The secret to a strong pricing model isn’t your cost structure or how feature-rich your product is: it’s segmentation.
Too often, SaaS companies price as if all customers value the product the same way, use it the same way, and are equally willing to pay. That assumption might make things simpler, but it’s almost never true and it can result in massive untapped revenue potential.
Think about a startup using your product to manage their first few clients versus an enterprise scaling it across multiple departments. Should they see the same pricing page? Should they get the same offer? Of course not. Yet many companies design their pricing around a single “average” user and leave money on the table.
Segmentation is what makes your pricing model adaptive instead of rigid. It’s what allows you to meet different customer needs without undercharging or overcomplicating. It’s also the gateway to more precise packaging, better sales motions, and stronger retention.
What Makes a Good Segment and Why It Matters
Not all segments are created equal.
Just because you can slice your customer base by company size, industry, or geography doesn’t mean those groupings will lead to better pricing decisions. Good segments aren’t just about description, they’re about differentiation.
A good segment meets four criteria:
- It’s meaningfully different: The customers in this group behave or think differently from others in ways that impact how they use or value the product.
- It’s consistent: Members of the segment share common needs, preferences, or patterns that are relevant to pricing, packaging, or positioning.
- It’s measurable: You can identify who belongs in this group using available data (behavioral, demographic, or attitudinal).
- It’s actionable: You can build offers, packages, or messages specifically for this group.
Why does this matter? Because pricing based on averages ignores the real differences in how customers use your product and what they’re willing to pay. In reality, “average” customers rarely exist, and building your monetization strategy around a hypothetical middle ground often means missing the mark for everyone.
Let’s use an example:
A product-led SaaS company might notice that their users fall into three natural groups:
- Individual users who want quick value with minimal friction
- Small businesses who need some collaboration and support
- Enterprises that require security, integrations, and dedicated onboarding
If all three are offered the same plan, you’re likely undercharging the enterprise group and overcomplicating things for individuals. On the other hand, the smaller customers are likely paying for more than they need. But with smart segmentation, you can tailor pricing and packaging to match what each group values and what they’re willing to pay.
Segments are the building blocks of monetization strategy. When done right, they help you price with precision, message with clarity, and grow with confidence.
Finding the Right Balance: Flexibility vs. Complexity
If segmentation is so powerful, why not take it to the extreme? Why not create a custom offer for every single customer?
In theory, that sounds like the ideal: no two customers are exactly alike, so a tailored offer for each one would maximize revenue and perfectly align with each customer’s willingness to pay.
But in practice, that level of precision quickly becomes a nightmare for your product team, your sales team, your operations, and even your customers. Complexity leads to confusion, inconsistent pricing, and internal misalignment. The overhead required to manage thousands of micro-segments almost always outweighs the benefit.
The goal isn’t hyper-customization. The goal is structured flexibility: finding the few key segments that capture meaningful differences across your customer base, and designing offers that align with those patterns.
The best segmentation strikes a balance:
- Too rigid and you under-serve key groups or miss monetization opportunities.
- Too granular and you overwhelm your organization and customers with complexity.
That’s why segmentation should be driven by data, not gut feel or arbitrary filters. When you use behavioral patterns, value perceptions, and buyer journeys to guide your segmentation, you can create a model that’s both flexible enough to reflect real customer differences and simple enough to operationalize.
So how do you know how many segments you should have?
There’s no universal answer, and anyone who gives you a fixed number is ignoring the nuance. But here are a few guiding principles we use when helping SaaS companies define the “right” number of segments:
- Look for Natural Breaks in Behavior and Willingness to Pay: Use your data, both quantitative (usage, spend, buying patterns) and qualitative (surveys, interviews, focus groups), to find meaningful groupings. You’re looking for clusters that share needs, usage patterns, or value perceptions.
- Test Whether You Can Build Distinct Offers for Each Segment: A segment is only worth building around if it supports a differentiated offer: different pricing, different features, or a different message. If two segments look different on paper but would ultimately be offered the same thing, they might not be true segments.
- Avoid the Trap of Considering Every Edge Case: It’s tempting to create a new segment for every outlier or special case, especially in enterprise sales. But one-off deals are often just that: exceptions, not trends. Build segments around repeatable patterns, not edge cases.
In most SaaS environments, three to five segments is a common sweet spot. Enough to reflect real diversity in customer needs and value, but not so many that your pricing model becomes unmanageable.
Making Segmentation Work in Practice
It’s easy to fixate on segmentation and try to get it perfect before making any pricing decisions. But that mindset can stall momentum and lead to over-analysis, especially when data is incomplete or messy (which it almost always is).
The truth is, you don’t need perfect segmentation to make progress. You just need a clear starting point.
Use what you already know: patterns in usage, value perception, or sales motion to form a few smart hypotheses, build offers around them, and see how they perform. You’ll learn a lot more from iteration and testing than from endless modeling.
Segmentation doesn’t have to be complex to be effective. It just has to be intentional.
Need help identifying the right segments to build your pricing strategy around? Let’s talk!
