Value-Based Pricing
Value-based pricing sets prices according to the perceived or measured value your product delivers to customers — not based on your costs, competitors' prices, or arbitrary round numbers. If your product saves a customer $100K annually, pricing at $10K (10% of value) is a value-based approach.
Why Value-Based Pricing Matters for SaaS Companies
Most SaaS companies underprice by 20-40% because they base prices on costs or competitors rather than value delivered. Value-based pricing captures more of the value you create, improving margins, LTV, and unit economics without reducing demand. For Seed to Series B companies, pricing is often the single highest-leverage growth lever — a 10% price increase drops straight to the bottom line.
An Operator's Take
I have never worked with an early-stage SaaS company that was overpriced. Every single one was underpriced. Founders set prices during beta when the product was simpler, and never updated them as capabilities grew. At one engagement, the product saved mid-market companies an average of $180K per year in operational costs. It was priced at $4,800/year. We repositioned pricing at $24,000/year — still only 13% of value delivered — and close rates actually improved. Higher prices signal higher value. The fear of raising prices is almost always worse than the reality.
Common Mistakes
What I see go wrong at Seed to Series B companies.
Pricing based on what competitors charge instead of the value you deliver. If your product delivers 2x the value, matching competitor pricing leaves money on the table.
Setting one price for all segments. The value your product delivers varies dramatically by customer size — enterprise accounts extract far more value than SMBs.
Not quantifying the value you deliver. If you cannot articulate the dollar impact of your product, you cannot price based on value.
Being afraid to raise prices. Most SaaS companies can raise prices 20% with minimal churn impact because they were significantly underpriced to begin with.
What to Do This Week
Concrete steps you can take right now.
Interview 10 customers and ask: what would it cost you if you did not have our product? What alternatives would you use? This quantifies perceived value.
Use the Pricing Scorecard to evaluate your current pricing strategy against best practices.
Model a 15-20% price increase applied to new customers only. What is the ARR impact if close rates drop 5%? (Spoiler: it is almost always positive.)
Related Resources
Related Terms
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Further Reading
Frequently Asked Questions
How do you implement value-based pricing?
Three steps: 1) Quantify the value your product delivers (cost savings, revenue generated, time saved) through customer interviews and data analysis. 2) Set prices as a percentage of value delivered — typically 10-20% for B2B SaaS. 3) Segment pricing by customer size, since larger companies extract more value and should pay more.
Should you raise prices on existing customers?
Yes, but carefully. Grandfather existing customers at their current rate for 6-12 months, then transition them to new pricing. Most companies find that price increase churn is 2-5% — far less than the revenue gained from higher prices on the remaining 95-98% of accounts.
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