name: subscription-models description: Use when designing SaaS pricing and subscription models. Covers per-seat, tiered, usage-based, and hybrid pricing patterns with Stripe integration, plan transitions, and revenue optimization. allowed-tools: Read, Glob, Grep, Task

Subscription and Pricing Models

Patterns for SaaS pricing strategies, subscription management, and billing integration.

When to Use This Skill

Designing pricing strategy for a new SaaS product
Implementing subscription management system
Integrating with payment providers (Stripe, etc.)
Managing plan upgrades/downgrades
Optimizing conversion and revenue

Pricing Model Spectrum

Fixed                                                Usage-Based
  ◄──────────────────────────────────────────────────────────►

┌──────────────┬──────────────┬──────────────┬──────────────┐
│   Flat-Rate  │   Per-Seat   │    Tiered    │   Metered    │
├──────────────┼──────────────┼──────────────┼──────────────┤
│ $99/month    │ $10/user/mo  │ $99-$999/mo  │ $0.01/API    │
│ All features │ Feature sets │ Feature tiers│ Pay-as-go    │
│ Unlimited use│ Scale w/team │ Upgrade path │ Variable cost│
├──────────────┼──────────────┼──────────────┼──────────────┤
│ Simple       │ Predictable  │ Flexible     │ Aligned      │
│ Low friction │ Team growth  │ Segmentation │ Fair pricing │
└──────────────┴──────────────┴──────────────┴──────────────┘

Model 1: Per-Seat Pricing

Concept

Per-Seat Model:
┌────────────────────────────────────────────────────────────┐
│ Price = Base Price × Number of Licensed Users              │
│                                                            │
│ Example:                                                   │
│ - $15/user/month                                          │
│ - 10 users = $150/month                                   │
│ - Add user = +$15/month (prorated)                        │
│ - Remove user = -$15/month (credit or next cycle)         │
│                                                            │
│ Variations:                                                │
│ - Banded: First 5 users $20, next 10 users $15           │
│ - Volume: 1-10 users $20, 11-50 users $15, 51+ $10       │
│ - Named vs Concurrent: Different licensing models         │
└────────────────────────────────────────────────────────────┘

User Types

User Classification:
┌────────────────────────────────────────────────────────────┐
│ User Type       │ Description           │ Billing          │
│ ───────────────┼───────────────────────┼─────────────────  │
│ Full User       │ All features          │ Full price       │
│ Light User      │ Limited features      │ Reduced price    │
│ Read-Only       │ View only             │ Free or minimal  │
│ External        │ Guest/client access   │ Often free       │
│ Admin           │ Platform admin        │ May be free      │
│ ───────────────┼───────────────────────┼─────────────────  │
│ Example: Slack                                             │
│ - Full: $8.75/user/month                                  │
│ - Guest: Free (limited channels)                          │
└────────────────────────────────────────────────────────────┘

When to Use

✅ Ideal For:
- Collaboration tools (Slack, Teams, Notion)
- CRM systems (Salesforce, HubSpot)
- Project management (Jira, Asana)
- Clear per-person value
- Team-based products

❌ Avoid When:
- Value not tied to user count
- Automation-heavy (fewer users, same value)
- Consumer apps (too friction-heavy)
- API-first products

Model 2: Tiered Pricing

Concept

Tiered Model:
┌────────────────────────────────────────────────────────────┐
│                    PRICING TIERS                           │
│                                                            │
│  ┌──────────────┐ ┌──────────────┐ ┌──────────────┐       │
│  │    FREE      │ │    PRO       │ │  ENTERPRISE  │       │
│  │              │ │              │ │              │       │
│  │   $0/month   │ │  $29/month   │ │  $99/month   │       │
│  │              │ │              │ │              │       │
│  │ ✓ 3 projects │ │ ✓ Unlimited  │ │ ✓ Unlimited  │       │
│  │ ✓ 1 GB       │ │ ✓ 50 GB      │ │ ✓ 500 GB     │       │
│  │ ✓ Community  │ │ ✓ Email      │ │ ✓ Priority   │       │
│  │              │ │ ✓ Analytics  │ │ ✓ SSO/SAML   │       │
│  │              │ │              │ │ ✓ API Access │       │
│  │              │ │              │ │ ✓ Audit Log  │       │
│  └──────────────┘ └──────────────┘ └──────────────┘       │
│                                                            │
│  Upgrade triggers:                                         │
│  - Feature needs (SSO, API)                               │
│  - Usage limits (storage, projects)                       │
│  - Support requirements                                   │
└────────────────────────────────────────────────────────────┘

