Value-Based Pricing for SaaS: Complete Guide for Software Companies

Value-based pricing is a strategy where the perceived value it delivers to customers rather than the cost of production or competitor prices determines the price of a product or service. This approach focuses on aligning the price with the benefits or outcomes that customers experience from using the product, ensuring that businesses capture the maximum value based on customer satisfaction and success. An example of value-based pricing is Zendesk's outcome-based model, where customers are charged based on the number of successful customer service requests resolved by AI agents. However, disadvantages include difficulty in accurately assessing and quantifying customer perceptions of value and the need for extensive market research and customer feedback. This approach may not be suitable when target customers have limited awareness or understanding of the product's value or if there are numerous direct competitors offering similar features at lower prices.