Introduction

Per-user pricing is a common strategy where you charge based on the number of users (or seats), especially amongst B2B SaaS companies. A subset of usage-based, user-based pricing is appealing because revenue goes up as the customer size does, as well as being a straightforward pricing model to understand.

Overview

PROS
  • Revenue scales with product adoption and customer growth
  • Easy to understand by customers
CONS
  • Discourages adoption
  • Users often aren't a great value-metric

Breakdown of the Pros

Revenue scales with product adoption and customer growth

As a customer onboards more teams, revenue increases. This means there is usually a direct correlation between customer growth and revenue. 

Easy to understand by customers

Some other pricing models, such as feature-based or product based, can get very complicated very quickly. With a user-based model, its very simple - customers get charged based on the number of users registered in the product.

Breakdown of the Cons

Discourages adoption

Customers are not going to be motivated to onboard more of their teams if they are charged more for doing so. This negative incentivization leads to a host of problems, including:

  • Increased churn, it's easier to cancel when a team of 10 people uses a product vs. 1000
  • Sharing accounts, have you ever been in a situation where you have to wait for someone to finish using an app before you can log in? It sucks.
  • Slow adoption, be prepared for slow "test runs" of micro teams before any level of significant adoption

Users often aren't a great value-metric

An excellent value metric is one that directly impacts the value a customer gets from a product. A lot of times, it doesn't matter to a customer whether they have three users or hundreds using a product, meaning the value gained from the product is not related to the number of users and is, therefore, a poor value-metric.


WHO SHOULD USE IT

SaaS companies whose product's value is directly tied to the number of users are an ideal case for charging per user. It's often very tempting to charge based on number of users because its a very popular model, but companies are often better off charging for a different value metric.

Implementation

The implementation in Stripe Billing is very simple, create a plan, and change the quantity based on the number of users. A company can add multiple tiers by having multiple plans.

The User Interface

The implementation in Stripe Billing is very simple, create a plan, and change the quantity based on the number of users. A company can add multiple tiers by having multiple plans.

SUBSCRIPTION MANAGEMENT
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Examples

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