Tier Design Best Practices

Tier Structure Guidelines:
┌────────────────────────────────────────────────────────────┐
│ 1. Three Tiers (Good-Better-Best)                          │
│    - Free/Starter: Lead generation, self-qualification    │
│    - Pro/Growth: Core paying customers                    │
│    - Enterprise: High-value, sales-assisted               │
│                                                            │
│ 2. Clear Upgrade Triggers                                  │
│    - Usage limits that grow with success                  │
│    - Features that unlock as needs mature                 │
│    - Not artificial restrictions                          │
│                                                            │
│ 3. 10x Value Gap Rule                                      │
│    - Each tier should provide 10x more value              │
│    - Justifies 2-3x price increase                        │
│                                                            │
│ 4. Anchor Pricing                                          │
│    - Middle tier is most popular (position it)            │
│    - Enterprise tier makes Pro look reasonable            │
└────────────────────────────────────────────────────────────┘

When to Use

✅ Ideal For:
- Products with clear feature segmentation
- SMB to Enterprise sales motion
- Self-serve + sales-assisted mix
- Clear upgrade path based on growth

❌ Avoid When:
- Hard to differentiate features
- Continuous value spectrum (use usage-based)
- Very small market (custom pricing better)

Model 3: Usage-Based Pricing

Concept

Usage-Based (Metered) Model:
┌────────────────────────────────────────────────────────────┐
│ Price = Unit Price × Units Consumed                        │
│                                                            │
│ Examples:                                                  │
│ ┌─────────────────┬────────────────────────────────────┐  │
│ │ Product         │ Unit                               │  │
│ ├─────────────────┼────────────────────────────────────┤  │
│ │ AWS             │ Compute hours, storage GB          │  │
│ │ Twilio          │ SMS sent, minutes used             │  │
│ │ Stripe          │ Transactions processed             │  │
│ │ Snowflake       │ Compute credits                    │  │
│ │ OpenAI          │ Tokens processed                   │  │
│ │ SendGrid        │ Emails sent                        │  │
│ └─────────────────┴────────────────────────────────────┘  │
│                                                            │
│ Billing Models:                                            │
│ - Pay-as-you-go: Bill for exact usage                     │
│ - Prepaid credits: Buy credits upfront (discount)         │
│ - Committed use: Commit to minimum (bigger discount)      │
└────────────────────────────────────────────────────────────┘

Metering Implementation

Usage Metering Architecture:
┌────────────────────────────────────────────────────────────┐
│                                                            │
│   Application                                              │
│       │                                                    │
│       ▼                                                    │
│   ┌─────────────────────────────────────────────────────┐  │
│   │ Usage Event Publisher                               │  │
│   │ - tenant_id, metric_id, quantity, timestamp        │  │
│   └───────────────────────┬─────────────────────────────┘  │
│                           │                                │
│                           ▼                                │
│   ┌─────────────────────────────────────────────────────┐  │
│   │ Event Queue (Kafka, SQS, EventHub)                  │  │
│   └───────────────────────┬─────────────────────────────┘  │
│                           │                                │
│                           ▼                                │
│   ┌─────────────────────────────────────────────────────┐  │
│   │ Aggregation Service                                 │  │
│   │ - Hourly/daily roll-ups                            │  │
│   │ - Deduplication                                    │  │
│   │ - Tenant isolation                                  │  │
│   └───────────────────────┬─────────────────────────────┘  │
│                           │                                │
│                           ▼                                │
│   ┌─────────────────────────────────────────────────────┐  │
│   │ Billing Integration (Stripe Metered Billing)        │  │
│   │ - Report usage to Stripe                           │  │
│   │ - Generate invoices                                │  │
│   └─────────────────────────────────────────────────────┘  │
│                                                            │
└────────────────────────────────────────────────────────────┘

When to Use

✅ Ideal For:
- API-first products
- Infrastructure/platform services
- Highly variable workloads
- Value scales with consumption
- Transparent, fair pricing

❌ Avoid When:
- Customers need budget predictability
- Hard to measure meaningful units
- Low-volume, high-value interactions
- Consumer products (prefer flat rate)

