Building A Monetization Strategy That Doesn’t Leave Untapped Revenue in Your User Base

Product leaders are rightfully obsessed with acquisition. They pour resources into new sign-ups and track monthly active users religiously.

But over many years of working with SaaS teams, there is something counterintuitive we’ve learned about this approach.

The companies that scale fastest aren’t always the ones acquiring the most users. They’re often the ones who build monetization strategies that focus on their existing user base. As users find more value in the tool and increase usage, the tool’s pricing fluctuates accordingly.

Realistically, every SaaS tool will hit a growth plateau. There aren’t infinite users that will find value in your product, even though we all wish there were.

The goal is to build growth into your monetization strategies so you don’t leave any untapped revenue in your existing user base. This ensures you don’t reach a premature growth plateau once net new users become stagnant.

The fundamental shift in monetization strategy from seats to value

Before we get started, throw your traditional SaaS monetization playbook out the window.

For years, companies have relied on seat-based pricing because it made sense. With each new hire, a new account or seat was purchased for tools. Revenue grew linearly with team size.

But now one person can do the work of two or three people. AI tools, automation, and productivity software mean that the relationship between users and value creation has completely shifted. When your customers can accomplish twice as much with half the team, seat-based pricing isn’t sustainable.

Smart companies are pivoting to value-based extraction. Instead of charging for the number of people using your software, they charge for the value you create. This isn’t just about switching to usage-based pricing; it’s about fundamentally rethinking how you capture the value your product delivers.

Consider HubSpot’s evolution. Instead of sticking to their standard seat-based pricing model as the market has evolved, they’ve created a dynamic pricing system. Users can pay for seats at their specific account tier, but also have a layer of contact-based pricing, aligning cost with the actual value delivered rather than just the number of users.

They’ve also recently added token-based pricing for certain functions in the tool, like marketing email sends, AI features, and API calls. These changes allow them to maintain revenue growth even as customers reduce their seat count.

You’re trying to capture more of the consumer surplus

Most SaaS tools have a consumer surplus. There are features or outcomes that customers would pay more for, but don’t have to because of your pricing model.

You can never eliminate all surplus (you need happy customers), but you can likely capture more of it through strategic segmentation and value extraction.

Think about your demand curve. It’s not a straight line. It’s a complex slope that varies by customer segment, use case, and willingness to pay. Most companies set one or two price points and leave massive value on the table. The companies that scale create multiple packages along that curve.

Netflix understood this when it evolved from a single $7.99 plan to Basic, Standard, and Premium tiers. Each tier captures different segments of willingness to pay while allowing customers to self-select into the option that works for them. However, the real insight wasn’t in the tiers themselves, but rather an understanding that different customer segments valued different features. Knowing that allowed Netflix to extract more value from customers who were willing to pay more while keeping price-sensitive customers from defecting.

Research changes everything

To get started on a monetization strategy based on value and capture more of the consumer surplus, companies have to build their understanding of what customers are willing to pay for.

Research from monetization and pricing expert Madhavan Ramanujam says that 20% of features drive 80% of willingness to pay. The challenge is to make sure you aren’t over-indexing on features that customers don’t actually value while underdeveloping the ones that drive revenue.

The solution is systematic research that reveals what customers actually want to pay for. Here are three methods to make it happen:

Max diff analysis: Present customers with feature lists and ask them to identify the most and least important items. With enough volume, you can rank features by their impact on willingness to pay. Features that over 50% of customers want become your “leader” features or the core value proposition that justifies your price point.

Anchoring questions: Instead of asking customers what they’d pay (which doesn’t work), ask them to compare your value to a known competitor. “If Salesforce brings your team 100 points of value, where do we rank?” This gives you relative value positioning without the discomfort of direct pricing questions.

Van Westendorp pricing: Ask customers four questions about price sensitivity: What’s acceptable? What’s expensive but you’d consider it? What’s so expensive that you wouldn’t consider it? What’s so cheap that you’d question the quality? This reveals the psychological price boundaries for different customer segments, providing a window of tenable prices that capture both the price-sensitive and high-willingness-to-pay corners of the market.

The Shopify monetization strategy: how to scale with your customers

An innovative and extremely effective monetization strategy allows you to grow with your customers. Shopify cracked this code by creating a model where their revenue increases as their customers become more successful. Instead of charging an ever-larger flat monthly fee, they take a percentage of gross merchandise volume (GMV).

This creates a virtuous cycle: Shopify is incentivized to help their customers succeed because customer success directly translates to revenue growth. When a merchant goes from $10,000 to $100,000 in monthly sales, Shopify’s revenue from that customer increases 10x.

Smaller businesses benefit from a proportional cost as they get started, and if businesses leave once they grow, Shopify doesn’t mind.

Shopify actually optimizes for this churn, not against it. As Archie Abrams, VP of Product and Head of Growth at Shopify, explains: “The way we think about churn [goes] back to Shopify’s mission and what we want to do, which is to increase the amount of entrepreneurship on the Internet.”

Instead of trying to prevent customers from leaving, Shopify focuses on lowering barriers to entry so more entrepreneurs can try starting businesses. They know most will fail, but the few who succeed generate massive value. This counterintuitive approach has helped Shopify power over 10% of U.S. e-commerce with $235 billion in GMV in 2023.

The beauty of this model lies in its retention through value creation, rather than friction. Traditional SaaS companies worry about churn because losing a customer means losing all their revenue. But when your revenue scales with customer success, churn becomes less of a concern. Your most successful customers are worth 10x or 100x more than your average customer, creating a natural buffer against churn.

Finding your untapped revenue

The process of discovering untapped revenue in your user base can be synthesized into a few steps:

Step 1: Segment your demand curve

Different customer segments have different willingness to pay. Enterprise customers might value security and compliance features, while SMBs prioritize ease of use and cost. Map these segments and understand what each values most.

Step 2: Identify value gaps

Look for places where customers are getting significant value but paying relatively little. These are your biggest opportunities for revenue expansion. Often, these are found in features that save customers time or help them make money.

Step 3: Create extraction mechanisms

Build pricing tiers, usage limits, or premium features that allow high-value customers to pay more for the value they receive. The key is making this feel like a fair exchange rather than a penalty.

The most effective monetization strategies combine multiple approaches. For example:

• Base + usage: Provide a predictable subscription base with usage-based charges for additional value. This gives customers cost certainty while allowing you to capture upside from heavy users.
• Tiered value: Create pricing tiers based on customer segments and use cases, not just feature lists. Each tier should feel designed for a specific type of customer.
• Expansion revenue: Build mechanisms for customers to naturally increase their spending as they grow. This could be through additional seats, increased usage, or premium features.
• Value-based upgrades: Tie pricing increases to value delivered, rather than just features added. When customers see clear ROI, they’re willing to pay more.

Step 4: Test and iterate

Pricing optimization is an ongoing process. Test different approaches, measure customer response, and iterate based on data. The best monetization strategies evolve continuously.

A monetization strategy that works for the long term

The future of SaaS monetization is about aligning pricing with value creation rather than resource consumption. The untapped revenue in your user base is real, measurable, and accessible, and approaching it with a value-based strategy will help you capture it.

At The Good, we specialize in helping SaaS companies optimize their monetization strategies through data-driven research and strategic experimentation.

Our services can help you identify value gaps, design pricing experiments, and implement changes that drive meaningful revenue growth. Get in touch to learn how we can help you extract more value from your existing customers.