Why Your SaaS Pricing Strategy Might Be Wrong

Is your pricing holding back your growth? Over 90% of SaaS founders undercharge when they should be driving real value.

“Charge more.” – Patrick McKenzie, based on his early MicroConf keynote advice

Did you know that even Sam Altman, CEO of OpenAI, is wrestling with pricing issues? The company—valued at a staggering $80 billion—revealed they’re losing money on their $200 monthly ChatGPT Pro plan. If one of the world’s most sophisticated tech businesses can underprice a flagship offering, chances are your SaaS venture might be doing the same. In this article, we’ll explore why pricing matters, common pitfalls that business founders face, and how you can turn pricing into your biggest growth lever.

Charging Too Little is the Silent Killer of Great Businesses

Underpricing is a common business mistake that quietly erodes revenue, discourages investment, and impedes long-term growth. Many SaaS founders struggle with:

1. Fear of No Sales: The concern that higher prices will block customer acquisition. In reality, many companies in your market charge more, yet still enjoy robust sales.
2. Imposter Syndrome: Doubting your own product quality leads you to offer it at bargain rates, even when it outperforms competitors.
3. Competitor Pricing: Assuming you must match or undercut competitors ignores the value you uniquely deliver. Differentiation in features, service, or positioning justifies premium pricing.
4. Fear of Pricing Changes: Worries about churn or backlash hold you back from updates. While some churn is inevitable, the long-term benefits often outweigh short-term losses.

Back in 2011, Patrick McKenzie famously condensed effective SaaS pricing advice into just two words: “Charge more.” That simple mantra underscores the idea that confidence in value often translates directly to revenue and growth. When founders recalibrate their mindset and overcome the fear of rejection, they open the door to significant upside.

Each of these barriers can limit your ability to invest in features, marketing, and customer support—ultimately slowing your company’s trajectory.

Why You Should Charge More

Pricing is arguably the most powerful lever in SaaS growth. When you optimize pricing:

• Immediate Uplift in MRR: A modest increase can translate into tens of thousands more in monthly recurring revenue without any extra sales effort.
• Improved Customer Quality: Higher-priced plans tend to attract and retain customers who are more committed and less price sensitive.
• Enhanced Perceived Value: Premium pricing signals quality, encouraging prospects to view your solution as enterprise-grade.

For example, a Tiny Seed–backed SaaS segmented its churn by price tier. Customers on a $29 plan churned at over 11% annually, while those on a $99 plan delivered a net negative churn of 4%. That single pricing adjustment can be the difference between a $1 million and a $4 million ARR business. Similarly, Gather increased its entry-level plan from $39 to $99 without losing conversion momentum, unlocking faster growth and lower attrition.

Common SaaS Pricing Models

Choosing the right pricing model is as important as setting the right price tags. You can select from:

• Per-user pricing is straightforward and scales with the customer’s team but can discourage adoption across departments.
• Usage-based pricing aligns payments with usage metrics like API calls or data processed, ensuring fairness but adding complexity.
• Tiered pricing bundles features into clearly defined plans—Basic, Pro, and Enterprise—to cater to different customer segments.
• Freemium or free-trial models lower barriers to entry by offering limited features or time-based access, then upselling paid tiers for advanced capabilities.

Evaluating these models helps you match your pricing structure to customer needs and market expectations, fueling sustainable SaaS growth.

How to Raise Your Prices Effectively

Ready to adjust your pricing? These tactics will help you execute smoothly:

1. Adjust Value Metrics: Reduce usage limits on lower tiers rather than raising sticker prices. For instance, lower the contact cap from 3,000 to 2,500 for the same fee, then monitor upgrades.
2. Eliminate Low-Tier Plans: Remove the cheapest offering to simplify options and nudge customers to higher-value tiers. A two-tier structure often yields stronger average contract values.
3. Experiment Cautiously: Treat price adjustments like reversible experiments. Set clear benchmarks, audiences, and rollback thresholds before you launch.
4. Segment New vs. Existing Customers: Grandfather existing accounts at old rates while applying new pricing to incoming customers. This approach reduces backlash and gives you time to analyze the impact.
5. Communicate Transparently: Announce changes with at least 60 days’ notice. Explain why the adjustment is necessary—cover rising costs, added features, or enhanced support.
6. Incentivize Early Sign-Ups: Offer a short-term window for customers to lock in current pricing by committing to an annual plan. This drives advanced conversions and offsets initial hesitation.

Each tactic reduces friction, maintains trust, and preserves your brand reputation while you capture more revenue.

Wrapping It Up

Implementing an optimized pricing strategy can transform your business by boosting MRR, improving churn dynamics, and positioning you as a market leader. You don’t need to overhaul every element at once—small changes can have outsized effects.

What steps will you take this week to align your pricing with your product’s true value? Share your wins and questions in our founders’ community for feedback and support.

If you want to dive deeper, watch our 48-minute conference talk on advanced pricing techniques and join our webinar series exclusively for SaaS founders focused on sustainable growth.

• Bold Takeaway: Review your current pricing tiers and identify at least one immediate change—whether adjusting value metrics or grandparenting a new plan—to boost MRR and customer loyalty.