The Pricing Roadmap: How to Design B2B SaaS Pricing for Growth and Profit

1. The Pricing Roadmap

In the ever-evolving landscape of B2B SaaS (Software-as-a-Service), pricing is one of the most critical, yet challenging, aspects of business strategy. The Pricing Roadmap by Ulrik Lehrskov-Schmidt provides a comprehensive guide to designing a pricing model that drives growth and profitability. This book is essential for entrepreneurs, business leaders, and self-improvement enthusiasts seeking a structured approach to monetizing their SaaS offerings effectively.

1.1. Relevance to Entrepreneurs and Business Leaders

Entrepreneurs and leaders often focus on product development, sales, and marketing while underestimating the power of a well-structured pricing strategy. Pricing is more than just setting a number; it involves understanding customer psychology, market positioning, and revenue optimization. This book provides a roadmap for:

Achieving Competitive Advantage – A strong pricing model can create sustainable superior profits, which is the essence of business strategy.
Scaling Effectively – Lehrskov-Schmidt introduces different types of scaling (cost, product, and distribution) and explains how pricing influences them.
Customer Segmentation and Pricing Discrimination – Learning how to price different customer segments appropriately ensures businesses maximize their revenue potential.

By implementing the principles from this book, leaders can transform their pricing strategy into a strategic growth lever rather than an afterthought.

1.2. Real-World Application of the Book’s Concepts

One of the practical applications of Lehrskov-Schmidt’s pricing strategy is the “Land-and-Expand” model. A logistics SaaS company implemented a tiered pricing structure to first attract customers with a low-entry product and then gradually move them up the value chain.

Step 1: Identify the “Point of First Demand” – The company introduced a predictive maintenance tool, a product with high market demand.
Step 2: Create a Product Ladder – Once customers were engaged, they were offered an upgrade to operational efficiency solutions.
Step 3: Use Expansion Pricing – As customers saw the value, they upgraded to full management software, significantly increasing customer lifetime value (CLV).

This structured approach allowed the company to exceed a +120% net dollar retention benchmark, demonstrating how effective pricing can drive business growth.

1.3. Key Ideas and Concepts from the Book

Lehrskov-Schmidt presents a structured methodology for designing pricing strategies, covering key concepts such as:

1. Price Your Customer, Not Your Product

One of the central themes of the book is that businesses should price customers based on their willingness to pay, rather than setting a static price for the product. Different customer segments have different price sensitivities, and businesses can use pricing models to optimize revenue.

2. Scale Economics and Competitive Advantage

Superior profits come from scale, and there are three types of scale:

Cost scale – Reducing costs per unit as sales increase.
Product scale – Increasing value for customers by improving offerings.
Distribution scale – Expanding market reach efficiently.

3. The CUPID Model for SaaS Pricing

Lehrskov-Schmidt introduces the CUPID model to guide pricing decisions. This framework ensures pricing supports overall business strategy and long-term growth.

C-Clarify Value: This step emphasizes understanding and articulating the value that the product delivers to customers. It involves identifying the specific problems the product solves and how it benefits the customer, ensuring that pricing reflects this perceived value rather than just costs or competitor benchmarks.
U-Understand Customer Segments: Here, the focus is on segmenting the customer base to tailor pricing strategies to different groups. By analyzing customer needs, behaviors, and willingness to pay, businesses can create targeted pricing tiers or packages that appeal to each segment, maximizing appeal and revenue potential.
P-Price to Demand: This step involves setting prices based on demand dynamics and customer willingness to pay. It encourages businesses to use data-driven insights, such as market research or willingness-to-pay analysis, to establish pricing that captures value while remaining competitive and attractive to customers.
I-Iterate and Test: Pricing is not a one-time decision but an ongoing process. This step highlights the importance of testing pricing models, gathering feedback, and iterating based on real-world results. It ensures that pricing evolves with customer preferences and market conditions.
D-Design for Scale: The final step focuses on creating pricing structures that support long-term growth. This includes designing scalable models (e.g., tiered pricing, add-ons, or usage-based metrics) that encourage expansion revenue as customers grow and adopt more features over time.

4. Product and Pricing Models

Pricing models should not be simple but should be easy to sell. The book categorizes pricing structures into transactional fees, flat fees, and metric-based fees, helping companies design models that optimize revenue.

5. Wallet Structuring and Buyer Personas

Enterprise software purchases often involve multiple stakeholders (the “Wallet”). Companies should structure pricing to align with different budget owners within an organization, ensuring maximum revenue capture.

The Pricing Roadmap is an essential guide for entrepreneurs, SaaS leaders, and business strategists looking to develop a scalable and profitable pricing model. Lehrskov-Schmidt provides a structured framework that enables companies to move beyond gut-feel pricing decisions and implement strategic pricing structures that drive long-term growth. Whether you are a startup founder, a SaaS executive, or a business consultant, this book offers actionable insights that can transform your approach to pricing and profitability.

2. Why Pricing Is Hard?

Pricing is one of the most misunderstood and challenging aspects of running a B2B SaaS business. In Chapter 1 of The Pricing Roadmap, Ulrik Lehrskov-Schmidt explains why pricing is not just about numbers but about strategic design. Many entrepreneurs approach pricing as a math problem when, in reality, it is a decision-making process that shapes the success or failure of a product. This chapter lays the groundwork for understanding pricing complexities and introduces key concepts that will be expanded upon in later chapters.

2.1. Why Pricing Feels Like a Catch-22

When businesses set a price, they often feel trapped in a no-win scenario. If they set the price too high, they risk losing potential customers. If they set it too low, they leave money on the table and may not be able to sustain profitability. This is what Lehrskov-Schmidt calls the Price Optimization Problem—a dilemma that plagues SaaS founders and executives.

To illustrate this, the book presents a real-world example of a SaaS company that secured a €1 million contract with an insurance firm, only to realize later that the customer was prepared to pay significantly more. The company had unknowingly underpriced its value, missing out on substantial revenue. This example highlights a key lesson: businesses rarely hear that their prices are too low, but they will always hear complaints when their prices are perceived as too high.

2.2. Why Asking “What Should My Product Cost?” Is the Wrong Question

Most businesses approach pricing by asking, “What should our product cost?” This is a flawed starting point because it focuses on the product rather than the customer. Pricing should be built around how different customer segments perceive value, not just around production costs or competitor benchmarks.

To rethink pricing, businesses should follow these steps:

a. Identify the Core Value Proposition

Instead of starting with a number, businesses should define the core value they provide. Customers do not buy software; they buy solutions to their problems. A pricing strategy should begin with an understanding of what problem the product solves and how much solving that problem is worth to the customer.

For example, a SaaS platform that automates compliance reporting saves companies hundreds of employee hours. The price should reflect that time and cost savings rather than simply the cost of maintaining the software.

b. Segment Customers Based on Willingness to Pay

Customers have different needs and budgets. The same product may be worth vastly different amounts to different segments. Pricing should be designed to maximize revenue across these segments rather than settling on a single universal price point.

One way to segment customers is by company size. A small startup may have limited funds, while a Fortune 500 company may be willing to pay premium prices for additional support, integrations, and security features. By structuring pricing tiers that cater to different segments, businesses can capture more value without alienating lower-budget customers.

c. Avoid the Mistake of “One-Size-Fits-All” Pricing

A common error in SaaS pricing is setting a fixed price that does not account for variations in customer value. Instead of choosing a single price, businesses should create a flexible pricing model that adjusts based on usage, value, or features.

For instance, many SaaS companies use tiered pricing, where basic functionality is offered at a lower price while premium features are reserved for higher-paying customers. This allows businesses to serve multiple segments while maximizing revenue.

d. Use Pricing as a Business Strategy, Not Just a Sales Tactic

Pricing should not be an afterthought or a last-minute sales decision. It should be an integral part of the overall business strategy. Companies should design their pricing structure to align with their growth model, product positioning, and competitive landscape.

For example, some companies use land-and-expand strategies, offering a low initial price to attract customers and then increasing prices over time as customers become more dependent on the product. Others use premium positioning, pricing high to signal exclusivity and value.

e. Recognize That SaaS Pricing Is Different from Physical Product Pricing

Traditional businesses often set prices based on cost-plus pricing, where a markup is added to production costs. However, in SaaS, production costs are often negligible once the software is built. Instead, pricing should be based on customer value and market positioning rather than cost.