Model 4: Hybrid Pricing

Concept

Hybrid Model (Base + Usage):
┌────────────────────────────────────────────────────────────┐
│ Price = Base Platform Fee + Usage Charges                  │
│                                                            │
│ Example: HubSpot                                           │
│ ┌────────────────────────────────────────────────────────┐ │
│ │ Professional Plan: $800/month (base)                   │ │
│ │ + $50/month per 1,000 additional contacts              │ │
│ │ = Predictable base + scales with usage                 │ │
│ └────────────────────────────────────────────────────────┘ │
│                                                            │
│ Benefits:                                                  │
│ - Predictable revenue floor                               │
│ - Grows with customer success                             │
│ - Easier to budget than pure usage                        │
│ - Captures value at scale                                 │
└────────────────────────────────────────────────────────────┘

Tier + Usage Combination

Tiered Features + Usage Metering:
┌────────────────────────────────────────────────────────────┐
│           │ Starter      │ Pro          │ Enterprise      │
│ ──────────┼──────────────┼──────────────┼─────────────────│
│ Base      │ $0           │ $99/mo       │ $499/mo         │
│ ──────────┼──────────────┼──────────────┼─────────────────│
│ API Calls │ 1K free      │ 10K included │ 100K included   │
│ Overage   │ $0.01/call   │ $0.005/call  │ $0.002/call     │
│ ──────────┼──────────────┼──────────────┼─────────────────│
│ Storage   │ 1 GB         │ 50 GB        │ 500 GB          │
│ Overage   │ $0.10/GB     │ $0.05/GB     │ $0.02/GB        │
│ ──────────┼──────────────┼──────────────┼─────────────────│
│ Features  │ Basic        │ + Analytics  │ + SSO, API Keys │
└────────────────────────────────────────────────────────────┘

Plan Transitions

Upgrade Flow

Upgrade Handling:
┌────────────────────────────────────────────────────────────┐
│ 1. Immediate Upgrade (Recommended)                         │
│    - Prorate remaining time on current plan               │
│    - Apply as credit to new plan                          │
│    - Start billing new plan immediately                   │
│    - Unlock features instantly                            │
│                                                            │
│ 2. Next Cycle Upgrade                                      │
│    - Schedule upgrade for next billing date               │
│    - Continue current plan until then                     │
│    - Simpler billing, delayed value                       │
│                                                            │
│ Proration Example:                                         │
│ - Current: Pro $100/mo, used 15 days                      │
│ - Upgrade to: Enterprise $300/mo                          │
│ - Credit: $100 × (15/30) = $50 unused                     │
│ - New charge: $300 - $50 = $250 today                     │
│ - Next month: Full $300                                   │
└────────────────────────────────────────────────────────────┘

Downgrade Flow

Downgrade Handling:
┌────────────────────────────────────────────────────────────┐
│ 1. End of Cycle Downgrade (Recommended)                    │
│    - Continue current plan until period ends              │
│    - Apply new plan on next billing date                  │
│    - Preserve paid value, reduce churn                    │
│                                                            │
│ 2. Immediate Downgrade                                     │
│    - Apply credit for unused time (optional)              │
│    - May trigger data/feature loss                        │
│    - Handle gracefully (warning, export data)             │
│                                                            │
│ Feature Loss Handling:                                     │
│ - Warn user about features that will be lost              │
│ - Provide data export before downgrade                    │
│ - Grace period for critical features                      │
│ - Consider "soft" downgrade (hide, don't delete)          │
└────────────────────────────────────────────────────────────┘

Trial and Freemium

Trial Strategies

Trial Models:
┌────────────────────────────────────────────────────────────┐
│ Time-Limited Trial:                                        │
│ - 14/30-day full access                                   │
│ - No payment required upfront                             │
│ - Converts or loses access                                │
│ - Best for: Products with learning curve                  │
│                                                            │
│ Credit Card Required Trial:                                │
│ - 7/14-day trial with card on file                        │
│ - Auto-converts unless canceled                           │
│ - Higher conversion, lower volume                         │
│ - Best for: High-intent customers                         │
│                                                            │
│ Freemium (Permanent Free Tier):                            │
│ - Limited free tier forever                               │
│ - Upgrade for more features/usage                         │
│ - Lead generation + virality                              │
│ - Best for: Products with network effects                 │
│                                                            │
│ Reverse Trial:                                             │
│ - Start on premium, downgrade to free                     │
│ - Experience full value first                             │
│ - Best for: Feature-rich products                         │
└────────────────────────────────────────────────────────────┘

