Price

Grammarly currently owns two revenue streams: subscriptions and sales.

Subscriptions (Software as a service)

Most of Grammarly’s revenue comes from subscriptions for its AI proofreading web
application. Grammarly leverages on a free service, which covers basic proofreading services
such as grammar, spelling, and punctuation. In addition to freemium model, it offers premium
and business plans to its freemium users from $12 to $25 per month.

It is not uncommon for a SaaS provider to apply this kind of bottom-up sales model as it
grabs market share quickly and saves a lot of cost for sales pitch. Besides, Grammarly’s heavy
online advertising practices reinforce the network effect: Heavy advertising on Youtube and
social media attracts freemium users who have difficulty in reviewing their writing. They
themselves become customers and advocators of Grammarly, strengthening the online
presence of its service. This direct network effect creates a virtuous circle for Grammarly to
convert more freemium and premium customers, and thereby generating more revenue from
subscription and sales.

Sales (Human proofreading service)

About 20% of Grammarly’s revenue is from the sales of its human proofreading service.
Although the emergence of natural language processing seems inevitable, the accuracy of
deep learning models is still questionable for many language experts. Therefore, Grammarly
provides human proofreading service for its users and charge a one-time service fee based
text length and deadline set. It is also worth mentioning here that the service also benefits
from the subscription model mention above.

Pricing strategy
Given that Grammarly is one of the earliest explorers in this market with heavy advertising, it
is reasonable that the company adopts a skimming pricing strategy to seek an ideal profit
margin after dominating the market. Grammarly charges $25 for a single month subscription,
while its competitors (e.g., Ginger, Reverso) often price their premium service at $10-$15 per
month. Also, the adoption of tiered pricing allows Grammarly to target more potential
customers and thus maximize its sales.

For human proofreading service, Grammarly also offers two tiers of service: Correctness only
and Correctness & Clarity. For the first tier, the experts would review the document and
conduct a thorough proofreading for customer, correcting grammar, punctuation and
sentence structure. Correctness & Clarity service would check the conciseness, precision and
readability of the work in addition to the correctness. Also, Grammarly controls its cost by
outsourcing works to developing countries such as India and Philippines where the labor cost
is lower. This strategy enables the company to charge a fair price and keep a large profit
margin at the same time.