Bottom-Up SaaS Pricing: Mapping Value to Customers

Not long ago, the idea of establishing a Software-as-a-Service (SaaS) business focused on individual user adoption – meaning a company where most purchase choices are made without direct sales interaction – was relatively new. Currently, our analysis indicates that at least 30% of companies featured on the Cloud 100 list now operate using this bottom-up approach.

We are now seeing a shift where individual workers are increasingly impacting the software choices within their organizations, rather than having those choices dictated by upper management. Businesses designed for self-service capitalize on this trend, utilizing individual users to promote their products, expanding from initial individual applications to use by small groups, and eventually throughout the entire company.

A genuinely self-service system allows individual users to register and evaluate the product independently. Obtaining approvals for data security or assistance from IT for integrations isn’t required—line-level users can handle everything themselves. This user then often becomes a key advocate, encouraging wider implementation within the company.

Currently, many prominent software businesses, including Datadog, MongoDB, Slack, and Zoom, among others, are constructed around a predominantly bottom-up, product-led sales strategy.

This article will provide a more detailed examination of this evolving trend—and specifically how it has significantly changed pricing strategies—along with a method for aligning pricing with the value delivered to customers.

Aligning value with pricing

Within a market focused on accessible SaaS solutions, pricing structures must be clear and consistent – generally speaking, with some exceptions as noted later. This level of transparency is essential for enabling your product to attract customers independently. Consequently, ad-hoc pricing determined by sales representatives’ judgment is no longer viable; a well-defined approach that connects the price to the benefits customers receive is now necessary.

Successfully implementing this requires a thorough understanding of your customer base and their product usage patterns. With this knowledge, you can effectively categorize customers to ensure pricing accurately reflects the value they obtain.

The MAP customer value framework

To effectively define and communicate their requirements, the MAP customer value framework necessitates a thorough comprehension of your customers, focusing on Metrics, Activities and People.

While not every aspect of MAP should dictate your pricing strategy, it’s likely that one of these components will serve as the most suitable foundation for your pricing structure:

Metrics: This category encompasses quantifiable measures such as time used, the number of messages sent, meetings held, or the amount of data and storage consumed. What specific metrics are most important to your customers? Is there a point at which the value derived from these metrics significantly increases? By monitoring these key metrics from the outset, you can determine whether an increase in a particular metric correlates with greater customer value. Consider these examples:

• Zoom — Usage Time: Offers a complimentary service with a 40-minute limit for group meetings.
• Slack — Message Volume: Provides a free plan up to 10,000 total messages.
• Airtable — Data Capacity: Allows free use up to 1,200 records.

Activity: Consider how your customers actually utilize your product and how they characterize their own roles. Are they primarily content creators? Do they focus on editing? Do different customer segments employ your product in distinct ways? Rather than relying on metrics, your pricing may be best anchored to the various roles users fulfill within an organization and their corresponding needs. If you base pricing on activity, you’ll need to align feature availability and functionality with specific usage patterns (for instance, creators might have access to more advanced tools than viewers, or administrators might have broader permissions than standard users). Examples include:

• Figma — Editing versus Viewing: Free for viewing, with charges applied after two edits.
• Monday — Creation versus Viewing: Viewing is free, while creators are billed $10-$20 per month.
• Smartsheet — Creation versus Viewing: Viewing is free, with creator access costing $10 or more per month.

People: Analyze how your customers are situated within a larger organizational structure. Are they predominantly individual users? Do they operate within groups? Are they part of a larger enterprise? Does the value of your product increase as more users are added? The value you provide may be directly linked to how you manage groups of people and their interactions. For example:

• Asana — Team Size: Free for teams with fewer than 15 members, with fees applying to larger teams.
• Notion — Individual versus Team: Priced at $5 per month for individuals and $10 per month for teams.
• Gitlab — Small Business versus Enterprise: $19 per user for small businesses (Silver plan) and $99 per user for enterprises (Gold plan).

Tiered pricing

After analyzing your MAP – that is, your metrics, activities, and people – and identifying the element that provides the greatest value for monetization, the subsequent step involves deciding on the structure of your pricing tiers. It’s likely that your customer base will not all be willing to pay the same amount. Importantly, your tiered pricing structure should directly correspond to the value being provided.

Currently, tiered pricing is fairly consistent across Software-as-a-Service (SaaS) platforms, generally categorized into three levels: individual, team, and enterprise.

• Individuals generally experience the lowest total cost, but the highest cost per user.
• Teams incur a greater overall expense, though the per-user cost is reduced.
• Enterprises represent the largest total expenditure, but frequently benefit from the lowest cost per user of the product or service.

