Subscription-based pricing models have been around since the 17th century and became prevalent with the rise of newspapers, journals, and book publishing. Today, more and more companies are leveraging subscription pricing models because they are convenient for customers, provide a stable stream of recurring revenue, and create opportunities to scale revenue growth.
We’re in our subscription pricing era
Subscription pricing has become the backbone of modern SaaS. Nearly all leading enterprise platforms—Salesforce, Slack, Google Workspace—have adopted this model, and for good reason: it delivers predictable revenue for businesses and ongoing value for customers. According to our 2021 benchmark report for revenue leaders, 75% of surveyed companies earned the majority of their revenue from subscriptions. Even more compelling, existing customers spend an average of 67% more than new ones, making customer retention a top priority, and pricing a powerful lever for growth.
As SaaS companies scale, subscription pricing has evolved from simple flat-rate models to dynamic, hybrid approaches tailored to buyer behavior, usage, and value delivered. There’s no one-size-fits-all solution. Smart pricing strategies adapt to customer segments, sales stages, and perceived value, directly influencing acquisition, expansion, and retention.
From freemium plans for startups to modular pricing for mid-market teams and bundled packages for enterprise buyers, today’s pricing models must align with diverse buyer personas. Whether billed monthly or annually, subscription pricing gives customers the flexibility to scale, and businesses the insight to forecast revenue more accurately.
Below are five core subscription pricing models, along with key considerations to help determine whether your current strategy is driving maximum revenue impact.
5 types of subscription pricing models
Four main subscription pricing models and various hybrids are popular among B2B and B2C companies, each with its advantages and disadvantages. To maximize recurring revenue, it’s crucial to optimize your subscription pricing model to fit the structure and framework of your business and the goods or services you sell.
1. Fixed or flat-rate pricing
This model offers subscribers a single price for all the products or services they’re purchasing. Customers typically get access to all features and are charged monthly or annually. A fixed or flat-rate pricing model can be a good fit for companies that offer a product with limited capabilities or features. Companies may find themselves selling to a limited number of customers. Smaller businesses may not be able to afford the flat-rate price and enterprise organizations may find the capabilities and features available do not meet their needs.
Usually, these products offer a clear solution to common pain, making them easier to sell, especially to a single buyer persona. And since there is a fixed rate, pricing is simple and easy to communicate to customers.
But a fixed pricing model doesn’t work for every company. It may be appropriate for companies that offer a simple and predictable product, but B2B SaaS companies that have feature-rich software will find this type of pricing inefficient. It’s difficult to set a fixed price on SaaS tools due to their complexity of offerings, and the diverse needs of each customer.
2. Tiered pricing
A tiered pricing model provides customers with different package options and features and gives them the flexibility to choose which is best for them. This pricing model is common among SaaS companies that offer software with different levels of service and features. It’s also a popular pricing model choice for e-commerce companies, such as streaming services, apps, and mobile games. This is because it provides benefits to both buyers and sellers. The buyer is able to choose from different pricing packages that are available and sales teams can offer buyers additional package options that increase up-sell opportunities.
Tiered pricing models are commonly used because they are scalable, as upsell opportunities become easily achievable. This pricing model has the ability to reach a larger target market because it provides different solutions and prices for customers to pick from, based on their unique needs and preferences. Lastly, it helps maximize customer lifetime value by enabling customers to upgrade their subscription plan as needed.
When creating a tiered pricing model, businesses should ensure each package has a clear distinction between features or levels of access. This enables customers to fully understand the differences in pricing and value of the product or service.
3. Per-user pricing
Many businesses choose to go with a per-user model because it’s simple and easy to scale as their customer base grows. Since it’s based on number of users, as a company grows, so does their user count – which means they need to upgrade their plan.
For the seller, a per-user approach simplifies revenue forecasting. And owing to its ease of scaling, this model is often used by SaaS companies
This pricing model does come with some disadvantages, though. Employees frequently share their login information and the end result is lost revenue. And per-user pricing doesn’t necessarily reflect the value of your services or products. Just because the price of 30 users costs a certain amount, does not mean the inherent value of the product should be based on user count. The value should be based on additional sales, user adoption rate, and customer satisfaction levels.
4. Usage-based model
Usage-based pricing models, or “pay-as-you-go” models, charge customers based on their usage of a particular product or service. It’s less popular among SaaS companies because it depends solely on usage, which sets a tight ceiling on potential revenue. Usage-based pricing models are primarily used by IT and telecommunication companies.
Usage-based pricing models are considered the most “fair” to customers because they are charged in direct proportion to their usage. But it comes with a number of disadvantages for the seller. Usage-based pricing models are difficult to scale because companies cannot charge customers different prices in relation to the size of their business. Smaller businesses may be paying more and enterprise sized organizations may be paying less, based on their usage amount, leading to lost revenue opportunities. Additionally, revenue prediction and forecasting is more difficult because it can be hard to predict a customer’s future usage.
