Customer churn is the loss of customers to your service. Price is a major churn cause factor in SaaS businesses. When customers do not think that the prices are not equivalent to value, it will cancel a significant number of customers. Indeed, research indicates that approximately 71% of customers believe that the primary factor that causes them to depart is price increases. According to SaaS churn benchmarks, 4% churn per month can be said to be good. That is, the higher your churn the higher the problem with pricing. Therefore, one of the main factors that can ensure people are happy is the selection of appropriate SaaS pricing models. We will describe typical models and demonstrate how the most appropriate can lead to the decrease in churn.

Most SaaS businesses use models like subscription, usage-based, tiered, or freemium. Each has a different way to charge customers. For example, Snowflake sells consumption credits (usage-based) and Twilio charges per API call usage-based. Datadog mixes per-host fees with usage add-ons, and Salesforce offers tiered per-user plans. These are SaaS pricing model examples that tie price to customer value. In general, aligning price with what the customer uses or values raises retention. One study found that companies matching pricing to core value saw about 15% higher retention. This means customers stick around when they feel the price fits the value.

• Subscription model: Customers pay a fixed fee every month or year. This is predictable for everyone. For example, a team might pay $29/month for software, no matter how much they use it.
  
• Usage-based model: Customers pay only for what they use. Think of it like a mobile data plan. You pay per GB of usage. Small users pay less, big users pay more.
  
• Tiered pricing: The product has multiple plans (Basic, Pro, Enterprise) at different price points. Each plan includes more features. This lets small teams choose a cheap plan and big companies pick a full-featured plan.
  
• Per-user pricing: Cost increases with each user. For example, many team collaboration tools charge per seat. As you add teammates, your bill goes up.
  
• Freemium model: A free version is available with limited features. Users can use the product forever without paying until they need advanced features.
  
• Hybrid or other models: Some mix fixed and usage fees, and others use bulk credits. The key is to match how customers use the product to what they pay.
  

SaaS dashboard is able to monitor usage, revenue, and churn. Organizations pay attention to such indicators as Monthly Recurring Revenue (MRR) and churn. In context, constant analysis of the use of features and categories of customers to make pricing. The dashboard above demonstrates the number of active users and the number of the revenue. Based on this information, businesses make decisions on whether prices are reasonable. Having an understanding of how the customers actually utilize the software can be useful in setting prices so that customers do not quit.

Usage vs Subscription

Usage-based vs subscription pricing SaaS is one of them. Under the subscription model, users can pay a constant amount of fees each month or year. This is easy to budget and explain. For example, your app might cost $50/month no matter what. Predictable bills mean customers won’t get surprised, and surprise-free billing reduces churn. Subscriptions make revenue easy to forecast.

Usage-based pricing is the opposite: users pay only for what they use. This can feel very fair. If a customer has a slow month, they pay less. Startup companies often like usage pricing because they pay nothing until they use the product. And it’s also good for customers who want flexibility. However, usage-based can cause bill shock if a customer unexpectedly exceeds their limit. If a customer gets a huge bill one month, they might cancel in surprise. In fact, the Ordway guide notes that unpredictable usage bills or unclear value metrics cause bill shock and churn.

To reduce churn with usage-based pricing, transparency is key. Always show customers their usage and costs as they go. Provide alerts when they are near limits. Simple, transparent pricing lowers barriers to adoption and keeps people longer. In short: usage-based pricing can work if done clearly, but subscription fixed plans keep billing predictable.

Hybrid SaaS Pricing Model

Many SaaS now use a Hybrid SaaS pricing model that combines subscription and usage. In this model, customers pay a base fee plus additional charges for extra usage. For example, a company might have a $100/month plan that includes 1,000 API calls, then $0.05 per extra call. Hybrid gives a safety net plus flexibility. Ordway says hybrid balances predictability with flexibility.

This model is becoming popular because it can offer the best of both worlds. In fact, a 2025 pricing report found that companies using hybrid models have the highest growth, almost 21% median growth compared to pure subscription or pure usage models. Customers like knowing a base price while still only paying for extra use.

