Per-User Pricing

What is Per-User Pricing?

Per-user pricing is a subscription model where companies charge based on the number of individual users accessing their service. Each user requires a unique login, and the total cost scales linearly with team size.

The model follows a straightforward formula: multiply the number of users by the price per user. A company with 10 employees using a tool priced at $20 per user per month pays $200 monthly. Add another employee, and the bill increases to $220.

This pricing structure is common in B2B SaaS, particularly for collaboration tools, CRM systems, and project management platforms where each team member needs their own account to perform their work.

Why Per-User Pricing Matters

Per-user pricing creates predictable revenue streams for vendors and predictable costs for customers. Finance teams can forecast software expenses by multiplying headcount by per-seat costs. Sales teams can model expansion revenue by tracking customer employee growth.

The model aligns well with how many teams actually use software. When every sales rep needs their own CRM account or every designer needs their own workspace, charging per user makes intuitive sense to both the vendor and the buyer.

However, this simplicity can become a constraint. Companies may limit software access to control costs, which can reduce the value customers extract from the product. A marketing tool that charges per user might only be provisioned to the core marketing team, even though sales and customer success could benefit from access.

How Per-User Pricing Works

The basic implementation is simple: count users, multiply by price, generate invoice. But real-world implementations add several layers of complexity.

User Definition and Tracking

Vendors define "users" differently. Some count any provisioned account, whether active or not. Others only charge for users who logged in during the billing period. Still others distinguish between full users with complete access and limited users with restricted permissions.

Slack charges only for active users in the past 28 days. GitHub charges per user but allows unlimited external collaborators on private repositories. These variations address different customer concerns about paying for unused seats.

Volume Discounting

Most vendors implement tiered pricing that reduces per-user costs as teams grow. A tool might charge $30 per user for teams under 10, $25 per user for teams of 10-50, and $20 per user for larger teams. This encourages broader adoption while maintaining margins on smaller accounts.

Feature Tiering

Many companies layer feature tiers on top of per-user pricing. Salesforce charges different per-user rates depending on which edition a customer purchases. Their Essentials edition starts at one price per user, while Enterprise edition costs more per user but includes advanced features.

This creates a pricing grid: horizontal axis for user count, vertical axis for feature tier. A 50-person team on Professional edition pays differently than a 50-person team on Enterprise edition.

Billing and Proration

Adding or removing users mid-cycle requires proration logic. Billing systems like Meteroid handle the calculations automatically, crediting unused time when seats are removed and charging prorated amounts when seats are added.

Common Challenges with Per-User Pricing

Seat Sprawl and Cost Creep

As organizations grow, software costs increase automatically. A tool that costs $5,000 monthly for a 50-person team becomes a $50,000 annual expense at 500 people. Finance teams scrutinize these line items during budget reviews.

This leads to "seat optimization" efforts where IT teams audit who actually uses each tool and deprovision inactive accounts. Some companies implement rigid approval processes for adding new seats, which creates friction when teams need to onboard new members quickly.

Shared Access Workarounds

High per-user costs incentivize account sharing. Multiple team members might share a single login to avoid paying for additional seats. This undermines the vendor's revenue model and often violates terms of service.

Some vendors combat this through technical controls like concurrent session limits or IP address monitoring. Others accept some level of sharing for occasional users while enforcing seat counts for primary users.

Usage Variance

Per-user pricing treats all users equally, even when usage patterns differ dramatically. A power user who spends eight hours daily in the product pays the same as someone who logs in twice a month. This mismatch between value delivered and price paid creates tension, particularly in accounts with a mix of heavy and light users.

Enterprise Procurement Friction

Large enterprises often negotiate based on potential user counts rather than current active users. A company might purchase 1,000 seats upfront to cover projected growth, even if only 600 employees currently need access. This creates unused capacity and complicates ROI calculations.

When Per-User Pricing Makes Sense

Per-user pricing works well when:

Value scales with users. Each additional user creates incremental value for the customer. CRM systems where each sales rep manages their own pipeline fit this pattern. Adding another rep means another seat makes sense.

User boundaries are clear. It's obvious who should have an account and who shouldn't. Email systems, communication platforms, and productivity tools have natural user boundaries at the employee level.

Usage is relatively uniform. Most users interact with the product similarly. Project management tools where every team member tracks tasks and updates status fit this pattern.

Customers can control user count. Organizations can predict and manage how many seats they'll need. This makes budgeting straightforward and reduces billing surprises.

Alternatives and Hybrid Approaches

Usage-Based Pricing

Instead of charging per user, some companies charge based on consumption metrics like API calls, compute hours, or data processed. Twilio charges per message sent. AWS charges for resources consumed. This aligns costs more directly with value for products where usage varies significantly.

Usage-based pricing creates variable costs that finance teams find harder to forecast, but it eliminates the seat optimization problem and allows unlimited users.

Flat-Rate Pricing

Basecamp charges a single flat rate for unlimited users. This removes friction around adding team members and simplifies the buying decision. It requires confidence that customer usage patterns won't create unsustainable support or infrastructure costs.

Hybrid Models

Many companies combine approaches. A base platform fee might include a certain number of users, with additional seats available at a per-user rate. Or a per-user base fee might be combined with usage-based charges for heavy consumption.

GitHub charges per user for private repositories but layers on usage-based pricing for Actions minutes and storage. This captures value from both team size and product usage intensity.

Implementation Considerations

Billing Infrastructure

Implementing per-user pricing requires systems to track user provisioning, calculate charges, handle proration, and generate invoices. Modern billing platforms like Meteroid provide these capabilities out of the box, connecting to identity providers to monitor active users and automatically adjusting subscription quantities.

Self-Service Management

Customers expect to add and remove seats without contacting sales. A self-service portal where administrators can adjust user counts, view current charges, and manage billing settings reduces support burden and improves customer experience.

Contract Flexibility

Sales teams need flexibility to structure deals differently for different customers. Some might want annual commitments with set seat counts. Others prefer monthly billing with seats that flex based on active users. Your billing system needs to support these variations without custom development.

Analytics and Reporting

Finance teams need visibility into seat utilization across all accounts. Reports showing provisioned versus active users help identify optimization opportunities and inform pricing model evolution. Customer success teams use seat expansion as a leading indicator of account health.

Evaluating Per-User Pricing for Your Business

Consider three factors when evaluating whether per-user pricing fits your product:

Value alignment. Does adding another user create proportional value for the customer? If yes, per-user pricing feels fair. If value comes from other factors like data volume or transaction count, usage-based pricing might align better.

Customer behavior. Do customers naturally segment users into clear full-access and limited-access groups? If everyone needs similar access, per-user pricing works. If usage patterns vary wildly, you might need tiered pricing or usage-based models.

Sales motion. Can your sales team easily explain and justify per-user pricing? If prospects immediately understand the model and can predict their costs, it's a good fit. If you spend significant time justifying seat counts or explaining pricing nuances, consider simplification.

Per-user pricing remains one of the most common B2B SaaS models because it's intuitive for both vendors and customers. But it's not universal. The best pricing model aligns how you capture revenue with how customers derive value from your product.