A great example is cloud computing services. Amazon Web Services (AWS) prices its offerings not based on the cost of running servers but on the value of scalability and reliability to customers. Similarly, B2B SaaS companies should think in terms of customer outcomes rather than internal costs when setting prices.

2.3. Why SaaS Pricing Is Like Running a Train

To further explain why pricing should focus on customer value, the book uses the analogy of railroads in the 1800s. Steam trains were a breakthrough technology, drastically reducing travel costs. Before trains, traveling across the U.S. was expensive and dangerous. Once railroads were built, the cost of moving a passenger was nearly zero—but what should the ticket price be?

If the price was too high, only the wealthy could afford it, limiting market reach.
If the price was too low, the railroads would never recover their massive infrastructure investments.
The solution was price segmentation—first-class passengers paid premium rates for luxury travel, while third-class passengers traveled in basic, sometimes uncomfortable conditions.

This same principle applies to SaaS pricing. Companies should design pricing structures that cater to different customer segments rather than trying to set a single “optimal” price.

2.4. The Key Takeaway

The main argument of Chapter 1 is that pricing is not just about numbers—it is about designing a structure that aligns with customer value, business strategy, and long-term growth. Businesses that focus on customer-centric pricing models will avoid common pitfalls and maximize revenue.

To get pricing right, SaaS companies should:

Stop asking, “What should my product cost?” Instead, ask, “What is my customer willing to pay?”
Recognize that pricing is dynamic. It should evolve based on market feedback, customer behavior, and product improvements.
Design pricing structures, not just price points. Tiers, usage-based pricing, and premium features should all be part of the equation.
Use pricing as a competitive advantage. A well-structured pricing model can help differentiate a company from competitors and create long-term profitability.

By shifting their mindset from static pricing to pricing as a design challenge, entrepreneurs and business leaders can build SaaS businesses that thrive. This chapter sets the stage for the rest of The Pricing Roadmap, where Lehrskov-Schmidt dives deeper into how to create scalable and profitable pricing models.

3. Understanding Scale Economics

In Chapter 2 of The Pricing Roadmap, Ulrik Lehrskov-Schmidt explores scale economics and why it is crucial for SaaS businesses to design their pricing models with scalability in mind. Unlike traditional businesses that rely on physical production, SaaS companies can grow revenue significantly without proportionally increasing costs—if they structure their pricing and operations effectively.

This chapter explains how different types of scaling impact profitability and how businesses can build a pricing model that maximizes revenue while maintaining a competitive edge.

3.1. Why Scaling Is the Key to Profitability

SaaS businesses are unique in that their unit costs—the cost of serving one additional customer—are extremely low. Unlike manufacturing, where each new product requires raw materials and labor, software can be replicated with minimal additional expense. This is why SaaS companies often talk about “scaling” rather than just selling.

However, not all scaling is created equal. If a company grows without a strategy, it risks increasing costs and complexity without improving profitability. To build a truly scalable business, companies must focus on three key types of scaling: cost, product, and distribution.

3.2. The Three Types of Scaling and How They Affect Pricing

a. Cost Scaling – Lowering Unit Costs as You Grow

The first type of scale is economies of scale, where costs decrease as revenue grows. This is common in traditional industries, but in SaaS, it applies mainly to development and infrastructure costs.

In a SaaS business, the cost to develop a product is fixed, meaning companies spend millions building software before they ever make a sale. However, once the software is built, the cost of delivering it to additional customers is nearly zero. This is what makes SaaS so profitable at scale.

A great example is cloud computing. Amazon Web Services (AWS) initially invested billions in data centers, but once those centers were running, serving additional customers cost almost nothing. This allowed AWS to dominate the market with low-cost, high-margin services.

To achieve cost scaling, SaaS businesses should:

Invest heavily in development early on while keeping operational costs as low as possible.
Optimize cloud and infrastructure expenses to ensure margins improve as customer volume increases.
Automate customer onboarding and support to minimize human costs while growing.

b. Product Scaling – Increasing the Value of Your Software Over Time

The second type of scale is product scaling, where the value of the product increases as more people use it. This is often referred to as network effects.

A classic example is LinkedIn. When only a few people used LinkedIn, its value was low. But as more professionals joined, the platform became more valuable to every user, making it harder for competitors to disrupt.

SaaS businesses can create product scaling by:

Building features that improve with usage, such as AI recommendations that get smarter over time.
Encouraging collaboration within the software, like Slack or Asana, where each new user makes the tool more valuable.
Developing integrations with other software to create an ecosystem that locks users in and enhances their experience.

When product scaling is successful, companies can increase prices over time because customers will pay more for a platform that becomes indispensable.

c. Distribution Scaling – Lowering Customer Acquisition Costs Over Time

The third type of scale is distribution scaling, which occurs when customer acquisition costs (CAC) decrease as the company grows. Many SaaS companies struggle with CAC because they spend heavily on sales and marketing. If these costs remain high, profitability becomes impossible.

One of the best ways to achieve distribution scaling is by leveraging viral growth and brand recognition. Dropbox, for example, grew rapidly by offering free storage in exchange for referrals, reducing its reliance on paid marketing.

To scale distribution, businesses should:

Develop a product that encourages referrals, such as by offering rewards for customer recommendations.
Use freemium models to attract a large audience, converting free users into paying customers over time.
Create partnerships and integrations to reach new markets without excessive advertising costs.

When done correctly, distribution scaling makes customer acquisition cheaper over time, increasing profit margins.

3.3. How to Apply Scale Economics to Pricing Strategy

Once a SaaS business understands the three types of scaling, it can design a pricing model that supports long-term profitability. Lehrskov-Schmidt introduces the CLTV/CAC ratio as the key formula for pricing success.

a. Calculate CLTV/CAC to Measure Pricing Effectiveness

CLTV (Customer Lifetime Value) divided by CAC (Customer Acquisition Cost) is the metric that determines whether a SaaS business is financially viable. A CLTV/CAC ratio of 5:1 means that for every dollar spent acquiring a customer, five dollars are earned in revenue over that customer’s lifetime.

To improve this ratio:

Increase CLTV by raising prices or expanding product offerings.
Lower CAC by reducing marketing costs and improving conversion rates.
Find a balance between acquisition and retention, ensuring customers stay long enough to justify acquisition costs.

b. Structure Pricing to Support Scalability

Pricing should be designed to enhance all three types of scaling.

For cost scaling, businesses should focus on subscription models that provide recurring revenue, ensuring long-term profitability.
For product scaling, pricing should reflect increasing value over time, such as by charging more for advanced features.
For distribution scaling, businesses should experiment with tiered pricing, freemium models, and incentives for referrals.

By aligning pricing with scaling, businesses ensure that they are not just growing in revenue but also increasing profit margins.

c. Understand the Competitive Landscape

Scaling does not happen in isolation. Competitors are constantly evolving, and pricing must remain competitive while supporting long-term goals.

If a market is highly competitive, a low-entry pricing model can help acquire customers quickly before transitioning to higher-value offerings.
If a business has a strong competitive advantage, premium pricing can reinforce its position as a market leader.
If a company is entering a crowded space, differentiation through unique pricing structures (e.g., usage-based pricing) can help stand out.

A good example is HubSpot, which offers a free CRM but charges for advanced marketing automation tools. This strategy allows HubSpot to acquire customers at a low cost and upsell them into premium products later.

3.4. Key Takeaways: How to Design a Scalable Pricing Model

Recognize that SaaS businesses scale differently from traditional businesses—costs are front-loaded, but long-term profits depend on pricing strategy.
Leverage all three types of scaling—cost, product, and distribution—to maximize revenue and minimize expenses.
Measure pricing success through CLTV/CAC—if customer lifetime value does not exceed acquisition costs by a significant margin, profitability is at risk.
Align pricing with competitive dynamics—the right pricing strategy depends on market conditions, customer willingness to pay, and long-term growth potential.
Treat pricing as a strategic advantage—companies that optimize pricing as part of their overall scaling plan will achieve sustainable, high-margin growth.

