Abstract:

The pricing methods of charging by usage and charging by stage is examined for SaaS service providers. Three pricing discrimination strategies are considered to analyze their impact on the pricing methods of these providers. The objective is to determine which pricing methods and strategies SaaS service providers should adopt in different scenarios to maximize profits. The optimal profit of the two billing methods is investigated under three different price discrimination strategies. Additionally， it analyzes the influence of five factors on the profits of SaaS service providers. Furthermore， the research identifies the recommended price discrimination strategies for SaaS service providers using both charging by stage and charging by usage.The findings indicate that when the usage is high and transaction costs are high， SaaS service providers can generate greater profits by employing the stage-based charging method. In cases where the usage rate and transaction costs reach an equilibrium state， both pricing methods yield similar profits. However， when usage is low and transaction costs are low， SaaS service providers can maximize their earnings by implementing per-usage billing. For SaaS providers using the stage charging method， the choice of price discrimination strategy depends on the discount rate of the second phase. A behavior-based price discrimination strategy is most effective when the discount rate is high， while an inter-period price discrimination strategy works best when the discount rate is low. Conversely， when the charge-by-usage method is utilized， the intertemporal price discrimination strategy proves to be the most beneficial. These research findings have important management implications. Enterprises should carefully consider the usage and transaction costs associated with SaaS services when determining their pricing strategies. These insights help explain the varying pricing strategies employed by different types of SaaS service providers. For instance， Wistia， a video hosting platform， adopts an intertemporal price discrimination strategy based on usage pricing due to limited video uploads by users. On the other hand， Salesforce， a CRM service provider， utilizes an inter-period price discrimination strategy under the stage charging method， given its high user usage and transaction costs.

Key words: SaaS service, pricing strategy, pricing method, charge according to usage, phased charge