Hybrid pricing can reduce churn by giving customers choice. They get a clear baseline and pay fairly when they grow. The challenge is complexity: billing systems must handle fixed and variable parts. But the tradeoff is worth it for many fast-growing SaaS businesses.

Value-based Pricing

Another approach is Value-based pricing in SaaS. Here, you set prices based on the perceived value to customers, not just costs. Paddle explains that with value-based pricing, you set the price according to how much your target customer believes it’s worth. In simple terms, ask customers what the product is worth to them. If they’re getting big benefits, they might pay more.

Value-based pricing often means talking to customers a lot and building trust. Paddle points out that this process builds trust with customers and leads to higher retention and less churn. When people feel the price matches the good they get, they stay subscribed longer. Of course, it takes research and surveys to do well. But for many SaaS companies, value-based is the best route. It also ties into upgrades: when you add features that customers really value, you can raise prices with less pushback.

In practice, value-based pricing might look like offering custom quotes or feature bundles where customers choose what they need (and pay accordingly). The key is to always align pricing with the problem solved and results delivered.

Per-User vs Per-Feature Pricing

A common debate is Per-user vs per-feature SaaS pricing. With per-user or per-seat pricing, each additional user in an account adds to the price. Many collaboration tools Slack, Zoom, Salesforce, etc. use this. The logic is simple: more users means more value, so charge more. It’s easy for customers to understand: just count seats. However, per-user can sometimes discourage adding new users if the company wants to save money. It also doesn’t account for differences in how much each user actually uses the software.

Per-feature pricing (also called feature-based or tiered) charges based on what features or bundles are included. There might be a Basic plan with core features, then higher tiers unlocking advanced features. Customers pay for exactly the features they need. For example, HubSpot has Marketing, Sales, and Service hubs each with multiple tiers.

According to pricing experts, matching the right model to your product is key. One report noted that companies that align pricing to their value proposition saw 15% higher retention. Also, a study found that companies using feature-based pricing had about 38% higher customer lifetime value than those using strict per-user models. This suggests when customers pay by feature value, they often stick around longer and spend more over time.

Some businesses use a hybrid: tiered plans with per-user rates inside them. Salesforce is an example: they have different editions Essentials, Professional, Enterprise with set features, and charge per user within each edition. That lets them cover both models. Ultimately, choose per-user if your product’s value really scales with team size, or per-feature if certain features drive value.

Tiered Pricing with Add-Ons

Another popular approach is Tiered pricing with add-ons SaaS. As we saw, tiered pricing means offering packages at different price points. Each tier bundles features together. For example, imagine a photo editing tool: Basic plan has filters and storage, Pro adds advanced tools, Enterprise adds collaboration and premium support.

The Above shows one example. ChartMogul’s pricing page (image) has Free, Pro, and Enterprise tiers. The Free plan is limited, while paid plans unlock more features. This is tiered pricing in action.

On top of tiers, companies add optional extras. Lomit Patel explains that adding customizable add-ons boosts revenue. For instance, a project management SaaS might have basic, pro, and enterprise tiers, with extras like advanced reports or more storage that customers can add on. This way, a customer starts with a plan and only pays more for the extra features they need. It can increase the average revenue per user and keep customers engaged by letting them personalize their plan.

Tiered pricing fits a broad range of customers. Entry-level users buy basic plans, and as companies grow, they can move up tiers or buy add-ons. Because each tier and add-on is clearly defined, customers know exactly what they’re getting. This clarity and choice help reduce churn: users don’t feel trapped in an ill-fitting plan. They can grow step-by-step in the same product.

Freemium vs Free Trial

When onboarding new customers, many SaaS use Freemium vs free trial SaaS strategies. Both give people a risk-free way to try the product, but they work differently.

A free trial usually offers full access to the product for a short period like 15 or 30 days. After that, users must pay to continue. In contrast, a freemium plan gives users a limited version of the product for free forever. For example, an email marketing tool might let you manage up to 1,000 subscribers on the free plan. To get more, you upgrade.