Scaling is the foundation of any successful SaaS business, and pricing is a critical factor in achieving sustainable growth. By understanding the three types of scaling and designing a pricing model that aligns with business strategy, SaaS companies can increase profits, reduce risks, and create a lasting competitive advantage.

Chapter 2 of The Pricing Roadmap provides a blueprint for how pricing and scale work together, setting the stage for more advanced pricing strategies in the following chapters.

4. The Product Model

In Chapter 3 of The Pricing Roadmap, Ulrik Lehrskov-Schmidt explores the product model—a crucial element in designing an effective SaaS pricing strategy. Pricing is not just about setting a number; it is about structuring the product in a way that aligns with customer value. This chapter explains how businesses should package their offerings, segment customers, and create a pricing structure that maximizes revenue while ensuring long-term growth.

4.1. Why the Product Model Matters in Pricing

Many SaaS companies fail in pricing because they price their product instead of pricing their customer. Businesses often focus too much on internal costs and competitor benchmarks rather than considering how different customers perceive value. A well-designed product model helps companies create different price points for different customers, ensuring that no revenue is left on the table.

For example, an enterprise customer will value security, compliance, and advanced analytics, while a startup may only need basic features. If a company prices its product too high, it loses smaller customers. If it prices too low, it undercharges enterprise customers who would have paid more. The solution is a structured product model that enables pricing differentiation.

4.2. The Two Levels of the Product Model

To build an effective product model, companies must structure their offerings at two levels: the product ecosystem and product packaging.

a. Product Ecosystem – Defining the Full Scope of Value

The first step is to define what the business is selling beyond just the core product. SaaS businesses often have multiple revenue streams that can be bundled, expanded, or optimized.

For example, an event management SaaS platform may start by selling event planning software, but over time, it could add integrations for venues, speaker marketplaces, and attendee engagement tools. This product ecosystem allows businesses to create multiple monetization opportunities.

To define a product ecosystem, companies should:

First, identify the core product that drives initial adoption. This is the main functionality that solves the biggest pain point for customers. In an event management SaaS, this might be the ability to organize virtual or in-person events efficiently.

Second, map out additional features or services that enhance the product’s value. These could be integrations, premium analytics, white-labeling, or automation features that larger customers will pay extra for.

Third, determine which add-ons or adjacent products can create new revenue streams. If customers are using the platform for event planning, the company might monetize venue bookings, speaker listings, or ticket sales.

b. Product Packaging – Structuring Offerings for Different Customer Segments

Once the ecosystem is defined, the next step is to package the product into clear tiers or bundles that align with different customer segments. This ensures that each customer type gets the right features at the right price.

To structure product packaging, companies should:

First, segment customers based on willingness to pay and use cases. Not all customers have the same needs. A small business might need only basic functionality, while a large enterprise may require premium features, integrations, and dedicated support.

Second, define pricing tiers that reflect increasing levels of value. A standard SaaS pricing model typically includes a basic (free or low-cost) tier, a professional tier with advanced features, and an enterprise tier with premium services.

Third, set feature fences that encourage upgrades. Customers should have a clear reason to move from one tier to the next. For example, limiting the number of users, storage, or access to advanced analytics can nudge customers toward higher-priced plans.

A strong example of product packaging is Slack. The free tier provides basic messaging functionality. The pro plan offers unlimited integrations and message history. The enterprise plan includes compliance features, security, and dedicated account management. This structure allows Slack to serve a wide range of customers while optimizing revenue.

4.3. The Three Key Tools for Pricing Your Customer

A well-structured product model is built using three key tools: fencing, laddering, and pricing metrics.

a. Fencing – Separating Customer Segments Without Alienating Them

Fencing is the process of differentiating customers by their needs and willingness to pay. The goal is to charge different prices to different customer groups without making them feel like they are being unfairly treated.

To create effective fences, businesses should:

First, use feature-based fences by restricting access to premium features for lower-tier customers. This works well for enterprise software, where advanced security, AI-driven insights, or integrations justify higher prices.

Second, implement usage-based fences that limit the number of users, API calls, or storage capacity. This encourages customers to upgrade as they scale. Zoom, for example, limits meeting duration on its free plan to push users toward paid plans.

Third, apply customer-type fences, where different industries or business sizes get custom pricing. A SaaS platform may offer discounts to nonprofits or educational institutions while charging enterprises a premium.

b. Laddering – Designing an Upgrade Path for Customers

Laddering is about guiding customers from lower-priced plans to higher-priced plans over time. Many SaaS businesses fail because they focus too much on acquiring new customers rather than expanding revenue from existing ones.

To implement laddering, businesses should:

First, create pricing plans that encourage gradual upgrades. Customers should feel that each plan is a natural next step rather than a dramatic jump in cost.

Second, introduce add-ons that provide incremental value. Instead of forcing customers into an expensive plan, offer individual upgrades, such as additional storage, advanced reporting, or premium support.

Third, build expansion revenue strategies like per-user or per-usage pricing. Instead of a flat monthly fee, charge based on team size or consumption, ensuring that revenue grows alongside customer success.

A classic example is HubSpot, which offers a starter plan for small teams, a professional plan with automation features, and an enterprise plan for large-scale marketing teams. Customers naturally move up as their needs evolve.

c. Pricing Metrics – Choosing the Right Way to Charge Customers

Choosing how to charge customers is as important as what to charge them for. SaaS businesses have several options when selecting pricing metrics.

To define pricing metrics, companies should:

First, identify the key value metric that aligns with customer success. If customers get value from the number of transactions, the company should charge per transaction. If value comes from the number of users, a per-user model makes sense.

Second, choose a pricing model that aligns with customer growth. Subscription-based pricing is popular, but some companies thrive with usage-based models, where customers only pay for what they consume.

Third, test hybrid pricing models that combine different metrics. AWS, for example, uses a mix of subscription pricing and pay-as-you-go billing to serve a broad range of customers.

Key Takeaways: How to Design a Profitable Product Model

Understand that pricing is about structuring value, not just setting a number. A product model should segment customers effectively and provide upgrade paths.
Build a product ecosystem that allows for expansion. Instead of just selling one product, consider adjacent revenue streams that add value to different customers.
Create strong pricing tiers that align with different levels of customer needs. Basic, professional, and enterprise plans should reflect increasing levels of value.
Use fencing to separate customer segments effectively. Limit access to certain features, usage, or customer types to ensure customers pay based on their needs.
Encourage upgrades through laddering. Design an upgrade path that naturally moves customers from lower to higher-value plans.
Choose the right pricing metrics to optimize revenue. Charge customers based on how they receive value, whether that’s per user, per transaction, or per usage.

Chapter 3 of The Pricing Roadmap makes it clear that pricing is a design problem, not a simple mathematical formula. Businesses that invest in a well-structured product model will have more flexibility in pricing, better customer retention, and higher long-term revenue. With strong fencing, effective laddering, and the right pricing metrics, SaaS companies can build a scalable and profitable pricing strategy that grows alongside their customers.

5. The Pricing Model

In Chapter 4 of The Pricing Roadmap, Ulrik Lehrskov-Schmidt explains why a well-structured pricing model is just as important as the price itself. Many SaaS businesses fail because they focus only on setting the right price rather than designing a model that maximizes long-term revenue. A pricing model should align with customer behavior, value perception, and business scalability.

A common mistake companies make is assuming that pricing is just about numbers. In reality, it is about defining how customers pay, what they pay for, and how value is communicated. This chapter introduces the core elements of a strong pricing model and how companies can optimize pricing to drive both customer satisfaction and business growth.

5.1. Why Pricing Models Matter

Pricing models determine how revenue is generated. A poorly designed pricing model can limit growth, while a well-structured one can unlock new customer segments and create scalable revenue streams. Businesses often fall into the trap of choosing a simple pricing model for convenience rather than effectiveness.

For example, a flat monthly fee may seem straightforward, but it might not capture the full value customers receive. On the other hand, a usage-based model might maximize revenue but make costs unpredictable for customers. The key is to find a balance between simplicity, flexibility, and revenue maximization.

5.2. The Three Pillars of an Effective Pricing Model

A good pricing model is built on three fundamental pillars: pricing structure, pricing metrics, and monetization strategy.

a. Pricing Structure – Defining How Customers Pay

The first step in designing a pricing model is to decide how customers will be charged. There are multiple ways to structure payments, each with advantages and drawbacks.