5. Hybrid subscription pricing models
While most pricing strategies fall into clear categories, many SaaS companies are now adopting hybrid pricing models that combine elements from multiple approaches to better align with customer needs and product value.
Standard hybrid pricing models include:
Modular pricing (pay per module): Customers pay only for the specific features or components they need. This model is common in CPQ, CRM, and ERP platforms as it allows businesses to tailor plans to different team roles or departments.
Usage-based + subscription hybrid: A fixed base fee ensures predictable revenue, while variable charges scale with usage (e.g., API calls, storage, or transactions). This is common in cloud and infrastructure SaaS.
Freemium + add-ons: Core functionality is free, but users can purchase additional modules or capabilities as needed. Ideal for product-led growth strategies.
Tiered base with active user billing: Combines tiered feature access with charges only for active users, making it more equitable for large or fluctuating teams.
Hybrid models provide the flexibility to grow with customers and align pricing more closely with value delivered, making them increasingly popular among SaaS providers targeting multiple market segments.
Using pricing as a sales tool
Pricing is a sales enablement strategy. The right pricing model can accelerate deal velocity, reduce friction in the buying process, and increase customer lifetime value. When sales teams are equipped with flexible, transparent pricing options, they’re better positioned to tailor offers, handle objections, and close deals faster.
Modern SaaS buyers expect pricing to reflect the value they receive. That’s why many successful companies move beyond static pricing and adopt hybrid models, combining subscription tiers, usage-based charges, and modular add-ons. This flexibility allows sales reps to align pricing with customer priorities, whether it’s cost predictability, feature access, or scalability.
Sales teams also benefit from guided selling tools within CPQ (Configure Price Quote) platforms, which help structure deals around the customer’s specific use case and budget. This not only streamlines approvals and quote generation but also ensures consistency in pricing and discounting across the organization.
Ultimately, pricing should support, not slow down, the sales process. When viewed as a dynamic part of the customer journey, pricing becomes a strategic advantage that drives both deal conversion and revenue growth.
What to consider when choosing a subscription pricing model
To ensure you’ve chosen the right pricing model for your business model, you may want to ask yourself a few questions.
1. Who are your current customers
Understanding your customers and their needs will help you determine the right subscription pricing model. Do some customers choose different features and capabilities, or have higher usage rates than others? Are your customers mostly small-business owners? Such customers may have a harder time paying a total amount up front and thus prefer to spread out their payments over time.
When your customers are making purchasing decisions, do they prefer simplicity, or do they like the ability to choose different features or customizations? These types of questions will help you figure out what best suits your customers and may attract them to your subscription.
2. Does it suit the product you provide?
How complex is your product? Does it have multiple features and capabilities? If so, a tiered pricing model may be the best fit and enable you to charge for different levels of access. When thinking about your product roadmap and revenue model, think about what will help you scale revenue more effectively in the long term.
If your revenue model isn’t aligned with your product growth, then you’ll likely be letting untapped revenue slip through your fingers. You want to choose a pricing model that can grow alongside your product and expand your relationship with each customer – whether through additional features, number of users, or usage. A subscription-based pricing model will increase your recurring revenue, and ultimately, customer lifetime value.
3. What pricing model does your competition use?
Take a look at established and successful competitors. It’s important to note what works and what doesn’t. By studying the competition, you may also be able to determine where they are leaving gaps in the market – and revenue on the table.
For example, if the competition is geared toward serving large businesses, consider offering a tiered pricing option that will better serve smaller companies who may not have the budget or need as many features. Doing so will help you capture recurring revenue your competition is blindly leaving on the table.
4. Is it in alignment with your operating costs?
With subscription-based pricing, you need to keep in mind operating, fixed, and variable costs. Make sure your subscription revenue covers these costs so you can define sales margins and price your products and services accordingly.
By gaining a better understanding of how you need to price subscriptions in order to be profitable, you can choose a pricing model that optimizes subscription revenue while providing a plan that works well for your customers.
What’s next? Optimize subscription-based pricing models with subscription management software…
It would be a costly mistake to overlook subscription revenue in our subscription-based economy. Choosing the right pricing strategy will enable you to increase recurring revenue, forecast revenue growth accurately, and ensure healthy profit margins.
But managing subscriptions is easier said than done. Although 75% of companies earn most of their revenue from subscriptions, only 24% of them use subscription management software. To optimize your subscription model for success, it’s important to invest in subscription management software that can be used to maximize recurring revenue.
DealHub’s subscription management software allows you to automate the renewal process, identify and recommend up-sell and cross-sell opportunities, and easily generate subscription contracts. DealHub eliminates the need for laborious manual tasks that are often riddled with errors and negatively impact profit margins.
Subscription revenue is a key source of profit, and when properly managed, will enable you to grow recurring revenue and achieve sustainable long-term growth.
As pricing grows more complex, revenue platforms like DealHub help sales teams manage hybrid pricing models, accelerate quoting, and ensure pricing consistency across teams and regions.
Book a demo to see how you can implement any subscription pricing model with DealHub CPQ.
