[GTM glossary](/glossary.txt) Seat-based pricing GTM Strategy & SaaS Metrics # Seat-based pricing Also known as: per-seat pricing, per-user pricing In short Seat-based pricing is a pricing model where a customer pays a recurring fee for each named or concurrent user licensed to use the product. Ten users at a set price per seat means ten times that fee each month or year. It is the default for many SaaS tools because it is simple to quote, easy to forecast, and tied to a visible unit: people. Its weakness is that value does not always grow with the number of users. ## How seat-based pricing works The vendor sets a price per seat, usually billed monthly or annually. Discounts often kick in at volume tiers, and plans differ by feature set rather than by seat price alone. ### Named vs. concurrent seats A named seat is tied to one person. A concurrent seat allows a set number of people to be logged in at once, which suits shift-based or occasional users. --- ## Strengths and weaknesses * **Predictable revenue:** Finance can forecast recurring revenue from seat counts and renewals. * **Easy to sell:** Buyers understand the quote immediately and can budget by team size. * **Natural expansion:** Every new hire on the team is a chance to add seats. * **Value mismatch:** If one power user gets most of the value, customers resist paying for every seat. * **Seat sharing:** Customers may share logins to avoid cost, which hides real adoption. --- ## Example Say a sales tool costs a set amount per rep per month and a customer starts with 20 reps. If they hire 10 more, expansion revenue grows by half without any new deal. If they lay off a third of the team, the contract shrinks, which is the main risk of this model. --- ## When to use it and common mistakes * **Good fit:** Collaboration and productivity tools where each user gets value on their own. * **Poor fit:** Products where value comes from volume processed, such as data or messages sent. Consider usage-based pricing instead. * **Mistake: ignoring adoption:** Selling many seats that nobody activates sets up a downsized renewal. * **Mistake: no minimums:** Without a seat floor, small deals cost as much to sell as large ones. --- ## Seat-based pricing FAQs **What is seat-based pricing?** Seat-based pricing is a model where customers pay a recurring fee for each user who has access to the software. The total bill equals the price per seat multiplied by the number of licensed users, so it grows as the customer adds people. **What is the difference between seat-based pricing and usage-based pricing?** Seat-based pricing charges by the number of people with access. Usage-based pricing charges by how much of the product is consumed, such as records processed or messages sent. Seat pricing is more predictable; usage pricing tracks delivered value more closely. **What are the disadvantages of per-seat pricing for SaaS?** Per-seat pricing can discourage customers from rolling the tool out widely, invites login sharing, and shrinks revenue when customers cut headcount. It also misprices products where a few users or automation deliver most of the value. **How do you decide how many seats to sell in a seat-based deal?** Start from the team that will use the product daily, then add the people who need occasional access. Ask about planned hires, pilot scope, and rollout phases, and consider a smaller first order with a clear path to add seats. Share term --- ## More related phrases * [Lifetime Deal (LTD)](/glossary/lifetime-deal.txt) * [Freemium](/glossary/freemium.txt) * [Average revenue per account (ARPA)](/glossary/average-revenue-per-account.txt) ## Similar phrases * [Credit-based pricing](/glossary/credit-based-pricing.txt) Credit-based pricing sells prepaid credits that customers spend on actions or features, so cost scales with how much they actually use the product. * [Usage-based pricing](/glossary/usage-based-pricing.txt) Usage-based pricing charges customers according to how much of a product they consume, such as records processed or messages sent, instead of a flat fee. * [Pricing strategy](/glossary/pricing-strategy.txt) Pricing strategy is the approach a company uses to set prices and package its product, balancing customer value, competition, costs, and growth goals. * [Expansion revenue](/glossary/expansion-revenue.txt) Expansion revenue is the additional revenue a company earns from existing customers through upsells, cross-sells, added seats, or higher usage. * [Annual recurring revenue (ARR)](/glossary/annual-recurring-revenue.txt) Annual recurring revenue (ARR) is the yearly value of the subscription revenue a company expects to keep earning from its current customers.