First, companies must decide between subscription-based and transactional pricing. Subscription models provide predictable revenue and encourage long-term retention, while transactional pricing charges customers only when they use the product. SaaS companies often prefer subscription pricing because it creates monthly recurring revenue (MRR), ensuring stability and reducing churn risks.

Second, businesses should consider tiered vs. flat pricing. A flat pricing model charges a single fee for all users, making it easy to understand but potentially limiting revenue. A tiered model, where customers pay based on features or usage, allows businesses to maximize revenue by aligning price with value.

Third, companies need to evaluate freemium vs. paid models. A freemium strategy attracts a large user base but may lead to low conversion rates if free users never upgrade. Paid-only models generate immediate revenue but may reduce customer acquisition rates. The best approach is often a hybrid model, where free users are given limited access while paid plans offer significant additional value.

b. Pricing Metrics – Deciding What Customers Pay For

Once a pricing structure is in place, the next step is to define pricing metrics. This means determining what aspect of the product customers are charged for.

First, companies should identify the core unit of value in their product. If a software platform helps companies manage email campaigns, the number of emails sent could be the pricing metric. If it is a customer relationship management (CRM) tool, pricing might be based on the number of contacts or users.

Second, businesses must match pricing metrics with customer growth. The best pricing models scale with customer success. For example, a startup might initially need only 10 user accounts, while an enterprise client requires 500 accounts. A per-user pricing model ensures that customers pay more as they grow.

Third, it is important to avoid misaligned pricing metrics. If customers do not see a direct connection between their usage and cost, they may become frustrated. For example, a cloud storage company charging per login session might create confusion, whereas charging per gigabyte of storage used is more transparent.

c. Monetization Strategy – Optimizing Revenue Potential

After defining the pricing structure and metrics, companies must optimize how pricing is monetized over time. This ensures that revenue grows alongside customer adoption and product expansion.

First, companies should use expansion pricing to increase revenue over time. This could be through upsells, where customers pay for premium features, or cross-sells, where they purchase related products. A good example is Slack, which offers a basic plan for free but charges for message history, integrations, and security controls.

Second, businesses need a strategy for discounting and promotional offers. Discounts can help with customer acquisition, but overuse can devalue the product. The key is to offer discounts strategically, such as for annual commitments or bulk purchases, rather than making them standard practice.

Third, companies should plan for future price increases. Many SaaS companies underprice their products initially to attract users but later struggle to raise prices without backlash. A good strategy is to start with a lower entry price but build in value-based justification for future increases, such as new features, better performance, or industry recognition.

5.3. How to Choose the Right Pricing Model in Five Steps

Building a pricing model is not about copying competitors or guessing what customers will pay. It requires a structured approach that considers both business goals and customer expectations.

a. Define Your Business Goals

The first step is to identify what the pricing model should achieve. If the goal is rapid growth, a freemium model or low-cost entry pricing might be the best approach. If the goal is profitability, a tiered pricing model with strong upsell potential may be better.

b. Understand Customer Willingness to Pay

The second step is researching customer expectations. This can be done through surveys, competitor analysis, and direct conversations. Customers should clearly understand the value of each pricing tier, and there should be a logical reason for paying more.

c. Align Pricing with Customer Growth

The third step is ensuring that the pricing model scales with customer success. Businesses should choose pricing metrics that increase revenue as customers grow. For example, a project management tool should charge per team member or project rather than a flat fee.

d. Test and Optimize Pricing Regularly

The fourth step is validating pricing through A/B testing. SaaS businesses should experiment with different pricing structures to see which leads to higher conversions and revenue retention. Testing different pricing tiers, feature fences, and billing cycles can help identify what works best.

e. Plan for Pricing Adjustments Over Time

The final step is designing a pricing model that allows for future changes. Businesses should gradually introduce price increases while continuously improving the product. Customers are more willing to accept price increases if they see ongoing improvements in value.

5.4. Key Takeaways: How to Design a Scalable Pricing Model

First, a pricing model is more than just a number. It is about defining how customers pay, what they pay for, and how pricing evolves over time.

Second, choosing the right pricing structure—subscription, transactional, or tiered—affects how revenue is generated. The best structure aligns with customer expectations and business scalability.

Third, pricing metrics should be closely linked to customer value. The right metric ensures that customers pay more as they derive more value, leading to long-term revenue growth.

Fourth, monetization strategies must evolve. SaaS companies should plan for upsells, cross-sells, and gradual price increases to maximize profitability.

Fifth, pricing models should be tested and refined regularly. Businesses that experiment with different structures, metrics, and promotions will find the best combination for sustainable growth.

Chapter 4 of The Pricing Roadmap makes it clear that pricing models determine long-term business success. Companies that carefully structure how they charge customers, align pricing with value, and optimize revenue growth over time will have a strong competitive advantage.

By applying the principles from this chapter, SaaS businesses can design pricing models that attract customers, scale revenue, and ensure long-term sustainability.

6. Wallet Structuring

In Chapter 5 of The Pricing Roadmap, Ulrik Lehrskov-Schmidt introduces the concept of wallet structuring, a critical yet often overlooked aspect of B2B SaaS pricing. Many businesses focus on what they are charging without fully understanding who within an organization is actually paying. SaaS pricing is not just about setting a number but about aligning pricing structures with the decision-makers, budget owners, and internal politics of enterprise customers.

6.1. Why Wallet Structuring Matters in B2B SaaS Pricing

Enterprise customers are different from individual consumers. A single buyer rarely makes the decision to purchase software. Instead, multiple stakeholders—finance, operations, IT, procurement, and end-users—all have different priorities, budgets, and approval processes. If pricing does not align with these internal structures, businesses face delayed sales cycles, lost deals, and missed revenue opportunities.

For example, a marketing automation SaaS platform might be used primarily by the marketing team, but the budget approval could come from the CFO. If pricing is structured solely based on user needs without considering who actually controls the budget, sales efforts will struggle.

The goal of wallet structuring is to break down an organization’s purchasing power into multiple layers so that businesses can design pricing models that optimize revenue while aligning with internal decision-making processes.

6.2. The Three Layers of Wallet Structuring

Effective wallet structuring requires understanding three key layers within enterprise customers: user wallets, departmental wallets, and executive wallets. Each plays a different role in the pricing and purchasing process.

a. User Wallets – Pricing at the Operational Level

The first step in wallet structuring is to identify who within an organization directly uses the product. These are the people who experience the value of the software daily. However, just because they use the product does not mean they control the budget.

To structure pricing at the user level, businesses should:

First, identify the primary users of the software. This could be sales reps in a CRM platform, customer support agents in a ticketing system, or software engineers in a development tool. Understanding their needs ensures pricing aligns with daily workflows.

Second, design pricing models that scale with user engagement. Many SaaS products use per-user pricing, but this does not work for all cases. Some businesses charge based on usage, transactions, or data consumption rather than per seat, ensuring that customers pay more as they get more value.

Third, ensure that end-users can justify the cost to their managers. If individual users are the ones recommending a product internally, the price should be low enough to make it an easy purchase without requiring high-level approvals. This is why many SaaS companies offer low-cost entry points to encourage user adoption before expanding to larger contracts.

b. Departmental Wallets – Aligning Pricing with Business Units

The second layer of wallet structuring involves department-level budgets. In most enterprises, software purchases are approved at the department level, meaning pricing needs to align with how budgets are allocated within a company.

To structure pricing at the departmental level, businesses should:

First, determine which department owns the budget. A project management tool might be used across multiple teams, but the budget could come from operations or human resources. Understanding who approves spending helps tailor pricing models accordingly.

Second, create tiered pricing that caters to different department needs. A marketing team might need advanced analytics, while the sales team requires CRM integration. Offering modular pricing based on department-specific needs allows businesses to capture multiple budgets within the same organization.

Third, offer team-based pricing models. Instead of charging per individual user, pricing can be structured based on teams, business units, or specific workflows. For example, a customer support platform might charge per help desk team rather than per agent, making it easier for managers to justify the cost.

c. Executive Wallets – Maximizing Enterprise-Wide Spend

The third layer of wallet structuring is the executive budget, which encompasses company-wide purchasing decisions. At this level, pricing must align with high-level business priorities, cost efficiency, and long-term ROI.

