Product differentiation of SaaS-based software bears potential for both customers and providers. We present a micro-economic based model to show the effects of product differentiation for this new type of software provisioning. By formalizing concepts of product differentiation for SaaS, this article shall establish basic understanding and form the foundation for further research. Furthermore, the model provides evidence that reproduction costs, which have mostly been neglected in literature related to quantitative software versioning so far, can have significant influence on both the optimal sales volume and service size in the context of SaaS.