Your beach reading this week

I won't be the only one reading about usage-based pricing on vacation

👋 Hi, I’m Kyle and welcome to my newsletter, Growth Unhinged. Every other week I I take a closer look at what drives a SaaS company’s growth. Expect deep dive takes on SaaS pricing, Product Led Growth, public company benchmarks, and much more.

It’s the week of the July 4th holiday here in the US, which means school is finally out for the summer, the weather is *likely* pretty nice (although we’re about to see the remnants of Elsa in Boston), and you’re hopefully near a beach.

This is a great time to recharge and consider new perspectives to bring into your company in H2.

Right now many folks are considering making the switch to usage-based pricing, but still have lots of questions about what it entails. To help, I’ve curated a list of my favorite usage-based pricing resources. This isn’t your typical beach reading - unless you’re me, of course.

Side note: Have we reached the point where usage-based pricing is a buzzword in SaaS? The new CS DISCO S-1 filing has 24 (!?!) mentions of “usage-based.” This might be my favorite line: “Our model has enabled us to build an efficient, usage-based, product-led growth engine that spreads our solution across the legal ecosystem through collaboration and powerful word-of-mouth and facilitates rapid customer adoption and expansion.”

An introduction to usage-based pricing

The Usage-Based Pricing Playbook
Whether you’re trying to figure out if this model is right for your product or you’re already leveraging it, this playbook is an essential read (although I may be biased!).

7 Reasons Usage-Based Pricing is the Future of SaaS
Forma.ai helps us understand some of the reasons why usage-based pricing is here to stay.

Launching a Consumption-Based Pricing Model: What, Why, and How?
Zuora’s Product Management Director, Lucasz Weber, tells us why consumption-based pricing is a “win-win” for customers and industry—so long as it’s done right.

Align Price With Use: Reducing Up-Front Barriers With Usage-Based Pricing
From technological advances to the promise of unlocking latent demand, Deloitte investigates where this pricing model’s disruptive potential comes from.

Usage-Based Pricing 2.0
As a follow-up to The Usage-Based Pricing Playbook, this article hits on why pure usage-based pricing isn’t for every product, and how not all expansion revenue is created equally.

Success stories

Inside Cypress’s Playbook for Launching Usage-Based Pricing
I spoke with Mohammed Coovadia, VP of Customer Success and Sales, about what sparked the transition, how Cypress explored different pricing options, and what led them to a final decision.

How Usage-Based Pricing Fueled Two 2020 IPOs
In 2020, JFrog and Snowflake went public—and both companies have a usage-based pricing model. This post from my friend James Wood at Insight Partners discusses the benefits and best practices.

5 SaaS Companies That Have Mastered Usage-Based Billing
Chargify takes a closer look at the success of Digital Ocean, AWS, Mailgun, MessageBird, and Wordstream.

Financial implications

Usage-Based Pricing and the ‘Rule of 3s’
Subscribed.com on how companies can successfully design and implement a usage-based pricing strategy to increase customer value perception and grow revenue.

Is It Really ARR? In 2021+, Yes. As Long As Your NRR is > 100%. SaaStr’s Jason Lemkin unpacks how bleeding-edge SaaS companies are rethinking ARR in the age of consumption, payments, and marketplace revenue. Where you may land is a newer definition that ARR = annualized revenue run-rate.

The Rise of Usage-Based Revenue
Anthony Cessario, VP of Verticals and GTM Solutions at Clari, explains why he believes the future of usage-based revenue management is only growing.

Pricing and Revenue Recognition: Two Sides of a Very Valuable Coin
This Zuora article points out the importance of collaboration between your pricing team and revenue team—after all, the two are linked.

Moving to usage-based pricing

No, You Can’t Just Switch to a Usage-Based Pricing Model Overnight
The shift from pure subscription to usage-based pricing is nearly as complex as going from on-premise to SaaS.

4 Key Strategies to Implementing a Usage-Based Pricing Model
Sapphire Ventures takes a look at the biggest factors to consider if you’re thinking about moving away from a subscription model.

When Should You Choose a Consumption-Based Model Over a Subscription-Based Model?
Chargebee outlines why a flexible consumption-based pricing model might just be everything you’ve been looking for—along with four reasons it might not be.

Usage-Based Pricing: What SaaS Companies Need to Know
This guide from Baremetrics covers all the basics, including the advantages and disadvantages of adopting this pricing strategy.

The downsides of usage-based pricing

Five Pros and Four Cons of Usage-Based Pricing—And Why It Was a No-Brainer for Courier’s CEO
Usage-based pricing is often lauded as the holy grail of SaaS pricing models. However, the model is not for the faint of heart—it carries definite risks and also significant overhead to implement effectively.

It’s Wise to Question the Big Assumption About Consumption Pricing
The appeal for customers to simply pay for what they use looks great on paper. But without careful planning and effective execution, consumption-based pricing can elongate sales cycles, negatively impact customers, and squelch company fortunes.

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I’d love to hear from others who are either scaling with a usage-based model or pivoting their business to become more usage-driven. What resources have you found to be most valuable?