SaaS Pricing Strategy: 6 Approaches to Use When Markets Shift

A SaaS pricing strategy is the structured approach a software company uses to set, adjust, and communicate its prices based on market conditions, customer value, and competitive dynamics. Getting it right is as essential as the product itself — price too high and you lose customers, price too low and you erode your margins and brand perception.

The pricing strategy for a SaaS product means the same as air and water for the continuity of human life. Yes, pricing is vital to your product’s future and vertical growth. So why don’t we use the shifted market pricing strategy? Assuming you are asking what this strategy is, I will continue to write!

When updating the prices of SaaS products, you need to consider many different strategies and parameters. If you use the wrong strategy, you can hurt your sales and lose customers.

In spite of that, you can get the momentum you’ve been looking for by coming up with a plan that works for your product and the market you’re in.

Some of your competitors may charge lower service fees than yours, and some of your competitors may charge you higher service fees. Are you unsure about how to set your own prices? I strongly recommend the shifted market pricing strategy. Thanks to this strategy, we will determine our own pricing policy by looking at the prices of our competitors.

In a way, our competitors are going to decide for us. 🥀

In this post, we’ll talk about what the shifted market pricing strategy is. Also, I will explain how you can successfully use this for your SaaS pricing changes.

What is shifted market pricing strategy?

It raises some concerns for SaaS products when it comes to price increases, for example, about whether users will like the new pricing policy. But if your company’s costs are going up in different ways, you need to change your prices to keep your income and expenses in balance. 

You should make changes when the prices of competing products in your market begin to fluctuate. As a result of this change, a new price equilibrium forms in the market you are in.

Shifted market pricing strategy is a term that describes the process of raising prices when there is a change in the market. The most common reason to do this is when there is a shift in demand or supply. In short, it is the time when the price of goods and services changes.

The best example of this is when a company decides to raise its prices due to inflation. The inflation we experienced in 2022 and the recession expected to occur in 2023 is the fit example for this.

What are the pros and cons of using a shifted market pricing strategy?

Pros of using a shifting pricing strategy:

• Higher price, higher profit rates: You can increase your profit every time you sell by raising your prices. We will talk about the negative result later! 🙂
• Low prices can increase demand: If you set your pricing policy lower than alternative products, the demand for your SaaS product may increase.
• If you have a different pricing policy than the average of your competitors, you can differentiate your product from the market.

Cons of using a shifted market pricing strategy:

• You may lose customers: If your product charges higher than the market price, your customers may choose your cheaper competitors.
• Risk of damaging reputation: Charging significantly lower prices than the market price could lead to a perception that a company’s products or services are of lower quality, which could damage its reputation.

What are the 6 major SaaS pricing strategies?

1. Cost-Based Pricing (Cost-Plus)

Cost-based pricing is the simplest strategy available. A company sets its price based on what it costs to build and deliver the product, then adds a target profit margin on top. This approach works well in stable markets where costs are predictable and competitive pressure is low. However, for SaaS companies, it often underestimates the value customers receive — meaning you may be leaving significant revenue on the table.

2. Competition-Based Pricing

Competition-based pricing focuses on what the market is already bearing rather than your internal costs. You benchmark against direct competitors and position your pricing slightly above, below, or at parity based on your differentiation. This is particularly useful during market shifts when a competitor drops their price — you need a systematic way to evaluate whether to respond or hold your ground. The shifted market pricing approach is a form of competition-based pricing taken to a strategic level.

3. Value-Based Pricing

Value-based pricing is widely considered the most effective approach for SaaS. Instead of starting with costs or competitors, you start with the outcomes your customers achieve and price according to the value delivered. Companies like Salesforce and HubSpot use value-based pricing — their top tiers are expensive because the ROI for enterprise customers is enormous. This strategy requires deep customer research but produces the highest sustainable margins.

4. Penetration Pricing

Penetration pricing means entering or expanding in a market with a deliberately low price to capture market share quickly, then raising prices once you have established a loyal user base. Notion used this effectively in its early growth phase — offering an extremely generous free tier and low paid plans to displace incumbents. The risk is that early customers anchored to low prices may churn when you eventually raise them, so communicating the value increase is critical.

5. Price Skimming

Price skimming works in the opposite direction: launch at a premium price targeting early adopters and high-value customers, then gradually lower the price to reach broader market segments. This works well for innovative SaaS products with no direct competitor at launch. It allows you to maximize revenue from customers with the highest willingness to pay before commoditization pressure sets in.