To structure pricing at the executive level, businesses should:

First, position enterprise pricing as a strategic investment. High-level decision-makers, such as CFOs, CIOs, and CTOs, do not care about individual features. They focus on cost savings, security, compliance, and scalability. Pricing should reflect business outcomes rather than just product usage.

Second, offer discounts for multi-year contracts and large-scale deployments. Enterprise customers expect pricing that aligns with long-term commitments and centralized procurement processes. Offering volume-based or multi-year discounts encourages larger contract sizes.

Third, structure pricing to facilitate cross-department adoption. Many SaaS businesses expand within enterprises over time, starting with one team before scaling company-wide. Pricing should make it easy for executives to justify expanding usage across multiple departments.

A great example is Microsoft Teams, which initially gained adoption at the departmental level before becoming a standardized enterprise-wide communication tool. By offering flexible pricing and seamless integration, Microsoft made it easy for executives to approve company-wide deployment.

6.3. How to Implement Wallet Structuring in Five Steps

To effectively implement wallet structuring, businesses should take a systematic approach that aligns pricing with customer budget structures and internal approval processes.

a. Map Out Key Decision-Makers in the Buying Process

The first step is to identify who influences purchasing decisions. Businesses should analyze who uses the product, who approves the budget, and who has final decision-making power. Sales teams should develop customer personas for each level of influence.

b. Design Pricing Models That Fit Each Budget Layer

The second step is to align pricing with user, departmental, and executive budgets. Entry-level pricing should be designed for individual users, mid-tier pricing should fit departmental needs, and enterprise pricing should be structured for company-wide adoption.

c. Optimize Pricing for Internal Expansion

The third step is to make it easy for companies to scale their usage. Many SaaS companies start with one department or team before expanding. A pricing model should support cross-departmental adoption through discounts, multi-tiered packages, or enterprise agreements.

d. Align Pricing with Procurement and Compliance Requirements

The fourth step is ensuring that pricing aligns with procurement policies and compliance standards. Large enterprises have strict legal, security, and financial review processes. SaaS businesses should structure contracts and pricing to meet these requirements, ensuring smooth procurement approvals.

e. Test and Adjust Pricing Based on Customer Feedback

The final step is continuously refining wallet structuring. Sales teams should gather feedback from customers on purchasing challenges, budget constraints, and decision-making roadblocks. If pricing structures slow down sales cycles or create friction, adjustments should be made to simplify approvals and increase adoption.

6.4. Key Takeaways: How to Design a Wallet-Based Pricing Model

First, pricing should be designed based on who controls the budget, not just who uses the product. Understanding user, department, and executive wallets ensures that pricing aligns with internal decision-making.

Second, low-entry pricing should encourage adoption at the user level. Individual users should be able to try the product without needing executive approval.

Third, team-based and department-level pricing helps expand adoption. Offering pricing that fits specific business units makes it easier for managers to approve spending.

Fourth, enterprise pricing should focus on strategic value. CFOs and CIOs care about scalability, cost efficiency, and compliance, not just product features.

Fifth, pricing should be optimized for company-wide expansion. A good pricing model encourages cross-departmental adoption and long-term contracts.

Chapter 5 of The Pricing Roadmap highlights a crucial insight: successful SaaS pricing is not just about the number—it’s about structuring pricing in a way that aligns with customer budgets and internal decision-making processes.

By implementing wallet structuring, businesses can accelerate sales cycles, increase contract sizes, and maximize revenue potential while ensuring that pricing is aligned with enterprise purchasing behavior.

7. Price Points

In Chapter 6 of The Pricing Roadmap, Ulrik Lehrskov-Schmidt explores the importance of price points and how businesses should structure them to maximize revenue and customer adoption. Many SaaS companies struggle with setting the right price, often guessing based on competitors or internal cost structures. However, price points should be determined strategically, using customer psychology, market positioning, and revenue optimization techniques.

This chapter breaks down how to select, validate, and optimize price points that align with both customer expectations and business profitability. The goal is not just to find a single “perfect price” but to create a structured pricing model that captures value across different customer segments.

7.1. Why Price Points Matter

Setting price points is more than just deciding on a number. The right price point influences customer perception, conversion rates, and long-term revenue potential. A well-chosen price can make a product feel like a premium offering or a cost-effective necessity, depending on how it is positioned.

For example, two companies may offer similar software, but if one charges $99 per month and another charges $990 per year, they will attract different types of customers. The lower price may appeal to startups and small businesses, while the annual pricing suggests a more committed, long-term customer base.

Price points also impact upsell potential. If an entry-level price is too high, businesses may struggle with customer acquisition. If it is too low, they may attract budget-conscious users who never upgrade. The right price points balance acquisition with revenue expansion.

7.2. The Three Key Factors in Setting Price Points

Selecting price points requires understanding three core elements: customer psychology, competitive positioning, and revenue maximization.

a. Customer Psychology – Using Pricing to Influence Decision-Making

The first step in setting price points is understanding how customers perceive pricing. Psychological pricing techniques can influence whether customers see a product as affordable, premium, or a great deal.

First, businesses should use anchoring to shape customer expectations. When customers see multiple pricing options, they compare them to determine value. If a SaaS product offers a basic plan at $49, a pro plan at $99, and an enterprise plan at $499, customers will naturally view the $99 option as the best balance of price and features.

Second, companies should apply charm pricing strategies. Research shows that prices ending in 9 ($49, $99, $199) create a perception of a better deal, while rounded numbers ($50, $100, $200) feel more premium. This is why many SaaS companies use $9-based pricing for entry-level plans and round numbers for enterprise pricing.

Third, businesses can use tiered pricing to guide purchasing behavior. By offering three or four plans, customers tend to gravitate toward the middle option. This technique, called price bracketing, ensures that most customers choose a profitable, high-value plan instead of defaulting to the cheapest option.

b. Competitive Positioning – Placing Price Points in the Market Context

The second step is determining how price points compare to competitors. Customers do not evaluate prices in isolation; they compare them to alternatives in the market.

First, businesses should analyze competitor pricing models. If most competitors charge per user, a flat-fee pricing model might stand out. If competitors price based on features, a usage-based model could create differentiation. The goal is to position the product as a better value rather than simply being cheaper.

Second, companies should decide whether to be a premium or budget option. A higher price point signals exclusivity and quality, while a lower price attracts cost-sensitive customers. For example, Salesforce dominates the high-end CRM market, while HubSpot offers a more affordable, self-serve alternative.

Third, pricing should reflect market segment expectations. Small businesses are more sensitive to monthly costs, while enterprises focus on total cost of ownership. A SaaS company targeting large enterprises should emphasize ROI and long-term value rather than just price.

c. Revenue Maximization – Ensuring Price Points Drive Long-Term Growth

The third factor is designing price points that maximize revenue across different customer segments. A strong pricing model allows businesses to capture value from all levels of customers rather than focusing only on one group.

First, businesses should implement value-based pricing. Instead of pricing based on costs or competitor benchmarks, price points should reflect how much value the product delivers to customers. If software saves a company $10,000 per month in manual work, charging $500 per month feels like a bargain.

Second, companies should test upsell and expansion opportunities. Many SaaS companies underprice their entry-level plans, only to struggle with upgrades later. A better strategy is to offer mid-tier pricing that encourages customers to start at a higher level.

Third, price points should be optimized for customer lifetime value (CLTV). A low-price plan that leads to long-term, high-value contracts is more valuable than a high-price plan with short retention. Businesses should analyze which pricing strategies lead to higher retention and expansion revenue.

