Subscription Pricing Models
Pricing Models
Freemium Model
Description: Attracts users with a free basic version, encouraging upgrades to paid plans for premium features.
Example: Evernote offers a free Basic plan, with Premium and Business paid plans.
Use Cases: Gain market share, test in new markets, products with viral potential.
Pay per Quantity Model
Description: Charges based on the number of units (e.g., seats, emails).
Example: Help Scout charges $20/user/month after the free plan for 2 users.
Use Cases: Predictable costs that scale with business, targeting large organizations.
Pay per Active User Model
Description: Charges only for users active during the billing period.
Example: Slack charges based on active users, with a fair billing policy.
Use Cases: Persuade large enterprises, fair billing.
Flat-fee Model
Description: Charges a flat recurring fee for a single plan or product.
Example: Hubspot has different tiers with fixed monthly fees.
Use Cases: Generate consistent revenue, cater to risk-averse customers.
Pay-as-you-go (Usage-based) Model
Description: Charges based on usage with Tiered, Volume, and Stair-step variations.
Example: Postmark charges $10 for up to 10,000 emails, up to $400 for 300,000-700,000 emails.
Use Cases: Value-based pricing, flexible according to demand.
Tiered Model
Description: Different price points for different usage tiers.
Example: ManageWiz charges based on the tier of units purchased.
Use Cases: Structured pricing for varying quantities.
Volume Model
Description: Price per unit decreases with quantity.
Example: Jira offer price per unit decrease base on size of your company
Use Cases: Economies of scale, incentivize larger purchases.
Stair-step Model
Description: Fixed price points for usage ranges.
Example: Trello categorizes pricing by usage ranges with fixed prices.
Use Cases: Certainty in pricing, easy to understand.
‘Name Your Price’ or Custom Pricing
Description: Custom prices for each customer, often via sales negotiation.
Example: Jira offers custom deals for enterprise plans.
Use Cases: High-touch sales processes, tailored pricing for large clients.
Hybrid Model
Description: Combines multiple pricing models.
Example: DocuSign uses both user number and document limits for pricing.
Use Cases: Multi-dimensional value extraction, upgrade opportunities.
À la carte Model
Description: Customers choose and pay for specific features/services.
Example: Shopify allows merchants to choose and pay for specific features, like advanced reporting or additional staff accounts
Use Cases: Products with many use cases, flexible feature selection.
References
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Subscription Pricing Models