How to Price a SaaS Product: Setting Your First Price and Testing It
How to set a first price for a SaaS product or app: start from the outcome, check it against the alternatives and your costs, choose a pricing model, and test it with real payments.
By Suren, Founder & Growth Strategist at Gufy · Published
Price a SaaS product by starting from what the outcome is worth to one specific customer, charging a fraction of that, and then checking the number against the alternatives and your own costs. Do not start from a competitor's price list. Start from the customer's result.
This guide walks through setting a first price, choosing a model, and testing it with real payments before you commit.
Three ways to set a price
| Method | How it works | The problem for a startup |
|---|---|---|
| Cost-plus | Add a margin to what the product costs to run | Software costs little per customer, so this gives a price far below what it is worth |
| Competitor-based | Look at similar products and price nearby | You inherit someone else's guess, made for their costs and their customers |
| Value-based | Price against what the result is worth to the customer | Takes more work, because you have to know the customer |
Use the first two as checks. Use the third to set the number.
Step 1: Put a number on the outcome
Pick one customer type and work out what the product changes for them in time or money.
Take a product that saves a small-business owner about 12 hours of admin a week. If that owner's time is worth what they charge clients per hour, the weekly saving is in the hundreds of dollars. A founder we spoke with had exactly this kind of product, a modest monthly price, and prospects who still hesitated. Her site listed what the product handled. It never said what the hours were worth.
Said as arithmetic, the pitch becomes: you spend roughly this much of your own time on admin every week; this gives it back for a small share of that. A common rule of thumb is to price at about a tenth of the value delivered, so the customer keeps most of the gain and the decision feels easy.
Work out whether your customer is buying time or money. An owner working seven days a week wants hours. A business paying for five tools wants a smaller bill. The same product is priced and pitched differently for each.
If you cannot put a number on the outcome, the problem is not pricing yet. Go back to the job the customer is hiring the product for.
Step 2: Check it against the alternatives
The customer is already solving the problem somehow, and that sets the ceiling.
- A paid tool: your price will be compared with theirs, fairly or not.
- Staff time or a contractor: you can charge well, because people are expensive.
- Free alternatives: search, a general AI assistant, a spreadsheet, a social group. When the alternative is free, the question is whether your version is worth paying for at all, not how low you can go.
Do not halve a big competitor's price
A founder told us he had set his subscription by taking the market leader's price and cutting it in half. It felt safe. It has three problems:
- The leader does not live on that price. A company with millions of users usually has other income (advertising, partnerships, premium tiers) and scale you do not have.
- Half the revenue, the same cost to win a customer. Ads cost you what they cost everyone else. A lower price just leaves less to pay for them.
- It does not answer the real objection. His real competition was free. Being cheaper than a paid app does not matter to someone who is not paying for anything.
Compare like with like. If no competitor does what you do in the way you do it, their price is weak evidence for yours.
Step 3: Check it against your own numbers
A price has to cover two things.
The cost of serving the customer. Hosting, payment fees, support, and anything charged per use, such as messaging and AI. If a customer could run up unlimited usage on a flat fee, put a cap on it. A flat monthly price with fair limits on email, text messages and AI use protects your margin from the one account that would otherwise cost more than it pays.
The cost of winning the customer. This is where many low prices fail. If a customer pays $10 a month and stays six months, you have $60 of revenue to cover everything, including the ads that found them. Unit Economics for Startups shows the sums and how to work out the most you can afford to pay for a customer.
Your price decides how you can sell
| Price | How it can be sold | Why |
|---|---|---|
| Low (tens of dollars a month) | Self-serve only | There is no margin to pay a person to sell it, so the product and the onboarding must do the selling |
| Middle (around a hundred to a few hundred) | Self-serve, with demos for those who ask | Enough margin for founder-led demos and some support |
| High (a thousand a month and up) | Sales-led | Nobody enters a card for this without a conversation, which is why such products say "book a demo" |
Decide the price and the sales model together. A product that needs a demo to be understood cannot be sold at a price that only supports self-serve.
