subscription pricing

The Ultimate List of Usage-Based Pricing Resources

Software buying has evolved. Rather than looking at IT compatibility or key performance indicators (KPIs), people are using free trials to determine whether a product is worth adopting. And when it’s a yes, they tell their boss to buy it.

As this product-led wave gets bigger, the concept of usage-based pricing is becoming more and more appealing to software companies. Be it purely usage-based (per API, per call, per transaction, Gigabyte, etc.) or hybrid (upfront subscription fee, and then a usage-based charge), this billing strategy is a hot topic at the moment.

We know a lot of folks are considering making the switch, so we’ve curated this list of some of our favorite resources. It’s organized into the following sections:

Did we miss one of your favorite articles? Let us know on LinkedIn.

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 from OpenView is an essential read.

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.

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.

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.

Financial implications

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.

The 4 Critical Steps to Usage-Based Billing
From determining the correct value metric to billing the customer the right amount at the right time, these are the crucial steps to consider when implementing a financially strong consumption model.

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.

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.

Drive Growth with Usage-Based Pricing
While companies with usage-based pricing see faster growth compared to companies without any usage pricing, there is a tipping point where growth eventually stalls.

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.

The 5 Challenges of Moving to Usage-Based Billing
Determining your value, predicting your revenue, and three other common challenges every business must overcome to successfully switch to usage-based pricing.

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

Is Usage-Based Billing the Right Choice For Your Business?
Tridens Technology notes that one of the cons of usage-based pricing is that it makes predicting revenue much more difficult. Plus, they go into detail about which businesses should not adopt this pricing strategy.

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.

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.

Success stories

Inside Cypress’s Playbook for Launching Usage-Based Pricing
Kyle Poyar 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 Insight Partners discusses the benefits and best practices.

Companies With Usage-Based Pricing Grow 38% Faster
And, as OpenView’s Kyle Poyar explains, it’s all because they’re better at landing new customers, growing with them, and keeping them as customers.

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.

Miscellaneous

Flexible Consumption Business Models
According to Deloitte, switching to consumption-based pricing requires much more than just answering a few high-level questions. They share thoughts on why flexible consumption (aka everything-as-a-service, or XaaS) calls for an entirely new business model.

Consumption Forecasting: What It Is and Why It Matters
Building a successful business based on a consumption model means nailing your consumption forecast—but that’s easier said than done.

Subscription-Based Pricing Is Dead: Smart SaaS Companies Are Shifting to Usage-Based Models
Kyle Poyar shares four tips to help companies scale to $100+ million ARR.

Pricing Transformations In 2021
At the end of 2019, two pricing experts made some predictions for what 2020 would have in store. Neither of them had any idea there’d be a global pandemic, so how did their predictions hold up?

3 Ways Usage-Based Pricing Offers Higher Revenue Than Pure Subscriptions
Usage-based pricing offers agility, affordability, and low commitment that translates to greater profits. So it’s not surprising that many companies today are rethinking their subscription billing.

Quantity-Based Pricing vs. Usage-Based Billing: What’s the Difference?
Why and how quantity-based and usage-based pricing models might sound the same, but actually differ.

More resource roundups from OpenView

Kyle Poyar
Kyle Poyar
Partner at OpenView

Kyle helps OpenView’s portfolio companies accelerate top-line growth through segmentation, value proposition, packaging & pricing, customer insights, channel partner programs, new market entry and go-to-market strategy.
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