

Here are some of the ways you can monetize your SaaS applications:

Way 1: This strategy charges a one-time fee for access to the software, which includes ongoing support and updates. This can be a good option for SaaS companies that provide software that is used over a long period of time.

Way 2: This strategy charges users a monthly or annual fee for access to the software. This can be a good option for SaaS companies that provide ongoing services or support.

Way 3: This strategy offers a free version of the software with limited features while charging for access to more advanced features. This allows users to try out the software before committing to a purchase and can help to build a loyal user base.

Way 4: This strategy offers different pricing tiers for different levels of usage or access to features. This can help to cater to a wider range of users, from individual users to enterprise-level clients.

To choose the best pricing model for your SaaS application, consider your target audience, your competition, and the value that your software provides. You may also want to experiment with different pricing strategies, such as offering discounts for annual subscriptions or providing a free trial period. Remember to regularly evaluate your pricing model to ensure that it is effective and profitable for your business.