Software pricing models explained, with real examples

Software is sold under a small set of pricing models: free, freemium, open source, one-time purchase, subscription and usage-based. Per-seat billing is a common way to price subscriptions, and some vendors quote prices only on request. Each model suits a different kind of buyer, and each has traps that appear after the first month of use. This guide defines the models, gives examples from the catalog and explains what the labels on listme.name mean.

What the labels on listme.name mean

Each product page carries a pricing label and a free-use flag, and they answer different questions.

• pricing is the model the vendor mainly sells under. It takes one value: free, freemium, paid, subscription, one-time, open-source, usage-based or contact. The page shows it as a plain label, such as "Free plan, paid upgrades" for freemium or "Pay as you go" for usage-based.
• free_tier is a yes or no flag for whether a person can use the product without paying. A free plan, a free version, open-source software and free reading all count. A time-limited trial does not.
• open_source is set only when the source code is published under an open-source license.
• price_note is a short description of the price, such as which plan is free and what costs extra. Notes describe models and limits, and the how the rankings work page asks readers to confirm current prices on the vendor's site.

The ranking pages use the flags for their filters. A free page lists the products whose free-use flag is set, and an open-source page lists those whose source is open. A filtered page appears only when several products match, and never when the filter keeps every product on the list.

Free and freemium

Free means the vendor does not charge for the product. Signal is free for everyone and funded by donations. Google Search is free to use and funded by advertising, and that is the question to ask of any free product: what pays for it?

Freemium gives a free plan and charges for the rest. Bitwarden has a free plan for personal use, with Premium and Families as paid plans. The free plan is the part to test, because its limits decide when you start paying:

• Keeper limits its free plan to one mobile device and 10 records.
• Slack keeps only 90 days of message history on its free plan.
• Zoho CRM offers a free edition for up to 3 users.

A free plan can also be the reason to pick one product over another. 1Password has no free plan at all, which is why 1Password vs Bitwarden is a useful comparison for a budget decision.

Open source is not always free

Open source means the source code is published under a license that allows reuse. It does not mean the product costs nothing to run, or that no paid version exists. The catalog shows three patterns.

• Free to self-host, paid hosting. Joplin is free and open source, and Joplin Cloud is an optional hosted service. Linkwarden is free to self-host, and its cloud plan is paid.
• Open-source software you still pay for. Mullvad VPN publishes its apps under GPL-3.0, but its VPN has a flat monthly price and no free plan. Its free-use flag is off, even though its source is open. Mullvad VPN vs NordVPN shows the difference between an open-source paid service and a subscription that is not open.
• Open source with a one-time purchase. Threema publishes its Android code under AGPL-3.0, and its Private app is a one-time purchase.

The open-source password managers page shows which free password managers in the ranking are open.

One-time purchase

A one-time purchase is a single payment for a license. Procreate is pay once with no subscription, though its main app runs on iPad only. BusyCal is a one-time purchase after a free 14-day trial. Sublime Text can be evaluated for free, and its personal license includes three years of updates.

This model favors buyers who want to own the version they use and avoid a monthly bill. The traps are the update period and the platform. A perpetual license keeps the version you bought, but a later major version may cost extra, and some products are sold separately for each platform. Things is sold separately for each Apple platform, so a user with a Mac and an iPhone buys both.

Subscriptions and per-seat pricing

A subscription bills on a regular cycle for continued access. It favors buyers who want a predictable cost and who need updates and support for as long as they use the product. 1Password is a subscription with a 14-day trial. Xero bills monthly plans with no per-user license fees, which is a different shape from a per-seat plan.

Per-seat pricing charges for each user, and it is the usual shape of team subscriptions. Slack's costs rise per user as a team grows. Attio offers a free plan for up to three seats and paid per-seat plans after that. A small team can start free, then pay for each member once it grows. The subscription cost calculator adds up several subscriptions and per-seat prices before you commit.

Usage-based and contact pricing

Usage-based pricing charges for what you use, such as compute time, minutes of audio or paid invoices. It suits small or irregular use, and it is harder to forecast as use grows. AWS is billed by usage, and its free plan ends after six months or when its credits run out. Stripe Invoicing has no fixed fee but takes a percentage of each paid invoice. Umami is free to self-host, and its cloud pricing is usage-based.

Contact pricing means the vendor sells through a sales conversation, so you cannot compare costs before you talk to sales. Kontent.ai lists pricing on request and no free plan. Many industrial and enterprise products in the catalog carry the same label, so the price is a question for the vendor.

The traps that show up later

• Free-tier limits. Check the limits on records, users, history and storage before you move data in. Keeper, Slack and Zoho CRM above show how varied they are. HubSpot vs Zoho CRM puts two free CRM editions side by side.
• Lock-in. Some products work best inside one ecosystem or keep data on the vendor's servers. Apple Passwords works best inside the Apple ecosystem. The ecommerce platforms ranking notes that Shopify stores cannot move to self-hosting.
• Add-ons. A base price can leave out features that cost extra. Xero sells payroll and inventory as add-ons, and Wave charges card payment fees and sells payroll separately.
• Trials are not free plans. A trial that ends in a paid plan does not count as a free tier. 1Password has a 14-day trial and no free plan, which is why its free-use flag is off.
• Prices change. A price on a page can change after it is written down. Each product page shows the date its entry was last reviewed, so confirm current prices on the vendor's page before you commit.

Related rankings and guides

• Best CRM software: free editions and per-seat plans for sales teams.
• Best software for starting a small business: the tools a new business meets first, by stage.
• Best self-hosted apps: open-source software where the hosting cost is the main price.
• How to read software rankings: how the scores and filters work.