Step 4: Choose a pricing model
| Model | You charge | Suits | Watch for |
|---|---|---|---|
| Flat rate | One price for everything | Simple products, one kind of customer | Large customers pay the same as small ones |
| Per seat | Per user | Tools where each person gets value | Customers sharing logins to save money |
| Usage-based | Per unit used | Products with a clear unit: messages, transactions, reports | Bills customers cannot predict |
| Tiered | Packages with rising limits | Products serving clearly different sizes of customer | Too many tiers, too early |
| Freemium | Nothing for a basic version | Products that spread between users and cost little to serve | Free users who never pay but still cost you |
The best model has a bill that rises as the customer gets more value. Start with one or two plans. You do not yet know how customers differ, and every extra tier is another decision for the buyer.
Free trial or free plan? A trial gives full access for a limited time and asks for a decision. A free plan gives limited access for ever. For most paid B2B products a trial is the better start, as long as it lasts long enough for the customer to see the value. Our guide to the aha moment covers how long that is.
Annual plans. A discount for paying yearly improves cash flow and retention. Offer it once monthly customers are staying.
App stores. If you sell subscriptions through an app store, the store keeps a share, commonly between 15% and 30%. Build that into the price.
Step 5: Test it with real payments
Surveys are poor at pricing. People say yes to a price and then do not pay it. Three better tests:
- Pre-sell. Before launch, show the product to people in your target group and offer an early-customer discount if they sign up now. Ten to fifteen payments tell you the price is real and give you your first customers. Willingness to Pay covers deposits, fake doors and the other ways to test it.
- Say the price on calls and watch the reaction. If nobody pushes back at all, you are too low. If everyone does, either the price is too high or the value has not landed.
- Ask four questions. The Van Westendorp method asks at what price the product would be so cheap you would doubt it, a bargain, getting expensive, and too expensive to consider. The answers give you a range, which is more useful than asking "would you pay X?"
Often the price is not the problem. The founder with the admin product was sure of this: prospects were not objecting to the number, they did not understand what they would get. Fix the explanation before you cut the price. Our positioning guide covers that.
When to change your price
- Raise it when nobody objects, when you have added real value, or when the margin cannot support acquisition.
- Keep existing customers on their old price for a period. It costs little and keeps goodwill.
- Review it at least once a year. Most startups set a price at launch and never look again.
Common mistakes
- Copying or undercutting a competitor.
- Pricing from cost.
- Too many plans.
- Unlimited usage on something that costs you money.
- A price too low to pay for acquisition.
- Cutting the price when the real problem is the message.
- Never testing a higher one.
Common questions
How do you price a SaaS product?
Start from what the outcome is worth to one specific customer, and charge a fraction of that. Then check the price against three things: what the customer pays for the alternative today, what it costs you to serve them, and what it costs you to win them. Choose a pricing model that grows with the value they get, and test the price by asking for payment.
What is value-based pricing?
Value-based pricing sets the price from what the product is worth to the customer, not from your costs or a competitor's price list. If a product saves a business ten hours a week, the price is set against the value of those hours. A common rule of thumb is to charge around a tenth of the value delivered.
Should I price lower than my competitors?
Not by default. A lower price only wins if customers see the products as the same, and it leaves you less money to reach and serve them. Large competitors also earn in ways you cannot see or copy. Price against the outcome for your chosen customer, and compete on being clearly better for them.
Which SaaS pricing model is best for a startup?
The one where the bill rises as the customer gets more value and that a buyer can understand in one reading. For most early products that means one or two simple plans, priced per account or per seat, with limits on anything that costs you money to provide. Add tiers later, when you know how different customers use the product.
How do I know if my price is too low?
Signs include nobody ever questioning the price, customers who say it is a bargain, margins that leave nothing for acquisition, and buyers who doubt the product's quality because it is cheap. If no prospect in ten pushes back at all, you can almost certainly charge more.
Where Gufy fits
Gufy helps SaaS and mobile-app startups work out who the product is for, what the outcome is worth to them and how to say it, then tests the message and the offer with real buyers. That work sits inside our go-to-market strategy service, and often starts with a growth workshop.
If you have a price and no confidence in it, bring the product and what you know about your customers.