A few years ago I started writing about what seemed to be a new trend in SaaS pricing.Â
Rather than charging upfront subscriptions tied to a number of user seats, I noticed more SaaS businesses pivoting to usage-based models where pricing better connected with the value delivered to customers.
Usage-based pricing (UBP), also known as consumption-based pricing, is a monetization model where customers pay for a product, at least in part, based on how much they use it.
These pricing models had a lot to like:
Less friction for customers: Usage-based pricing let customers start using a product for a comparatively low cost, lowering the barrier to entry and attracting more new customers.
Built-in expansion: It removed limits to the number of people who had access to the software, helping customers discover new use cases and achieve greater long-term success.
Bigger TAM: And in doing so, usage-based pricing promised to expand market sizes by making products more accessible while uncapping the …
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