As a reminder, Per-Seat pricing is a kind of Unit-based pricing model where customers pay up front for the number of seats, licenses or accounts they want to purchase (in this case, the "unit" is a seat).

Unit- or per-seat pricing differs from usage pricing, where a customer is retroactively charged on actual usage, or for whatever amount of a various service they actually consumed.

The primary distinction lies in when customers are charged for these resources, and whether this is pre-set or based on actual usage. In unit-based pricing, customers typically commit to a specific number of units (such as seats) at the beginning of the billing period and pay for these units upfront. This approach provides a predictable cost structure for customers, as they know how much they will be charged for their chosen units.

In contrast, usage-based pricing involves metering customers' consumption of resources throughout the billing period and charging them for their actual usage at the end of the billing cycle. This model allows customers to pay for only what they use, which can be particularly appealing for businesses with fluctuating resource needs or seasonal demand patterns.

Remember, per-seat pricing is a type of unit-based pricing,  so this logic can be applied to another value metric or type of units, not just user licenses or seats, to better align your pricing strategy with the value your customers receive from your product.

It can be easy to mistake a "seat" for another priced element or simply group them all into one. For example, you may have distinct user dashboards that does necessitate the need for different licenses, but make sure that your "seat" allowance is not overshadowing another important metric, such as number of signatures, gigabytes of storage, or API calls.

Think of a cloud-based provider: often, a "seat" comes with a certain set amount of storage. But remember, these are distinct variables and even if one is included with the other, you need to account for them and measure them separately. What happens if User A goes over their allotment? Do they get charged an overage fee? Does User B get credits back if they don't use it all in a particular month? Can User A and B share their total allotment between the two of them if they're on the same account? Etc.

The takeaway: when you choose "seat" as your value metric, ensure this is the most appropriate, accurate and measurable way of pricing this particular feature, and consider if there are any other metrics tied to it that also need to be taken into account.

Once you've determined that users are the most accurate way to measure this particular value, think about your different types of users, and if they're all getting the same value or not.  "Seats" can be broken into different classes of users, such as admins, premium users or power users; normal users, and then view-only or limited access users. It can also be segmented by active or inactive users

Fixed Per-Seat Pricing: the fee remains the same for every user on your customer's account.

Variable Per-Seat Pricing: the fees for each seat may vary based on user type; for example, an Editor or Admin may have a higher seat price than a view-only user.

Active User Pricing: for either of these variants, you may choose to not charge the customer for idle users who only need to access the account, say, once per quarter.

Figma
Figma has adopted a per-seat pricing model, offering different plans for individuals, small teams, and larger organizations, all of which are based on the number of editors (designers who actively create and edit designs). Here, it distinguishes between classes of users, and provides unlimited access to viewers or view-only members while charging only for editor-access users.

Airtable
Airtable utilizes a per-seat pricing model, with different plans available for individual users, teams, and enterprises. Each plan offers varying levels of features and storage capacity, allowing customers to choose the option that best meets their needs. By charging per user, Airtable ensures that customers pay based on the number of team members who actively use the platform, aligning costs with the value derived from the service.

It's normal for SaaS companies to change their pricing model or price point to better reflect the value customers are getting out of their product (in fact, we encourage it!) Here are a couple of case studies where the company initially employed per-seat pricing but presumably this became no longer aligned with that value, and they changed things up.

Mixpanel
Mixpanel transitioned from per-seat model to a tiered usage limits models where they cap users at the number of events they consume each month.

Mailchimp
Mailchimp initially used a per-seat pricing model but transitioned to a tiered subscription model where they charge customers based on the number of email subscribers they have and features required; this generally scales in proportion to the sender.

Pure per-seat pricing is more rarely the most optimal when it comes to SaaS pricing strategies. The majority of the time, what's actually most beneficial is to combine per-seat pricing elements with another pricing element, a method called hybrid pricing.

Often, a SaaS company will "layer" per Seat and usage-based pricing, or per-seat pricing with a standard recurring monthly fee or add-on features. Combining these elements together can create a more intuitive, value-driven package that balances what's fair to both you and your customers, while potentially adding more revenue streams.

If you're considering implementing per seat pricing for your SaaS business, be aware that some basic vendors don't always offer a way to charge on a per-seat basis, particularly if you're needing to combine two or more different pricing models, such as a flat recurring fee with a per-seat limit.

Another potential block is in upgrades and downgrades; how easy is it for a customer to purchase licenses for new users? Can they change existing users, add additional users, and remove old inactive ones without having to contact Customer Service?

Do check the limitations of your billing provider and subscription management system provider first to ensure they'll actually be able to accommodate this new pricing model.

If they aren't able to, you may consider finding a vendor that's compatible with hybrid pricing, such as Wingback.

Because this pricing model scales with the number of seats a customer uses, it might seem fair to you as the seller, but buyers can sometimes resent this model as a sort of hidden tax on their business growth -- as they grow and scale, the price increases as their team size and number of users also grows. This, however, is just par for the course and is a normal part of any growth-minded pricing model. In other words, the only time a growing company isn't getting charged proportionately to their growth is if you offer a truly flat rate, fixed-price product. So don't let this discourage you in determining the right pricing strategy.

The more critical thing to benchmark your decision on is whether customers are getting value from each additional seat, and if this value is equivalent for every seat or if some users get more out of the product than others (eg admins vs viewers). Do be mindful of Ultimately, the key to a successful pricing strategy lies in understanding your customers' needs, the value your product provides, and selecting the most appropriate pricing model that aligns with these factors.

If you're considering implementing per seat pricing, using a billing automation solution like Wingback can streamline the process and reduce development effort. Always keep in mind that what you want to optimize for is aligning the value that your customers get out of your product with the price that you are charging.