Each approach has trade-offs. Product teams often debate which is better. The freemium gives unlimited, free access with limitations, whereas free trial is time-limited. Freemium can attract more signups because there’s no pressure; customers can explore at their own pace. Free trials pressure customers to see the value quickly or lose access.

There are success stories for both. For example, Tettra, an internal knowledge base tool switched from a 15-day trial to a freemium model and saw big gains. With freemium, more people signed up because there was no credit card needed. Over time, Tettra’s freemium strategy tripled the number of upgrades by the fifth quarter. Even better, retention soared: cohorts after freemium launch never dropped below 70% retention. In fact, retention was over 100% some months, meaning users expanded their usage and more customers upgraded.

However, freemium can bring tire-kickers who never plan to pay. Many of them will churn on the free tier. A free trial, by contrast, gives a clearer window: users know they will lose access if they don’t subscribe, so the decision is imminent. The key is balance: give enough value for free to hook users, but not so much that they never pay. Including upsell prompts and helpful nudges is important in either model.

In short, freemium works well if your product provides value over time so people stick around. Free trials can work if your product’s value can be shown quickly. Both models reduce churn if they are managed well. As ProductLed and others show, letting users experience value (without surprise) generally improves conversion and retention.

Transparent Billing

Regardless of model, clear billing is crucial. This is especially true in usage-based models. The Transparent billing in SaaS usage-based pricing as a must for retention. When customers understand exactly what they’re being charged for, they trust you more.

Surprises in the bill cause friction. Companies providing real-time usage data and detailed breakdowns see higher retention. Customers who understand their bills are less likely to churn. In fact, 31% of SaaS companies now give itemized invoices with usage tracking. When users can log in and see their exact usage and cost, they can adjust behavior and avoid overages.

Some best practices to reduce billing churn:

• Usage Dashboards: Show charts of usage vs. limits.
  
• Alerts and Caps: Send warnings when usage nears limits.
  
• Self-service Billing Portal: Let customers manage payment methods and view history.
  
• Clear Invoicing: List each fee (e.g., 50GB storage = $X, 1000 API calls = $Y).
  

Many companies with transparent billing see higher renewals and upsells. Customers feel in control. As one summary put it, transparent billing strengthens customer relationships. So always explain charges clearly. This trust-building practice cuts involuntary churn payment disputes and voluntary churn unhappy surprises.

How to Choose the Right Model

With so many models, How to choose a SaaS pricing model for your product? There is no single best answer. It depends on your product’s value, customer base, and costs. Here are simple steps that help you to choose right model:

• Analyze Your Product Value: What is the most valuable feature or outcome? We recommend enumerating your most outstanding features and their users. Per-user may be appropriate in case value is a team-usage feature such as a messaging app. A tiered model may be ideal in case such features as advanced reports would be valued.
  
• Know Your Customers: Segment them. A small startup might prefer a lower monthly fee, while an enterprise could handle a higher price for extra service. For example, a startup on a tight budget will need cheaper plans than a big company.
  
• Cover Your Costs: Remember your SaaS cost structure and pricing. Calculate fixed costs servers, development, support and variable costs hosting, customer support. Make sure your price covers these costs and a profit. Your price should sustain the business and reflect the service’s quality.
  
• Check Competitors: See what similar SaaS products charge. You don’t have to match them exactly, but you need to understand the market range.
  
• Experiment and Evolve: Try different pricing with small A/B tests, evolving pricing with the product. What works today may need adjusting as you add features.
  

As a matter of fact, you may mix models, perhaps a base subscription and usage add-ons. Or free trial to new users to register smoothly. The trick is to match the price with customer satisfaction. According to one source, Fair Pricing, Fair Pricing establishes long-run relations and loyalty. Use simple terms, do not have any hidden charges or communicate any change. And with that, your pricing is a retention weapon and not a churning one.

Pricing for Startups

New companies also have special needs. In the case of a SaaS pricing model with startups, flexibility and low initial cost are usually looked at. Startups normally begin small before expanding. A usage model would allow them to pay on usage of the product. Another B2B SaaS model that can be considered quite valid with startups and SMBs is the usage-based pricing, as there are no huge fees that people have to pay before they can begin using your product. It implies that a startup can get on board without spending a lot of money and expand as they grow.