7.3. How to Set and Optimize Price Points in Five Steps

Setting the right price points requires a structured approach that incorporates psychology, market research, and revenue testing.

a. Identify the Core Value Metric

The first step is to determine how customers measure value. If a SaaS company provides data storage, the value metric might be gigabytes used. If it provides collaboration tools, the metric might be number of users or projects. The price point should align with how customers derive value.

b. Analyze Market and Competitor Benchmarks

The second step is to research competitor price points. Businesses should evaluate whether they want to be the premium, mid-range, or budget option. If competitors charge $100 per user, charging $200 per team could create differentiation.

c. Test Multiple Pricing Tiers

The third step is to experiment with different price points. A/B testing different pricing pages can reveal which price structures maximize conversion rates. If a company offers $29, $99, and $299 tiers, it can test whether customers respond better to a $39, $129, and $499 structure.

c. Use Psychological Pricing Techniques

The fourth step is to optimize the way price points are presented. Using charm pricing ($49 instead of $50), anchor pricing (showing a high-value option first), and strategic tiering (pushing customers toward a profitable middle plan) can increase revenue without changing the actual price.

d. Monitor Customer Behavior and Adjust Pricing Over Time

The final step is iterating price points based on customer response. If a pricing tier has low adoption, businesses should analyze whether it is too expensive or lacks compelling features. If customers rarely upgrade, the pricing structure may need better incentives for expansion.

7.4. Key Takeaways: How to Design Effective Price Points

First, price points influence customer psychology. Using anchoring, charm pricing, and tiered structures can increase perceived value and conversions.

Second, price points should be positioned strategically against competitor pricing. The goal is not to be the cheapest but to offer the best value for the target market.

Third, value-based pricing ensures that customers pay in proportion to the benefits they receive. Price points should reflect customer outcomes rather than just costs.

Fourth, testing and adjusting price points over time leads to higher revenue and better customer retention. Businesses should regularly analyze which price structures lead to higher adoption and upgrades.

Fifth, price points should be optimized for long-term growth, not just short-term conversions. Ensuring that entry prices lead to expansion revenue is key to maximizing customer lifetime value.

Chapter 6 of The Pricing Roadmap emphasizes that price points are more than just a number—they are a strategic tool for influencing customer behavior, optimizing revenue, and positioning a product effectively in the market. Businesses that thoughtfully design and continuously optimize their price points will create scalable, profitable pricing strategies that drive long-term success.

8. Validation

In Chapter 7 of The Pricing Roadmap, Ulrik Lehrskov-Schmidt focuses on validating pricing models before launching them to the market. Many SaaS businesses make the mistake of setting prices based on assumptions rather than data, leading to lost revenue opportunities, poor customer adoption, and pricing mismatches.

Validation is the process of testing and refining pricing through real customer feedback, market research, and experimentation. A well-validated pricing model ensures that businesses are charging the right amount, aligning with customer expectations, and maximizing revenue potential.

8.1. Why Pricing Validation Is Critical

Pricing is one of the most difficult things to change once a product is launched. If prices are set too low, businesses risk leaving money on the table and struggling with profitability. If prices are too high, they risk low conversion rates, customer pushback, and sales cycle delays.

A validated pricing model removes guesswork and replaces it with data-driven decisions. It ensures that businesses test pricing before committing to a structure, reducing the risks of price misalignment and revenue loss.

8.2. The Three Core Methods of Pricing Validation

Effective pricing validation relies on three primary methods: customer research, market testing, and data analysis. These approaches work together to refine price points and optimize revenue.

a. Customer Research – Gathering Direct Feedback

The first step in pricing validation is to understand how customers perceive value and pricing. This involves surveys, interviews, and willingness-to-pay analysis to ensure that pricing aligns with customer expectations.

First, businesses should conduct customer interviews to understand how much they would pay for the product. Open-ended questions such as “What would be a fair price for this solution?” and “At what price point would this feel too expensive?” help reveal customer pricing sensitivities.

Second, companies should use Van Westendorp’s Price Sensitivity Meter, a widely used method for pricing validation. Customers are asked four key questions: at what price is the product too expensive, too cheap, a bargain, and too costly to consider? The results provide a pricing range that matches perceived value.

Third, businesses should segment customers based on budget and pricing willingness. A small startup may see $50 per month as expensive, while an enterprise might consider $500 per month a bargain. Segmenting responses ensures that pricing is optimized for different customer types.

b. Market Testing – Experimenting with Real-World Pricing

The second method of pricing validation is real-world testing. This involves experimenting with different price points, feature sets, and tiered plans to determine what drives the highest conversions and revenue.

First, businesses should A/B test different pricing pages. Displaying two different price structures to different customer groups helps determine which leads to better conversion rates. If a $99 plan outperforms a $79 plan in revenue while maintaining a similar conversion rate, the higher price is validated.

Second, companies should test pricing through beta programs. Offering early customers a discounted or custom pricing model allows businesses to gather feedback before making pricing public. If beta users strongly object to certain price points, adjustments can be made before launch.

Third, businesses should experiment with limited-time pricing offers to test customer reactions. If a discount of 20% significantly increases sales, this suggests that the original price may have been slightly too high. However, if discounting does not impact conversions, it confirms that customers are willing to pay full price.

c. Data Analysis – Measuring Customer Behavior and Revenue Impact

The third pillar of pricing validation is analyzing real customer behavior to measure the impact of pricing decisions. This involves tracking churn rates, conversion metrics, and revenue per user to ensure that pricing supports long-term profitability.

First, businesses should monitor customer acquisition cost (CAC) versus customer lifetime value (CLTV). If a price point leads to high churn or low lifetime value, it may be too high for the target market. If CAC is too high relative to revenue, pricing adjustments may be needed to ensure profitability.

Second, companies should track pricing objections from sales conversations. If customers repeatedly push back on price, this indicates that the perceived value is not aligned with cost. If sales reps rarely encounter price objections, pricing may be too low, suggesting room for increases.

Third, businesses should analyze expansion revenue and upsell rates. If most customers remain on the lowest pricing tier, it suggests that higher-priced plans lack compelling value. Adjusting feature sets or bundling premium features into mid-tier plans can encourage more customers to upgrade.

8.3. How to Validate Pricing in Five Steps

Pricing validation is an iterative process that involves research, testing, and continuous refinement. Businesses should follow a structured approach to ensure that their pricing models are optimized for conversion, retention, and profitability.

a. Conduct Customer Willingness-to-Pay Research

The first step is to gather direct customer insights through surveys, interviews, and pricing sensitivity tests. Businesses should identify what customers perceive as too expensive, too cheap, and fair value. This data serves as a foundation for setting initial price points.

b. Test Pricing in Real-World Scenarios

The second step is to experiment with different pricing models through A/B testing, beta programs, and limited-time offers. Displaying multiple price tiers to different customer segments helps determine which price structures lead to higher adoption and revenue.

c. Analyze Customer Behavior and Sales Data

The third step is to track customer response to pricing changes. Businesses should monitor conversion rates, churn, and customer objections to identify potential pricing misalignments. If a pricing tier has high sign-ups but low long-term retention, it may indicate pricing needs adjustment.

d. Adjust Pricing Based on Data-Driven Insights

The fourth step is to refine price points based on the results of market testing and customer analysis. If an A/B test shows that a $129 price point leads to better long-term retention than $99, businesses should adjust accordingly. Continuous testing ensures that pricing evolves alongside customer behavior.

e. Implement Pricing Increases or Adjustments Gradually

The final step is to introduce price changes strategically. Sudden price increases can lead to customer backlash, so businesses should phase in adjustments over time. Offering grandfathered pricing for existing customers while introducing higher rates for new customers is an effective way to increase prices without losing loyalty.

8.4. Key Takeaways: How to Validate SaaS Pricing Effectively

First, pricing validation ensures that pricing aligns with customer expectations. Conducting willingness-to-pay research helps businesses set price points that customers perceive as fair.

Second, market testing helps determine which price structures maximize conversion and revenue. Using A/B testing, beta programs, and experimental offers ensures that businesses make data-driven pricing decisions.

Third, customer behavior analysis provides real-world feedback on whether pricing is too high, too low, or optimized for long-term retention. Businesses should track churn, expansion revenue, and customer objections to refine pricing models.

Fourth, pricing should be adjusted gradually based on data insights. Sudden changes risk losing customers, so businesses should test incremental adjustments before making major shifts in pricing strategy.

Fifth, validated pricing models increase profitability and business scalability. Pricing should not be set once and forgotten—it should be continuously optimized based on customer feedback and market conditions.

Chapter 7 of The Pricing Roadmap emphasizes that pricing validation is not a one-time process—it is an ongoing strategy for maximizing revenue and customer adoption. Businesses that systematically test and refine their pricing models will create sustainable pricing strategies that drive long-term growth and profitability.