Conversion Optimization

Trial-to-Paid Conversion:
┌────────────────────────────────────────────────────────────┐
│ Key Metrics:                                               │
│ - Trial start rate (visitors → trials)                    │
│ - Activation rate (trials → active use)                   │
│ - Conversion rate (trials → paid)                         │
│ - Time to value (days to first value moment)              │
│                                                            │
│ Optimization Tactics:                                      │
│ ───────────────────────────────────────────────────────── │
│ 1. Reduce time-to-value                                   │
│    - Onboarding flows                                     │
│    - Templates and presets                                │
│    - Quick-start guides                                   │
│                                                            │
│ 2. Demonstrate premium value                              │
│    - Feature previews (locked but visible)                │
│    - Usage limit warnings                                 │
│    - "You're using a Pro feature" nudges                  │
│                                                            │
│ 3. Timely conversion prompts                              │
│    - Email sequences (day 1, 7, 12, 14)                   │
│    - In-app reminders before expiry                       │
│    - Extension offers for engaged users                   │
└────────────────────────────────────────────────────────────┘

Revenue Metrics

Key SaaS Metrics

Revenue Metrics:
┌────────────────────────────────────────────────────────────┐
│ MRR (Monthly Recurring Revenue):                           │
│ = Sum of all monthly subscription fees                    │
│                                                            │
│ ARR (Annual Recurring Revenue):                            │
│ = MRR × 12                                                │
│                                                            │
│ MRR Movement:                                              │
│ ┌────────────────────────────────────────────────────────┐ │
│ │ New MRR          +$10,000  (new customers)             │ │
│ │ Expansion MRR    +$3,000   (upgrades, add-ons)         │ │
│ │ Contraction MRR  -$1,000   (downgrades)                │ │
│ │ Churned MRR      -$2,000   (cancellations)             │ │
│ │ ────────────────────────────────────────────────────── │ │
│ │ Net New MRR      +$10,000                              │ │
│ └────────────────────────────────────────────────────────┘ │
│                                                            │
│ ARPU (Average Revenue Per User):                           │
│ = Total Revenue / Total Customers                         │
│                                                            │
│ LTV (Customer Lifetime Value):                             │
│ = ARPU × Average Customer Lifespan                        │
│ = ARPU / Churn Rate                                       │
│                                                            │
│ CAC (Customer Acquisition Cost):                           │
│ = Total Sales & Marketing / New Customers                 │
│                                                            │
│ LTV:CAC Ratio (Target: 3:1+):                             │
│ = LTV / CAC                                               │
└────────────────────────────────────────────────────────────┘

Decision Framework

Choosing Your Model

Model Selection Guide:
┌────────────────────────────────────────────────────────────┐
│ Question                          → Recommendation         │
│ ─────────────────────────────────────────────────────────  │
│ Value scales with team size?      → Per-seat              │
│ Clear feature differentiation?    → Tiered                │
│ Value scales with consumption?    → Usage-based           │
│ Need predictable + variable?      → Hybrid                │
│                                                            │
│ Market Considerations:                                     │
│ ─────────────────────────────────────────────────────────  │
│ Enterprise B2B: Tiered + Per-seat                         │
│ SMB B2B: Tiered (simple, self-serve)                      │
│ Developer/API: Usage-based or Hybrid                      │
│ Consumer: Freemium + Tiered                               │
│ Infrastructure: Usage-based                               │
└────────────────────────────────────────────────────────────┘

Related Skills

usage-metering - Event-driven metering implementation
entitlements-management - Feature gating and quotas
billing-integration - Stripe and payment provider patterns
trial-conversion - Trial optimization tactics

References

Load for tier design patterns
Load for upgrade/downgrade handling

Last Updated: 2025-12-26

subscription-models

$ Install

name: subscription-models description: Use when designing SaaS pricing and subscription models. Covers per-seat, tiered, usage-based, and hybrid pricing patterns with Stripe integration, plan transitions, and revenue optimization. allowed-tools: Read, Glob, Grep, Task

Subscription and Pricing Models

When to Use This Skill

Pricing Model Spectrum

Model 1: Per-Seat Pricing

Concept

User Types

When to Use

Model 2: Tiered Pricing

Concept

Tier Design Best Practices

When to Use

Model 3: Usage-Based Pricing

Concept

Metering Implementation

When to Use

Model 4: Hybrid Pricing

Concept

Tier + Usage Combination

Plan Transitions

Upgrade Flow

Downgrade Flow

Trial and Freemium

Trial Strategies

Conversion Optimization

Revenue Metrics

Key SaaS Metrics

Decision Framework

Choosing Your Model

Related Skills

References

Repository

Actions

Related Skills