Freemium and freemium-to-paid strategies also suit startups. Offering a free tier or free trial gets early users on board without barriers. For cash-strapped startups, attracting many free users can help spread word-of-mouth. Then, as soon as they grow or need more features, they pay. The example of Tettra showed this, switching to freemium tripled paid conversions over time.

However, startups must ensure they eventually monetize. A freemium startup needs a solid plan to convert free users to paid. A usage-based startup needs enough users or usage to cover costs. In all cases, focus on delivering clear value so that customers stay. Research suggests startups should be cautious with complex models—simplicity helps adoption. For instance, many startup SaaS pick a tiered model with a free option or a simple usage plan. The key is to reduce barriers early and align pricing with how a startup would use the product.

Cover Your Costs

No matter which model you pick, always remember your SaaS cost structure and pricing. SaaS has unique costs, your product is digital, so there isn’t a per unit cost like making widgets. Instead, costs include development, servers, customer support, and maintenance. Before finalizing the price, list all costs, cloud hosting, support staff, updates. Your price needs to cover these costs and leave profit. If you price too low, you might grow MRR but burn cash. Too high, and you drive away customers.

Industry standards and customer purchasing strengths can also be looked at. Churn can skyrocket due to an abrupt price increase: once more, 71% of them indicate that price increases are a motivator to send clients away. Any upsurge in price has to be supported by fresh worth and conveyed in an understandable way. Be competitive: see what the competitors charge but do not imitate. Apply some measure of value (such as per user or per feature) that is specific to your offering. And periodically assess the expenses against pricing with your product and market changing.

Lastly, simplify. Effective pricing helps to avoid confusion. The best practice claims to establish plain and clear prices and keep away any hidden charges. Customers are supposed to have the immediate view of the amount to be paid. An effective pricing site with levels and usage restrictions creates trust. Customers remain longer when they believe that the process of billing is fair and transparent. Keep in mind that customer experience includes pricing. Just a fair and aligned price has the potential of reducing churn and expanding your business.

Real SaaS Pricing Model Examples That Reduced Churn

Let’s look at some real SaaS pricing model examples. You’ll see how top brands use smart pricing to keep users around longer.

Slack: Slack has an intelligent blend of freemium vs free trial SaaS. The free plan has limits, and once a team has grown the paid plan becomes a natural progression. This will assist Slack in lowering churn since users upgrade when they are already finding value. It’s not forced.

Another type of SaaS pricing is their model, which is a per-user versus per feature. You only pay for active users. In such a way, when somebody leaves your team, you do not continue paying on that seat. This is open pricing which creates a sense of trust and satisfaction to the customers.

Notion: Notion follows a hybrid SaaS pricing model. It mixes free, team, and enterprise tiers with custom add-ons. Small users can stay free for long, while businesses can scale easily. It’s flexible, simple, and customer-first.

Notion focuses a lot on value-based pricing in SaaS. Instead of charging randomly, they base their prices on how much value the product gives. This makes users feel they’re paying a fair price, not just a number on a screen.

HubSpot: HubSpot is a classic example of tiered pricing with add-ons SaaS. You can start small with basic tools, then add features as your needs grow. This makes the pricing feel personal and flexible.

HubSpot also uses transparent billing in SaaS usage-based pricing. You always know what you’re paying for, and there are no hidden costs. That builds trust, which is key to reducing churn.

How to Test and Improve Your SaaS Pricing Models

Even the best SaaS pricing model can fail if you never test it. The market changes fast, and your customers’ needs do too. Here’s how you can make sure your pricing always fits your users.

1. Run A/B Pricing Tests: Make two copies of your pricing page. Present one of them to half your visitors, and the other to the rest. Which version will be more converted? You may discover that your usage-based/ subscription pricing SaaS implementation will be effective with different types of customers. Testing will assist you in knowing what is the most important to customers, features, flexibility or transparency in prices. If you’re building or managing SaaS tools, check out our post on Doge Software Licenses Audit HUD, it shows how software licensing impacts pricing transparency and user trust.

