4 min readBusiness software pricing, simplified
SaaS pricing is complicated. For a shopper, it is confusing and difficult to compare. At AppCity, we've spent a lot of time distilling price down to make it easy to understand and shop for business software on our site.
Here, we'll go a little deeper to understand the concepts behind our shopping experience. First, we'll look at two common price features across all business apps. Then, we'll break down the four most common pricing models: flat-rate, per-user, usage-based, and revenue-fee.
Common price features
Before we get to each price model, there are two common features we see across most business apps, regardless of price model: pricing tiers and annual billing discounts.
Most apps are broken down into tiers with different prices, features, and limits. You may have heard the term good, better, best. It's the same idea: pay more and you get access to more features, with less limits.
Descript has a common setup with four price tiers (or plans).
Pop-quiz: Can you guess Descript's pricing model? Answer at the bottom.
Annual billing discounts
It is common for app developers to offer a discount if you pay up front for the year. For the developer, this makes sense. A full year subscription paid today is worth more than one paid each month in increments. Some developers go even further and do not offer monthly billing (Salesforce, for example).
For you, annual billing may or may not make sense depending on how sure you are to use the app going forward. You can pay annually for a discount or pay monthly to retain some flexibility at a higher cost.
On AppCity, you can switch between monthly and yearly billing prices in search and on app pages.
Not everyone offers annual billing discounts, but for those that do, we see discounts ranging from 5% to 25%.
Common price models
After looking at thousands of apps, we break down apps into four primary pricing models:
- Flat-rate pricing
- Per-user pricing
- Usage-based pricing
- Revenue-fee pricing
Business apps typically converge around one price model for a given category. For example, CRMs are most often per-user pricing. While, email marketing tools are mostly usage-based pricing.
Flat-rate pricing is the most common pricing model. It is a fixed fee, paid per month or per year, for a set of features. Typically there are limits on the number of users or usage, with limits loosening as you pay more (upgrade tiers).
Per-user pricing is exactly what is sounds like: pay a fixed fee for each user on your account. Apps with per-user pricing are commonly broken into tiers, where you pay more or less per-user depending on the features you need.
While shopping on AppCity, you can see an app's pricing model by hovering over these tips.
Usage-based pricing is where you pay a variable rate based on the amount you use the app. For example, email marketing tools will commonly charge based on the number of subscribers or contacts you have on your email list.
Sometimes usage-based is paired with tiers, where each tier has a different base fee that includes certain features. Each tier price increases with your usage of the app. Mailchimp is an example of this model.
Others are simply free until you reach a threshold and the price increases from there. For example, Klaviyo is free up to 250 contacts. After that, it is $20 per month up to 500 contacts and it continues to increase as your email list grows.
Revenue-fee pricing is free to use, but as you make money (revenue) the app takes a cut. This is the least common pricing model, but you will see it occassionally. The nice part about this model is you pay nothing when you are making nothing. You only pay when you are making money.
Anchor, a podcast recording and hosting tool, uses this model. You pay nothing to host your podcast with them. When you start making money via listener support or ads, Anchor takes 4.5%.
That's business app pricing in a nutshell. We've incorporated this information into our shopping experience with price-model tips and the ability to switch between monthly or yearly billing, so you can shop for software like you shop for everything else.
Answer: Descript is per-user pricing!