In a recent video titled "AVOID these 5 SaaS Pricing Mistakes" from the channel "AI, SaaS & Agentic Pricing with Monetizely," a SaaS pricing consultant shares critical insights on the common pricing errors that frequently undermine SaaS companies' revenue strategies. The expert outlines five fundamental mistakes that founders and executives must avoid to establish effective pricing frameworks that drive both growth and profitability.
The Foundation: Why SaaS Pricing Strategy Matters
Pricing isn't merely about setting numbers—it's a strategic cornerstone that affects everything from customer acquisition to long-term revenue sustainability. Unfortunately, many SaaS leaders approach pricing as an afterthought rather than the critical business function it truly is.
As the pricing expert in the video emphasizes, a well-constructed pricing strategy aligns your business goals with customer needs while maximizing revenue potential. Let's explore the five critical mistakes that can derail even the most promising SaaS business.
Mistake #1: Misalignment on Customer Segmentation
Perhaps the most fundamental error in SaaS pricing—and arguably the most damaging—is failing to properly define and align on customer segmentation.
The consultant emphasizes this point strongly: "Not aligning on segmentation will mean a death nail on your SaaS pricing strategy. I cannot even explain the number of companies I have met with that do not agree on who their customer segments are."
Without clear segmentation, companies struggle to:
- Understand customer needs
- Identify jobs-to-be-done
- Create appropriate package tiers
- Align value metrics with customer goals
The consultant recommends: "Get the segmentation right, define your ICP, include both quantitative and qualitative elements—your pricing and your ability to make money depends on this."
This foundation is non-negotiable. Every other pricing decision cascades from properly understanding who your customers are and what they value.
Mistake #2: Obsessing Over Price Points Prematurely
Many SaaS teams spend excessive time debating specific price points before establishing more fundamental elements of their pricing architecture.
The pricing expert notes: "Don't spend all your time discussing price points. Price points are really a downstream decision that happens after you have figured out your the right packaging and tiers."
The proper sequence for pricing decisions should be:
- Define customer segments
- Create appropriate packaging and tiers
- Determine the right pricing metric that aligns with customer value
- Set specific price points for each tier and segment
As the consultant emphasizes: "Price points don't mean very much and really they're context dependent…I see a lot of companies spending a lot of time discussing price point where they should be discussing how they're aligning with their market segments."
Mistake #3: Blindly Adopting Good-Better-Best Packaging
The good-better-best pricing model has become nearly ubiquitous in SaaS, but mindlessly adopting this approach without considering your specific segments is a critical error.
"A lot of companies, even though they may have good segmentation, will start by say[ing] 'hey we're going to have three tiers and let's just slot our features into these three good better best tiers,'" the consultant points out.
Instead, let your segmentation guide your tier structure: "You already know the needs of your segments. You already know what these customers want from you. Isn't it better that you start with 'I have two segments and let me create the right tiers based on the needs of the segments' rather than say 'I will create three packages just because everybody does it'?"
Forcing features into predetermined tiers often creates friction in the sales process and fails to address specific customer needs properly.
Mistake #4: Neglecting the "Last Mile" of Implementation
Even the most brilliantly designed pricing strategy is worthless if it isn't properly implemented and enforced. The consultant highlights this critical oversight:
"A very common issue that I find with pricing strategies is that companies do not think about the last mile. They say 'this is our strategy, we've created it here, it's in this Google doc, all the sales people should be using it.'"
For effective pricing implementation, companies must consider:
- How sellers actually use pricing in practice
- Whether the pricing model is simple enough to be understood
- Training requirements for the sales team
- Clear and enforceable discounting policies
The consultant warns: "I cannot tell you the number of times where I've seen a pricing strategy, I've seen list prices, but sales does not adhere to the strategy. The management team does not care about enforcing it, and as a result, your average selling prices are nowhere near your list prices."
Without proper implementation, your pricing strategy exists only in theory, not in practice.
Mistake #5: Forgetting Payment Terms in Your Strategy
In today's economic environment, cash flow considerations are critical yet frequently overlooked in pricing strategy development.
"Not including payment terms in your pricing strategy," the consultant notes as the fifth major mistake. "In the time where free cash flow is important, you need to make sure you get your payment up front."
Many SaaS companies, especially those with usage-based models, optimize for growth while deferring revenue collection, which can create cash flow challenges:
"A lot of usage-based models optimize for growth and getting money later when the bill and the invoice is sent. And many customers still not pay on time."
To address this, consider incorporating:
- Minimum commitments
- Upfront payment requirements
- Payment term variations based on contract length
- Cash flow optimization mechanisms
As the consultant succinctly puts it: "Your business needs in this economic environment to get money in the bank. And your pricing strategy, while it may be the right strategy for you, is not letting you have the cash when you need it."
Taking Action: Building a Stronger SaaS Pricing Foundation
Effective SaaS pricing isn't accidental—it's the result of deliberate strategy, clear segmentation, and thoughtful implementation. By avoiding these five critical mistakes, SaaS leaders can develop pricing structures that drive growth while maintaining healthy margins and cash flow.
Remember that pricing is never "set and forget"—it requires ongoing refinement as markets evolve, customer needs shift, and your product matures. The companies that treat pricing as a strategic function rather than a tactical afterthought position themselves for sustainable competitive advantage.
By focusing first on customer segmentation, creating appropriate packaging, selecting aligned value metrics, implementing effectively, and considering cash flow implications, SaaS businesses can avoid the most damaging pricing mistakes that undermine otherwise promising business models.