2. Collect Real Feedback: Inquire users of their opinion on your pricing. In-app surveys or email feedback can be used. When your usage rate is deemed by numerous users that the price is too high or not clear enough, then it is time to restructure your SaaS cost and pricing. You have the best pricing consultants among your customers, you just need to listen to them. You can also try our SaaS ROI Calculator to estimate how pricing changes can impact your profit and retention rates.

3. Watch Your Metrics: Keep an eye on churn rate, lifetime value, and revenue growth. If churn goes up after a pricing change, it’s a red flag. Use this data to decide how to choose SaaS pricing model updates that work better for your audience. Never assume, always check. We also covered Platform Event Trap, which explains how ignoring platform data can hurt your growth and pricing accuracy.

4. Offer Small Experiments: Before changing your full pricing page, test it with new users or specific regions. This helps reduce risk and keeps your loyal users comfortable. Small, smart changes often give big results.

What’s Next for SaaS Pricing Trends 2025 and Beyond

In the future, the trend of SaaS pricing in 2025 is observed to shift to an increased flexibility and transparency. The current survey revealed that the commitment to subscription + usage of hybrids was growing more than any other growth in 2025. Median growth was 21% in companies that used hybrid pricing, which was better than pure subscription or pure use models.

Other trends include:

Value and AI: Charging specifically for AI-powered features is up to 44% of companies, meaning companies split features by type.

Usage and Outcome Billing: Many predict SaaS will shift even more toward outcome-based and usage-based models, especially as AI features become popular.

More Frequent Billing: 43% of SaaS companies now bill more often than monthly, to improve cash flow and trust. This frequent billing e.g. weekly or metered forces transparency in costs.

Transparent Practices: Customers expect to understand billing. Usage dashboards and self-serve billing tools are becoming normal.

Long-Term Contracts: Surprisingly, 40% of SaaS agreements are now multi-year, up from 14% in 2022) as companies lock in stable revenue and customers get discounts for commitments.

Revenue Forecasting: 73% of SaaS firms with usage-based models are now forecasting their variable revenue carefully, since unpredictability used to cause churn.

AI-Driven Pricing: AI tools are helping SaaS founders predict what users can afford and what they value. So, prices can adjust in real-time based on usage. It’s like a personal pricing model that fits each customer. This trend is growing fast and will shape SaaS pricing trends 2025 for sure.

More Transparent Billing: People hate surprises on bills. That’s why transparent billing in SaaS usage-based pricing will be more common. Companies that show clear cost breakdowns build long-term trust, and trust means lower churn.

Personalized Pricing Plans: Expect more products using hybrid SaaS pricing model setups. Customers will mix features, users, and usage to create their own plan. It’s flexible, fair, and helps both startups and big brands grow.

Focus on Retention, Not Just Revenue: Previously, SaaS companies used to pay attention to signups only. However, in the present case, they are more concerned with retaining users. That is where pricing strategy is very important. The startup pricing model of SaaS in particular must pay specific attention to retention. In case you are able to cut the churn in the early stages, lifetime value increases at a faster rate and investors like that.

These trends emphasize customer trust and value. Models that give customers control usage, hybrids, tiered with add-ons are on the rise. Transparent billing and flexible options are expected to keep customers long-term. As we see, 2025 is a year of evolution: SaaS companies must be ready to adjust models as customer needs change.

Final Thoughts

It is not only about a better product to reduce churn. It is also concerning smarter pricing. Customers will remain once they believe that they are paying a good flexible price. Therefore, you should test your plans, you should listen to your users and you should watch SaaS pricing trends 2025. Freemium vs free trial SaaS or go to hybrid SaaS pricing model, the point is, it is not hard to make pricing easy, fair, and human.

In summary, choosing the right SaaS pricing model can make a big difference in retention. Models that align with customer value and usage help customers feel they get what they pay for, which means they stick around. Make sure to communicate prices clearly, offer flexible options like tiered plans or usage billing, and consider creative approaches like freemium if it suits your product. Keep an eye on costs and market trends like 2025’s shift to hybrid/usage billing. By doing all this, you build trust and reduce the chances that customers churn.