Subscription-based pricing is the foundational pricing model for SaaS, where customers pay a regular fee (monthly or annually) rather than a one-time purchase price. It creates predictable revenue for the vendor and lower upfront costs for the customer.

Example: Instead of selling software for a $10,000 one-time license fee, a company switches to a $99/month subscription model, lowering the barrier to entry and creating a recurring revenue stream that grows with the customer base.