6. Dynamic Pricing

Dynamic pricing means adjusting prices in real time or on a regular cadence based on demand signals, usage patterns, or market conditions. This is the natural evolution of the shifted market pricing strategy — instead of reacting to a market shift after it happens, you build systems to monitor and respond continuously. SaaS companies using usage-based pricing models (like Snowflake or Twilio) are effectively practicing dynamic pricing, tying revenue directly to customer consumption.

SaaS Pricing Strategy Comparison

Understanding the market

Before developing a pricing strategy, you need to understand the market you are in. You may need to analyze the industry from different perspectives, such as industry size, the estimated total number of users, and whether the industry will grow or die.

This means figuring out if any changes have happened and figuring out how they affect prices.

If you observe an increase in demand by users for the service you provide, you can increase your prices. This won’t be a problem as long as the user responds to your product or service. 

However, if there is a decrease in demand, you may need to lower your prices. Because you need to do this to stay competitive and continue to generate income.

For example, the fast grocery delivery market has been very popular in recent years. It is valued at US$38.5 billion in 2022 and is expected to reach US$81.5 billion by 2032. Do you know what this means? New players are entering the game in these two markets. Former players are either offering big discounts or revising their prices to stay competitive by using a skimming pricing strategy.

In summary, in order to be competitive, you must be able to review and change your prices according to market balances. We call this flexibility the “dynamic pricing strategy.”

Developing a shifted market pricing strategy

By analyzing the market, we gained knowledge and learned the expectations of the market from us. We are now ready to develop a “shifted market pricing strategy.” This involves identifying your target audience and competitors, setting pricing goals, and determining the best pricing strategies and tactics to achieve those goals.

Consider demographic features and user needs when determining your target audience. In this way, you will develop your strategy in accordance with them.

The second step will be to examine how your competitors are pricing their products and services. You can find a suitable position for yourself by examining the prices of your competitors. For example, if your product is an immature SaaS product, it would not be attractive to charge as much as or more than an advanced competitor’s SaaS product.

Now that we understand our target audience and market competition, what’s next? We will set goals. Some of these might be to bring in more money, maintain a certain profit margin, or simply stay competitive in the market.

Finally, identify pricing tactics that will help you meet your pricing goals. This may mean offering discounts, grouping products or services together, or setting up a tiered pricing system.

Implementing the strategy

It’s time to put your shifted market pricing strategy into action now that you’ve developed it. This means telling customers about your price changes and creating new marketing efforts to fit in with your strategy.

Would you want the trust-based relationship you’ve built with your customers to be damaged? I know your answer! That’s why you need to share your price updates with them. Email newsletters, social media posts, or online meetings are excellent channels to inform your users.

In addition to communicating price changes to customers, you will also need to adjust your marketing and sales efforts to reflect your new pricing strategy. This could mean changing your sales pitch, updating your pricing and landing pages, or coming up with new ways to market your SaaS product. Keeping users engaged through pricing transitions is as important as the pricing decision itself — abrupt changes without clear communication are one of the top drivers of preventable churn.

Finally, it’s important to measure the effectiveness of your new market pricing strategy. This can be done through metrics such as revenue, customer loyalty, and overall satisfaction. By regularly reviewing these metrics, you can make any necessary adjustments to your pricing strategy to achieve your business goals.

Real-World SaaS Pricing Examples

The best way to understand how pricing strategy works in practice is to look at how successful SaaS companies have navigated market shifts. Each of the examples below illustrates a different strategic response to competitive or market pressure.

Slack started with a usage-based freemium model — charge only for active users, let everyone else stay free. When Microsoft Teams launched as a bundled Office 365 product at effectively zero marginal cost to enterprise buyers, Slack faced an existential pricing challenge. Their response was to sharpen value-based positioning (focusing on integrations and developer-friendly workflows) rather than competing on price. The lesson: when a competitor shifts the market with a bundle, matching their price is often a losing game — matching their value delivery is not.

Notion grew rapidly through a deliberately low-cost personal tier, then expanded into teams and enterprise with dramatically higher per-seat pricing as the product matured. This is penetration pricing executed methodically — win the individual user, convert to the organization. When they raised prices for existing personal pro users in 2023, they communicated the change well in advance via in-app announcements and email, giving users time to evaluate their options. The result was minimal churn despite a meaningful price increase.

Linear (the project management tool) launched with simple, transparent per-seat pricing and has largely avoided discounting in a market where competitors offer heavy promotional pricing. This is a value-based approach at work — Linear competes on product quality and user experience rather than on price, which allows them to maintain pricing integrity even when the market around them is discounting. Their pricing page is intentionally simple: no tiers of features designed to confuse, just clear value at each plan level.

