SaaS pricing: plans, freemium or free trial
Pricing subscription software involves two decisions: how much to charge for each plan and how customers start using it, through a free-forever plan (freemium) or a free trial period.
Plans and average price
Most SaaS products offer three plans, such as Basic, Pro and Business. The average price per customer (ARPU) is the price of each plan weighted by its share of customers. In the calculator’s example, with plans at $49, $129 and $399, ARPU is $129.50. A well-positioned expensive plan makes the middle one look affordable, the so-called anchor effect, and lifts the average price.
The example uses the calculator’s default values; replace them with your own.
Margin by plan
Every customer has a cost to serve: hosting, support, licenses. SaaS gross margin usually sits between 70% and 85%. Cheap plans with a lot of support can have thin margins, so check plan by plan.
Freemium or free trial
| Model | Works best when | Watch out for |
|---|---|---|
| Freemium | the product spreads on its own (users invite others) and a free user costs little | free-to-paid conversion is usually 2% to 5%; the free base costs money |
| Free trial | the product is more complex, higher priced, and its value shows quickly | fewer sign-ups |
What the calculator does
It simulates 24 months of both models: with freemium, more sign-ups join the free base and some upgrade each month; with a free trial, part of the sign-ups become customers directly. Gross profit includes the cost of free users. It also shows the monthly free-to-paid conversion at which both models break even, a useful number to compare with what you measure.