Setting a price for a new SaaS product is one of the hardest early decisions a founder has to make. It’s even harder when you’re building something novel and have no direct competitors or market benchmarks to guide you. Without a reference point, it can feel like you’re guessing.

However, this absence of benchmarks is also an opportunity. It forces you to price your product based on the most important factor: the value it delivers to your customers. This guide explains how to approach pricing from first principles, focusing on value, experimentation, and customer understanding.

Value-based pricing is the practice of setting a price based on the perceived or estimated value a customer receives from your product. Instead of looking at your costs or competitors, you anchor your price to the return on investment (ROI) your customer gets.

This approach requires a deep understanding of your customer’s problems. The goal is to quantify the impact of your solution. Does it:

• Save them time? (e.g., automating a 10-hour weekly task)
• Increase their revenue? (e.g., improving conversion rates by 2%)
• Reduce their costs? (e.g., consolidating three other software tools)
• Decrease their risk? (e.g., ensuring compliance to avoid fines)

By focusing on the outcome, you can have confident conversations about why your product is worth the price.

When you’re starting from scratch, it’s best to keep your pricing model simple. You can introduce complexity later as you learn more about your customers. The following models are excellent starting points for testing your assumptions.

• Tiered Pricing: This is the most common SaaS model for a reason. It allows you to offer different packages of features at different price points, catering to various customer segments. You can create tiers based on user personas (e.g., “Starter,” “Professional,” “Enterprise”) and align features to the needs of each.
• Usage-Based Pricing: This model directly links the price to a specific “value metric”—a unit of consumption that correlates with the value a customer receives. Examples include price per user, per API call, per gigabyte of storage, or per transaction. It’s a fair model that scales with your customer’s success, making it easier for them to start small.
• Flat-Rate Pricing: A single price for a single set of features. This model is the simplest to communicate and manage. It works well for products that solve one specific problem with a uniform feature set, like a simple analytics tool or a design asset library.

Pricing a product without benchmarks presents unique difficulties. Awareness of these challenges can help you navigate them more effectively.

• Fear of getting it wrong: Many founders worry about undercharging and leaving money on the table or overcharging and scaring away early adopters.
• Difficulty communicating value: Without a competitor as a reference, you bear the full burden of explaining your product’s value proposition and justifying its price.
• Analysis paralysis: The lack of data can lead to endless internal debates and a failure to make a decision and move forward.
• Ignoring the value metric: It’s easy to fall back on pricing per user, but that might not be where your customers find the most value. A tool that saves significant engineering hours might be better priced based on usage or features, not seats.

Pricing is not a one-time decision; it’s a process of continuous discovery. Use these best practices to gather data and iterate your way to an effective pricing strategy.

1. Talk to potential customers: Before you write a single line of code for a billing system, talk to your target users. Don’t ask, “What would you pay for this?” Instead, ask questions that uncover the value of solving their problem, such as:
   • “How much time are you currently spending on this process?”
   • “What is the business impact of this problem?”
   • “What other tools have you tried, and what did they cost?”
2. Start with a hypothesis and test it: Formulate a clear pricing hypothesis based on your initial customer research. For example: “We believe small marketing teams will pay $99/month for our ‘Pro’ tier because it saves them an estimated 20 hours of work per month.” Then, put it on a pricing page and see if anyone buys it.
3. Offer a “founder’s price” to early adopters: Reward your first users with a lifetime discount in exchange for their feedback. This builds goodwill and reduces their risk of adoption, giving you invaluable insights from a committed group of users. Be clear that the price will increase for future customers.
4. Focus on one clear value metric: Especially for usage-based models, pick the one metric that most closely aligns with the value your customers get. Is it the number of contacts in their database? The number of reports they generate? The volume of data processed? Keeping it simple makes it easy for customers to understand and predict their costs.
5. Treat pricing as a feature: Just like any other part of your product, your pricing needs to be reviewed and iterated upon. Plan to revisit your pricing every six to twelve months based on customer feedback, usage data, and your evolving product capabilities.

Pricing without benchmarks requires a flexible system that lets you test, learn, and adapt without sinking months into building custom billing logic. Kinde’s billing engine is designed for this kind of experimentation.

Instead of hard-coding prices into your application, you can use Kinde to define and manage your subscription plans. You can easily configure different pricing models, whether it’s a simple flat-rate subscription, tiered plans with different feature sets, or more complex usage-based pricing. This allows you to:

• Quickly launch a new pricing strategy.
• Test different price points for different customer segments.
• Change your pricing as you learn more about your market without requiring significant engineering resources.

With a flexible billing infrastructure, you can move faster and focus on what really matters: building a product that customers value and are happy to pay for.

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