Value-Based Pricing for B2B SaaS: What It Actually Means

Value-based pricing sets your price according to what your customer perceives your solution to be worth, rather than what it costs you to deliver or what your competitors charge. For B2B SaaS, it means your price reflects what the customer gets out of it, not what it costs you to build. This article explains what that means and why most companies get it wrong.

What value-based pricing actually is

The term gets thrown around a lot, usually in a way that strips it of any practical meaning. So let me be precise. Value-based pricing is a strategy where you set your price based on the perceived value your solution delivers to the customer. Not your cost. Not the market average. The value as your customer experiences it.

This lives at the heart of the fundamental pricing law: Cost < Price < Value. Your cost is the floor. Perceived value is the ceiling. Value-based pricing means deliberately positioning your price relative to that ceiling, rather than working up from the floor.

The key word is “perceived.” Value is not an objective number you can calculate in a spreadsheet. It is what the customer believes, based on their context, their alternatives, and the progress they are trying to make.

The three approaches compared

Cost-plus pricing starts with your costs and adds a margin. It is simple, defensible to a board, and completely disconnected from customer value. You might spend thousands on a feature nobody cares about and almost nothing on the one capability that saves your customer hundreds of thousands per year. Cost-plus pricing is the default for engineering-led companies because it feels scientific. It’s not. Your costs have nothing to do with what the customer is willing to pay.

Competitor-based pricing looks at what others in your market charge and positions relative to them. The problem is you are copying someone else’s guess. Unless your competitor has done genuine value research, and most have not, you are anchoring to an arbitrary number.

Value-based pricing starts with the customer. What outcome are they seeking? What is that outcome worth to them? What are their alternatives? This is harder. It requires genuine customer research and the confidence to price according to value rather than cost or competition. But harder is exactly why your competitors will not do it.

Why scale-ups struggle with this

Three reasons come up repeatedly. They do not know their own value, because the founding team describes features and technology rather than outcomes and impact. They are afraid to charge more, especially in European SaaS, where there is a fear that higher prices will scare customers away. And they lack the data, because most scale-ups do not have a real process for gathering pricing-specific insights from customers.

The real challenge is not understanding the concept of value-based pricing. It is building the customer insight, the quantification methods, and the confidence to actually do it.

In my upcoming book, Pricing from the Core, I walk through the full methodology for implementing value-based pricing step by step, from customer research to quantification to setting the actual price point. If you want to be notified when it launches, get in touch.