How to Analyze Your Competitor’s Pricing

Understanding competitor pricing is not a one-time exercise — it’s an ongoing intelligence function that should inform every pricing review cycle. Here is a practical three-step process for SaaS companies.

Step 1: Identify your direct and indirect competitors. Direct competitors offer similar features to the same buyer persona. Indirect competitors solve the same problem differently (e.g., a spreadsheet template versus your SaaS tool). For pricing analysis, focus on direct competitors first, but keep indirect ones in your peripheral vision — they define the lower boundary of what customers are willing to pay.

Step 2: Map their price points and packaging structure. Create a simple spreadsheet tracking each competitor’s plan names, monthly prices, annual discount, key feature gates per tier, and any public information about their customer size targets. Update this quarterly. Pay particular attention to where they gate features — this reveals their theory of value and their upsell strategy. If a competitor suddenly moves a feature from a paid tier to a free tier, that is a market signal that the feature is becoming commoditized.

Step 3: Observe how they respond to market changes. Pricing page archives (via Wayback Machine), changelog announcements, and LinkedIn posts from their team are all valid data sources. When a competitor changes their pricing, note what they changed, when they announced it, and how they framed the change to customers. This gives you a real-world case study in competitive pricing communication — and a data point for how your shared customers are likely to react if you make a similar move.

Signs It’s Time to Shift Your Pricing Strategy

One of the most important — and most neglected — questions in SaaS pricing is not how to set prices but when to change them. Here are five concrete signals that your current pricing strategy needs revision.

1. A direct competitor has dropped prices significantly. If a direct competitor reduces their price by 20% or more and you are not sure whether to respond, that is a sign you need a structured pricing review. The answer is not always to match them — but you need a deliberate rationale for holding your price, not just inertia.

2. Your win rate in competitive deals is declining. If sales cycles are getting longer or your team is losing deals to price objections more frequently, this is a lagging indicator that your pricing is out of alignment with market expectations. Review your lost deal data for the past 90 days before concluding — sometimes the issue is packaging, not the headline price.

3. A new market segment is requesting your product. When customers from an industry or company size you weren’t targeting start buying your product and using it in unexpected ways, your existing pricing tiers may not fit their usage patterns. This is an opportunity, not a problem — but capturing it often requires a new pricing tier or packaging option.

4. Your costs have changed materially. Infrastructure cost reductions (common as companies move up the cloud commitment curve) or significant cost increases (new compliance requirements, third-party API cost increases) are both valid triggers for a pricing review. Cost-driven price changes are harder to communicate positively to customers, so they require extra care in framing.

5. You are launching a repositioning or a major feature expansion. A significant product update — especially one that expands into an adjacent use case — is a natural moment to revisit pricing. Adding a major feature tier is much easier to justify to existing customers when it is positioned as new value rather than a price increase on the same product.

Common SaaS Pricing Mistakes to Avoid

Even experienced product and growth teams make recurring pricing mistakes. Being aware of these patterns before you redesign your pricing can save months of backtracking.

Copying competitor pricing without understanding their cost structure. Just because a competitor charges $49/seat/month doesn’t mean that price is right for your business. Their cost structure, target customer, and unit economics may be entirely different. Benchmark competitively, but build from your own value and cost foundation.

Raising prices without communicating the reason. A price increase without context feels arbitrary and disrespectful to existing customers. SaaS companies that communicate price changes transparently — explaining the value improvements that justify the new price, providing adequate notice, and grandfathering loyal customers where feasible — consistently see lower churn than those that issue a terse billing notification. AnnounceKit exists specifically to help SaaS teams make these announcements well: in-app, via email, and across channels, all from one place.

Too many tiers creating decision paralysis. More than three or four pricing tiers rarely helps conversion. Research on choice architecture consistently shows that beyond a certain number of options, customers default to the cheapest or make no decision at all. If your pricing page has five or more plans, consider whether consolidation would improve both conversion and average contract value.

Ignoring the freemium-to-paid conversion funnel. Freemium is a customer acquisition strategy, not a pricing strategy. Many SaaS companies run freemium plans indefinitely without a clear upgrade trigger — which means they’re subsidizing power users who will never convert. Design your free tier with the conversion path in mind: what is the one moment where a free user clearly needs a paid feature?

