Pricing is product strategy made concrete. The model you choose doesn’t just determine your revenue — it shapes your sales motion, your customer success approach, your engineering priorities, and the types of customers you attract.
Freemium
Freemium works when your product has viral network effects, extremely low marginal cost per user, and a clear upgrade trigger that free users naturally hit. Notion, Slack, and Dropbox are the canonical examples. The mistake most teams make is confusing “free trial” with “freemium” — they’re fundamentally different acquisition strategies.
Usage-Based
Usage-based pricing aligns your revenue directly with the value your customers receive. It reduces friction at the point of sign-up (no commitment), scales naturally with successful customers, and creates a powerful flywheel for expansion revenue. The downside: it creates revenue unpredictability and can penalize customers for success if not designed carefully.
Seat-Based
Seat-based pricing is the workhorse of B2B SaaS. It’s easy for buyers to understand, easy for you to forecast, and creates natural expansion opportunities as teams grow. The risk is that it can create perverse incentives — teams share logins to avoid seat costs, which undermines your usage data and expansion potential.
Our Recommendation
For most B2B SaaS products at the $0-$5M ARR stage, we recommend a hybrid: seat-based base pricing with usage-based expansion components. Start with simplicity — one or two pricing tiers with clear differentiation — and add complexity only when your data shows you’re leaving meaningful money on the table.
