What is Usage-Based Pricing?

Software buying has evolved. Long gone are the days of executives choosing software for their employees based on IT compatibility or KPIs.

Employees now find their preferred software products and start using them, usually for free. Then they usually tell their boss what to buy.

This is why we’re seeing SaaS pricing models evolve and more and more SaaS companies—DataLakeHouse.io, GCP, AWS, Snowflake, and Stripe, to name a few—finding success with product-led growth paired with usage-based pricing.

What is Usage-Based Pricing?

Usage-based pricing allows customers to pay for products according to how much they use or consume it. This approach is starting to replace more common subscription- and seat-based pricing models, especially when it comes to SaaS products.

The usage-based pricing model allows a customer to start at a lower cost based on their own levels of demand to get started while happily increase spend as a factor of usage over time because the price is directly tied with the demand value a customer receives.

Since you aren’t limited by any ceiling on the functionality customers are able to find new use cases for the product feature set they are using — which usually leads to more long-term success and higher lifetime value and return on investment.