Announcing Price Updates with AnnounceKit

If you’re looking to announce price updates to your customers, AnnounceKit is the perfect tool for the job. AnnounceKit allows you to easily create and share announcements with your audience, whether it’s through email, social media, or your website. When you shift your pricing strategy, the quality of your communication is just as important as the pricing decision itself — customers who feel informed and respected are far more likely to accept a price change gracefully than those who feel blindsided.

Here’s how to use AnnounceKit to announce price updates to your users:

• Create a new announcement in AnnounceKit. ✍
• Choose the appropriate channels for sharing your announcement. For price updates, it’s generally a good idea to send an email to your customer list and post the announcement on your website and social media accounts. 📧
• Craft a clear and concise message explaining the price changes. Be sure to include the new pricing and any other relevant details, such as the reasoning behind the changes or any special offers that may be available. 📣
• Preview and test your announcement to ensure it looks and sounds the way you want it to. 💻
• Schedule the announcement to go live at the appropriate time. 📅

Frequently Asked Questions

What is the best pricing strategy for SaaS?

Value-based pricing is generally considered the most effective long-term SaaS pricing strategy because it aligns your price with the measurable outcomes customers achieve rather than your costs or competitors’ choices. It produces the highest sustainable margins and the strongest customer retention, because customers who feel they’re getting genuine value are far less price-sensitive. That said, value-based pricing requires deep customer research and clear positioning — most early-stage SaaS companies start with competition-based pricing and graduate to value-based as they accumulate customer outcome data.

How do you communicate a price increase to customers?

The most effective price increase communications share three things: a clear reason for the change, adequate advance notice (typically 30 to 60 days for subscription changes), and an acknowledgment of the customer’s loyalty. Frame the increase around value improvements — new features, infrastructure investments, expanded support — rather than leading with the cost number. Use multiple channels to ensure every customer sees the announcement: in-app notifications, email, and your public changelog. AnnounceKit is built specifically to help SaaS teams coordinate these multi-channel announcements from a single dashboard, reducing the risk that customers feel blindsided.

What is value-based pricing in SaaS?

Value-based pricing in SaaS means setting your price based on the economic value your product delivers to customers — not on what it costs you to build, and not solely on what competitors charge. A project management tool that demonstrably saves a 50-person team 5 hours per week can justify a much higher price than its infrastructure costs would suggest, because the value delivered is large and measurable. Implementing value-based pricing requires customer interviews, willingness-to-pay research (often using Van Westendorp or conjoint analysis), and ongoing monitoring of whether your feature set still justifies your price as the market evolves.

How often should you review your SaaS pricing?

Most SaaS companies should conduct a formal pricing review at least once a year, with a lighter monitoring cadence quarterly. Trigger an out-of-cycle review whenever a major competitor changes their pricing, you launch a significant feature expansion, your win rate drops more than 10 percentage points in a quarter, or your infrastructure costs change by more than 15%. Pricing is not a set-and-forget decision — markets, competitors, and customer expectations shift continuously, and your pricing needs a regular process to keep pace.

What is dynamic pricing in SaaS?

Dynamic pricing in SaaS means adjusting prices based on real-time or regularly updated signals — usage volume, demand patterns, customer segment, or time of purchase. Usage-based pricing models (charging per API call, per active user, or per gigabyte processed) are the most common form of dynamic pricing in SaaS. Companies like Snowflake, Twilio, and Stripe use consumption-based dynamic pricing to align their revenue directly with the value customers extract. The advantage is that customers feel they’re paying fairly for what they use; the challenge is that revenue becomes harder to predict, which requires more sophisticated financial modeling and customer communication.

How does AnnounceKit help with pricing updates?

AnnounceKit is a customer communication platform that helps SaaS companies announce product and pricing changes to their users across multiple channels — in-app widgets, email digests, and public changelogs — from a single dashboard. When you change your pricing, AnnounceKit lets you craft a clear announcement, target it to the right customer segments, and schedule it to go live at the optimal moment. Teams that use AnnounceKit for pricing announcements report fewer support tickets about billing confusion and higher user trust scores, because customers feel informed and respected throughout the pricing change process.

Conclusion

A well-considered SaaS pricing strategy is one of the highest-leverage decisions you can make for your business. The changing market pricing strategy is a valuable tool for SaaS companies looking to maintain their competitive position in a dynamic market — whether that means responding to a competitor price drop, expanding into a new customer segment, or simply ensuring your price still reflects the value you deliver.

By understanding the market, selecting the right pricing approach from the six strategies above, setting clear pricing goals, and communicating changes transparently to your customers, you can navigate pricing shifts with confidence. And when it comes time to announce your next price update, make sure your customers hear it from you — clearly, early, and through every channel they use.