9. Discounts

In Chapter 8 of The Pricing Roadmap, Ulrik Lehrskov-Schmidt explores discounting strategies and how they impact a SaaS business’s revenue, customer perception, and long-term growth. Many companies view discounts as an easy way to attract customers, but if used incorrectly, they can erode profitability, devalue a product, and set the wrong expectations with customers.

This chapter explains the right way to use discounts—as a strategic tool rather than a desperate tactic. Businesses that discount correctly can increase sales without damaging pricing integrity, while those that discount carelessly risk losing customer trust and weakening their market position.

9.1. Why Discounts Matter in SaaS Pricing

Discounts are a double-edged sword. On one hand, they can increase conversions, attract new customers, and drive short-term sales growth. On the other, they can train customers to expect lower prices, reduce perceived value, and cut into profit margins.

For example, if a SaaS company regularly offers “50% off for new users,” customers may delay purchasing, knowing that a better deal is always around the corner. However, if discounts are strategically applied to annual contracts, volume purchases, or customer retention efforts, they can help increase revenue while maintaining product value.

9.2. The Two Types of Discounts

Lehrskov-Schmidt categorizes discounts into two main types: structural discounts and sales discounts. Each serves a different purpose and should be used carefully to align with business goals.

a. Structural Discounts – Built Into the Pricing Model

Structural discounts are intentional, permanent pricing strategies designed to reward long-term commitments, bulk purchases, or specific customer segments. These discounts are baked into the pricing model and provide a logical, predictable way for customers to save money.

First, annual discounts encourage long-term commitment. Many SaaS companies offer a 10-20% discount for annual payments instead of monthly billing. This improves cash flow, reduces churn, and locks in customers for a longer period.

Second, volume-based discounts reward larger usage. Companies that price based on data storage, API calls, or user seats often provide lower per-unit costs as usage increases. This ensures that large customers receive cost savings while the business maximizes revenue from high-value accounts.

Third, customer-segment discounts target specific industries or groups. Educational institutions, nonprofits, and startups may receive special pricing to make software accessible while still maintaining standard pricing for other customers.

b. Sales Discounts – Used as Tactical Incentives

Sales discounts are temporary, negotiable reductions in price used to close deals, drive urgency, or retain customers. Unlike structural discounts, they should be used sparingly and strategically.

First, negotiation-based discounts help close enterprise deals. In B2B sales, large customers often expect custom pricing. Instead of immediately lowering the price, businesses should offer additional value—such as premium support or extra features—instead of cutting costs directly.

Second, limited-time discounts create urgency. Short-term promotions, such as “Get 15% off your first three months”, can accelerate decision-making. However, these should be used occasionally to avoid training customers to wait for discounts.

Third, retention discounts prevent churn. When customers try to cancel their subscription, offering a short-term discount or an upgrade at the same price can encourage them to stay. This works best when combined with customer success efforts that highlight additional value.

9.3. How to Use Discounts Without Devaluing Your Product

Discounts should increase sales while maintaining pricing integrity. A structured approach ensures that discounts are effective without harming long-term revenue.

a. Define When and Why Discounts Are Used

The first step is to set clear rules for when discounts are applied. Businesses should determine whether discounts are based on customer type, contract length, or negotiation strategy. If every deal requires a discount, pricing may need to be adjusted instead.

b. Ensure That Discounts Are Justified by Value

The second step is to tie discounts to business goals. Instead of offering discounts randomly, businesses should ensure that customers earn the discount through commitments—such as signing an annual contract, referring new customers, or upgrading to a higher plan.

c. Use Discounts to Drive Specific Behaviors

The third step is to align discounts with strategic outcomes. Discounts should encourage customers to take profitable actions. For example, offering a discount on a multi-user plan rather than an individual seat can drive expansion within organizations.

d. Avoid Over-Reliance on Discounts

The fourth step is to monitor how frequently discounts are used. If customers are only converting when discounts are available, this indicates that the core pricing model may not be strong enough. Instead of fixing this with more discounts, businesses should adjust pricing tiers or improve the value proposition.

e. Test and Optimize Discounting Strategies

The final step is to track the impact of discounts on revenue, retention, and customer perception. Businesses should test different discount levels, time frames, and conditions to determine which strategies lead to higher customer lifetime value (CLTV) rather than just short-term sales spikes.

9.4. Key Takeaways: How to Implement Discounts Effectively

First, discounts should be strategic, not reactive. If discounts are given too freely, they erode pricing integrity and encourage customers to expect lower prices.

Second, structural discounts should reward long-term commitments. Discounts for annual plans, bulk purchases, or specific customer segments provide value without reducing perceived worth.

Third, sales discounts should only be used for negotiation, urgency, or retention. Discounts should encourage action, not just serve as an easy way to close deals.

Fourth, discounts should be aligned with business goals. If a discount does not lead to higher retention, expansion, or CLTV, it should be reconsidered.

Fifth, businesses should monitor and adjust discount strategies. If discounts become too frequent or necessary for conversions, this may indicate that pricing needs to be restructured rather than further discounted.

Chapter 8 of The Pricing Roadmap highlights that discounting is not just about lowering prices—it is about designing incentives that drive revenue growth without devaluing the product. When used correctly, discounts encourage long-term commitments, reduce churn, and optimize customer acquisition. When used poorly, they reduce profitability and weaken pricing credibility.

Businesses that apply discounting strategically and sparingly will attract the right customers, maintain pricing integrity, and ensure sustainable growth.

10. Raising Prices

In Chapter 9 of The Pricing Roadmap, Ulrik Lehrskov-Schmidt tackles one of the most challenging aspects of pricing strategy: raising prices without losing customers. Many SaaS businesses struggle with pricing increases because they fear customer backlash, churn, or negative brand perception. However, price increases are often necessary for long-term profitability, product improvements, and business sustainability.

This chapter explains why price increases should be a deliberate, strategic move rather than a reactive decision. When implemented correctly, raising prices can increase revenue, strengthen market positioning, and improve customer satisfaction.

10.1. Why Raising Prices Is Necessary

Many businesses set low initial prices to attract early customers. However, as a company expands, improves its product, and scales operations, these low prices often fail to cover rising costs or match the product’s true value. If prices are not adjusted, businesses risk stagnating revenue, declining margins, and an inability to invest in innovation.

For example, a SaaS company that initially charged $20 per user per month may realize that enterprise customers are willing to pay $50 or more for additional security, integrations, and support. If prices remain too low, profitability suffers, and long-term growth becomes unsustainable.

10.2. The Three Biggest Fears About Raising Prices

Before diving into price increases, it is important to address the most common fears businesses have when considering a pricing adjustment.

a. Fear of Losing Customers

The most common concern is that customers will cancel their subscriptions if prices go up. However, research shows that price sensitivity is often lower than businesses assume. If customers perceive the value justifies the price increase, they are likely to stay.

b. Fear of Negative Backlash

Businesses often worry about customer complaints and public criticism after raising prices. However, how a price increase is communicated plays a crucial role in how customers react. If an increase is framed as a result of new features, improved service, or business growth, customers are less likely to object.

c. Fear of Pricing Out Certain Customers

Some businesses hesitate to raise prices because they fear alienating budget-conscious customers. The solution is to introduce price increases gradually while offering alternative plans, grandfathering old customers, or providing additional value in exchange for higher costs.