Alternatively, consider these classifications:

• Free = provides a self-service experience with limited features. Offer customers a preview of the complete offering, sufficient to motivate them to upgrade for expanded access.
• Pro/Paid = enables self-service access to the product’s complete capabilities. This could involve higher usage allowances, support for more users, or access to advanced features, such as automation.
• Enterprise = involves a sales team and a tailored solution with “enterprise-level” features, including single sign-on and dedicated customer assistance.

Given that enterprise pricing is typically the most substantial and complex, here are some additional points to keep in mind:

Enterprise pricing

For enterprise-level pricing strategies, it's crucial to ensure that the additional benefits a customer gains exceed their additional expenses. Failing to do so could lead to the belief that larger organizations are receiving less favorable terms compared to small and medium-sized businesses. This is especially critical, as enterprises frequently contribute the largest portion of overall revenue.

Numerous businesses maintain strong relationships with their enterprise clients by delivering a superior level of service. This often includes a dedicated support contact, seamless single sign-on functionality, an administrative dashboard for user management, and specialized features tailored to the product itself – such as sophisticated automation tools for Monday.com or data security measures for Slack.

It’s also beneficial to incorporate value for the end-user within your enterprise package, extending beyond just security enhancements. This gives individual users who adopt your product a compelling reason to champion it within their organizations, and provides quantifiable data to support their advocacy. By concentrating on individual users rather than solely on institutional purchasing decision-makers, you can cultivate a network of internal advocates who will promote your product.

A prime illustration of a valuable enterprise-level feature is the ability to create externally shared channels within Slack, a capability exclusive to the premium subscription. If sales teams initially begin using the product, increased adoption will likely result in them pushing for an upgrade to maintain communication with clients and potential customers through Slack.

To publish or not to publish prices

Businesses have varying approaches regarding the display of enterprise pricing on their websites, with some opting to include it and others preferring to keep it private to initiate direct customer engagement.

In practice, both strategies present distinct advantages and disadvantages. When the process of implementing the enterprise solution is uncomplicated, publicly displaying pricing can lead to increased conversions – particularly for customers who prefer avoiding interaction with a sales representative. Conversely, if implementation is intricate and potential issues are more likely, many organizations necessitate a sales consultation to ensure successful deployment of the enterprise-level solution and prevent customer dissatisfaction.

If your offering presents adoption challenges for users or typically involves a prolonged sales cycle, it’s generally advisable to avoid publishing your enterprise pricing. Promoting self-service enterprise options is most effective when product adoption can be decided upon quickly.

Furthermore, withholding pricing information provides greater adaptability for your sales team. Companies in their early stages frequently leverage these enterprise discussions to gain insights into the development of future enterprise features. Ultimately, not revealing pricing can also help ensure that your product development priorities align with the requirements of a wider customer base, rather than being overly influenced by specialized enterprise needs.

When (not if) to hire a sales team

As previously discussed in our article concerning the three key questions for those implementing a bottom-up go-to-market strategy (Who? What? When?), product-led sales isn’t a permanent solution.

Even the most successful bottom-up SaaS businesses will eventually encounter a stage where they begin to consider strategies for reaching larger enterprise clients who need more personalized support—or operate within markets where established competitors have a strong presence. Both of these scenarios necessitate a dedicated sales force capable of demonstrating the benefits of your product and fostering relationships with your most important clients.

The challenge is that many bottom-up companies prioritize product development so intently that they delay building a robust sales team, hindering their long-term success. This often leads to a reactive situation where they must quickly adapt to a corporate landscape that may resist change. Proactively investing in sales, even before it feels absolutely necessary, will enable you to capitalize on significant opportunities as they arise and prevent future complications.

The following provides a concise overview of how current leaders are approaching bottom-up SaaS pricing.

Based on the last five years, the trend towards product-led growth is expected to continue shaping the next generation of software companies. As distribution costs decrease and customers become more discerning, resources will be increasingly allocated to product enhancements, ultimately delivering greater value to the end user.

For businesses, this shift will require a reevaluation of conventional go-to-market approaches. Aligning pricing, product development, innovation, and customer value can yield optimal results, but it demands careful consideration of your customer base, your offerings, your hiring needs, and your execution strategy.

Those who best understand their customers’ core motivations and link their pricing structures to those drivers will gain a competitive edge.

Please note that the information presented in this post is not intended as investment guidance from Coatue. As of this publication date, Coatue holds private investments in Airtable, Figma, Gitlab, and Notion, all mentioned within this article. Furthermore, as of this publication date, Coatue may have positions in the publicly traded companies referenced, and, aside from publicly filed SEC documents, federal securities laws restrict Coatue’s disclosure of publicly held stocks in which it invests.