10.3. How to Raise Prices Without Losing Customers

Successfully raising prices requires a structured, well-communicated approach that aligns with customer expectations, perceived value, and long-term business goals.

a. Justify the Price Increase with Clear Value Improvements

The first step in raising prices is to demonstrate why the increase is justified. Customers are more willing to accept a higher price if they see tangible improvements in the product or service. Businesses should highlight new features, enhanced security, faster performance, better support, or other added benefits that justify the higher cost.

b. Segment Customers and Apply Increases Strategically

The second step is to avoid a one-size-fits-all price increase. Instead of applying the same price hike to all customers, businesses should segment their audience. For example, new customers may immediately pay the higher price, while existing customers receive a gradual increase over time. Enterprise clients, who rely heavily on the software, may accept a larger price increase than smaller businesses.

c. Use Grandfathering to Retain Loyal Customers

The third step is to grandfather in existing customers, meaning they keep their original pricing for a set period before transitioning to the new rate. This strategy rewards early adopters and ensures that long-term customers feel valued rather than penalized. Businesses can also offer a discounted transition period to help customers adjust.

d. Communicate the Change Clearly and Transparently

The fourth step is effective communication. Price increases should not come as a surprise. Businesses should inform customers well in advance, explaining why the change is happening, how it benefits them, and what options they have. Transparency builds trust and reduces customer frustration.

e. Offer Alternatives or Additional Benefits

The fifth step is to soften the impact of the price increase by providing alternative options. Customers who are highly price-sensitive may be offered a lower-tier plan with fewer features. Others may receive exclusive benefits, such as priority support, additional integrations, or extended billing flexibility, as an incentive to stay at the higher price point.

f. Test the Price Increase Before Rolling It Out to Everyone

The sixth step is to experiment with price increases on a small scale before applying them to all customers. Businesses can A/B test different pricing structures with new customers or specific segments to gauge reactions and fine-tune their approach before making a company-wide change.

g. Monitor Customer Feedback and Adjust If Needed

The final step is actively tracking customer response to the price increase. Businesses should monitor churn rates, customer complaints, and support inquiries to identify any major issues. If backlash is higher than expected, they may need to adjust the messaging, offer additional value, or implement gradual increases instead of a single large jump.

10.4. How to Know If a Price Increase Is Working

A well-executed price increase should lead to higher revenue, improved customer retention, and stronger long-term growth. Businesses can measure success through several key metrics:

First, revenue per customer should increase. If the total number of customers remains stable while revenue grows, the price increase was successful.

Second, churn rates should remain within normal limits. A small increase in churn is expected, but if cancellations spike significantly, the price increase may have been too aggressive.

Third, customer satisfaction should remain strong. Businesses should monitor feedback through surveys, support inquiries, and social media sentiment to ensure that customers still feel they are getting good value for the price.

Fourth, new customer acquisition should not decline. If a price increase leads to a sharp drop in sign-ups, it may indicate that pricing has exceeded what the market is willing to pay.

10.5. Key Takeaways: How to Raise Prices Without Losing Customers

First, price increases should be justified with clear value improvements. Customers are more likely to accept higher prices if they see tangible benefits, such as new features, better service, or improved performance.

Second, price increases should be strategic and segmented. Applying price changes gradually and differently across customer groups prevents sudden churn and backlash.

Third, grandfathering can help retain existing customers. Offering legacy pricing for early adopters ensures they feel valued and gives them time to adjust.

Fourth, transparent communication is essential. Surprising customers with a price increase can damage trust, while clear and honest explanations reduce frustration.

Fifth, providing alternative options can reduce resistance. Businesses can offer lower-tier plans or additional perks to keep price-sensitive customers engaged.

Sixth, price increases should be tested before being fully implemented. Rolling out price changes in phases or select customer segments allows businesses to gather data and adjust before scaling the change.

Seventh, customer response should be closely monitored. Businesses should track churn, feedback, and revenue growth to ensure that the price increase is sustainable and well-received.

Chapter 9 of The Pricing Roadmap emphasizes that raising prices is not just about charging more—it is about capturing the true value of the product while maintaining customer trust.

Businesses that raise prices strategically, transparently, and with a clear value proposition will see higher revenues, stronger customer relationships, and long-term scalability. By following a structured approach to price increases, SaaS companies can avoid churn, maximize profitability, and continue delivering high-value solutions to their customers.

11. Conclusion

The Pricing Roadmap by Ulrik Lehrskov-Schmidt provides a comprehensive guide to designing a pricing model that drives growth, maximizes revenue, and aligns with customer expectations. Throughout the book, we explored key concepts that every SaaS business should master to create a profitable and scalable pricing strategy.

11.1. Key Takeaways from the Book

a. Pricing Is a Strategic Design Problem, Not Just a Number

Many businesses make the mistake of pricing their product instead of pricing their customers. A well-structured pricing model aligns with customer value, market positioning, and long-term revenue growth rather than being based on arbitrary numbers.

b. Scale Economics Define the Profitability of SaaS Businesses

SaaS businesses grow through cost, product, and distribution scaling. Pricing must support these growth levers by ensuring that customer acquisition costs (CAC) are lower than customer lifetime value (CLTV).

c. The Product Model Determines How Value Is Structured

A great pricing model is built on a well-defined product ecosystem and packaging strategy. Businesses should use fencing (restricting features), laddering (encouraging upgrades), and pricing metrics (aligning with customer value) to maximize revenue.

d. Choosing the Right Pricing Model Is Critical

Pricing models—whether subscription-based, usage-based, or tiered—must align with customer needs and business scalability. A poorly chosen model limits revenue potential, while an optimized one ensures continuous growth.

e. Wallet Structuring Aligns Pricing with Enterprise Budgets

In B2B SaaS, decision-making is distributed across different stakeholders. Pricing should be designed to align with user, departmental, and executive budgets to increase deal sizes and drive enterprise adoption.

f. Price Points Influence Customer Psychology and Perceived Value

Setting the right price points impacts conversion rates, market positioning, and revenue growth. Businesses should use anchoring, tiered pricing, and psychological pricing strategies to drive higher sales.

g. Pricing Validation Prevents Costly Mistakes

Pricing should never be based on guesswork. Businesses should test and refine pricing through customer research, A/B testing, and behavioral analysis to ensure it aligns with market demand and willingness to pay.

h. Discounts Should Be Strategic, Not Reactive

Discounts can drive short-term sales, but if used incorrectly, they devalue a product and reduce profitability. Businesses should limit discounts to structured incentives, such as annual commitments, volume purchases, or targeted promotions.

i. Raising Prices Is Necessary for Long-Term Growth

Price increases should be handled gradually, strategically, and transparently. Customers are more likely to accept price hikes if they see clear value improvements, are given enough notice, and have alternative pricing options.

11.2. Next Steps: How to Implement the Learnings from This Book

Understanding pricing strategy is one thing—implementing it effectively is what drives real business growth. Here are six actionable steps to apply the insights from The Pricing Roadmap:

a. Audit Your Current Pricing Model

Start by reviewing your existing pricing structure, price points, and customer segmentation. Identify where revenue is being lost, whether it’s due to underpricing, high churn, or lack of pricing tiers.

b. Research Customer Willingness to Pay

Conduct customer interviews, surveys, and pricing sensitivity tests to determine how much different customer segments are willing to pay. Use Van Westendorp’s Price Sensitivity Meter or other research methods to establish an optimal pricing range.

c. Optimize Your Product Packaging and Pricing Tiers

Structure your pricing to include clear upgrade paths, feature-based segmentation, and value-based pricing models. Ensure that higher-tier plans provide compelling benefits to encourage customers to move up the pricing ladder.

d. Test and Adjust Pricing Regularly

Run A/B tests on different pricing structures, price points, and feature packages to identify which models drive the highest conversion rates and long-term revenue. Pricing should be treated as an ongoing optimization process, not a one-time decision.

e. Implement Strategic Discounting and Price Increases

Use discounts selectively to drive annual contract sign-ups or volume-based incentives, but avoid overusing them as a sales crutch. If a price increase is needed, ensure that customers understand the added value and are given time to adjust.

f. Align Pricing with Business Growth Objectives

Your pricing strategy should support long-term scalability by reducing customer acquisition costs (CAC), increasing lifetime value (CLTV), and improving expansion revenue. Ensure that pricing aligns with product improvements, market positioning, and competitive landscape.

11.3. Final Thoughts

Pricing is one of the most powerful and underutilized growth levers in SaaS businesses. Companies that invest in a well-structured, data-driven pricing strategy will see higher revenue, better customer retention, and stronger competitive positioning.

By following the insights from The Pricing Roadmap, SaaS leaders can move beyond guesswork and develop a pricing model that scales with their business. The key is to continuously validate, refine, and optimize pricing to ensure it remains aligned with customer needs, market trends, and business objectives.

Start by implementing one improvement at a time, whether it’s restructuring pricing tiers, testing new price points, or introducing value-based upsells. Over time, a strong pricing foundation will become a competitive advantage that drives profitability and sustainable growth.