{"id":5275,"date":"2016-08-23T15:06:38","date_gmt":"2016-08-23T13:06:38","guid":{"rendered":"https:\/\/chartmogul.com\/blog\/?p=5275"},"modified":"2018-07-05T10:33:37","modified_gmt":"2018-07-05T08:33:37","slug":"usage-based-pricing-models","status":"publish","type":"post","link":"https:\/\/chartmogul.com\/blog\/usage-based-pricing-models\/","title":{"rendered":"SaaS Q&#038;A: What are some examples of usage-based pricing models?"},"content":{"rendered":"<p class=\"qtext_para\">Usage-based pricing in SaaS is increasingly common with highly transactional\u00a0services. When it comes to choosing a billing model, the biggest factor is\u00a0how your product\u00a0delivers\u00a0value to the customer. And by that I mean:<\/p>\n<blockquote>\n<p class=\"qtext_para\">&#8220;When your customer pays for your product, what (from their perspective) are they paying for, and how do they get it?&#8221;<\/p>\n<\/blockquote>\n<p class=\"qtext_para\">It&#8217;s important to not confuse\u00a0<strong>usage-based\u00a0<\/strong>pricing with\u00a0<strong>user-based<\/strong> pricing.<\/p>\n<h2 class=\"qtext_para\"><b>USER-based pricing<\/b><\/h2>\n<p class=\"qtext_para\">In products like Helpdesk or CRM solutions, most of the value for the customer is delivered on a per-user basis, meaning that it makes sense to charge for each user license required.<\/p>\n<ul>\n<li>With <b>5 support reps<\/b>: I can use the CRM to solve X tickets per day, which is equates to a certain value.<\/li>\n<li>With <b>10 support reps<\/b>: I can use the CRM to solve Y tickets per day, which represents incremental value to my business over 5 support reps. I therefore pay a greater amount for the service.<\/li>\n<\/ul>\n<p>User-based pricing is how many SaaS businesses still bill their customers today. It&#8217;s proven fairly effective for products that are used\u00a0by a specific team within a business which scales over time. A typical example of this is selling Helpdesk software to a\u00a0Support team. As your business scales, your support team will typically scale with it, meaning that you pay more for (expand) your account with the Helpdesk product.<\/p>\n<p class=\"qtext_para\">Simple, right? <i>Or is it? <\/i>There are many other ways to price your service that could\u00a0be tied more directly to the value seen by customers. One of them is <b>usage-based pricing.<\/b><\/p>\n<h2 class=\"qtext_para\"><b>USAGE-based pricing<\/b><\/h2>\n<p class=\"qtext_para\">This can work well in products and services that are more transactional in nature:<\/p>\n<ul>\n<li class=\"qtext_para\">Data services &#8211; paying for data, or insights from data<\/li>\n<li class=\"qtext_para\">Cloud storage services &#8211; paying for storage<\/li>\n<li class=\"qtext_para\">Payment services &#8211; paying to process a payment transaction<\/li>\n<\/ul>\n<p class=\"qtext_para\">In this model, we\u2019re saying that processing one \u201ctransaction\u201d in the system equates to some measurable value for the customer. This could also be referred to as &#8220;metered&#8221; billing &#8212; paying for something in the same way you would pay for your energy bill for example, by measuring how much of it you use.<\/p>\n<p class=\"qtext_para\">So what are some examples of this?<\/p>\n<h3 class=\"qtext_para\"><b>Example 1: Clearbit<\/b><\/h3>\n<figure id=\"attachment_5276\" aria-describedby=\"caption-attachment-5276\" style=\"width: 720px\" class=\"wp-caption alignnone\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-5276 size-full-column\" src=\"https:\/\/chartmogul.com\/blog\/wp-content\/uploads\/2016\/08\/clearbit-pricing-slider-720x251.png\" alt=\"Clearbit pricing\" width=\"720\" height=\"251\" srcset=\"https:\/\/chartmogul.com\/blog\/wp-content\/uploads\/2016\/08\/clearbit-pricing-slider-720x251.png 720w, https:\/\/chartmogul.com\/blog\/wp-content\/uploads\/2016\/08\/clearbit-pricing-slider-300x105.png 300w, https:\/\/chartmogul.com\/blog\/wp-content\/uploads\/2016\/08\/clearbit-pricing-slider-768x268.png 768w, https:\/\/chartmogul.com\/blog\/wp-content\/uploads\/2016\/08\/clearbit-pricing-slider-1024x357.png 1024w, https:\/\/chartmogul.com\/blog\/wp-content\/uploads\/2016\/08\/clearbit-pricing-slider.png 1514w, https:\/\/chartmogul.com\/blog\/wp-content\/uploads\/2016\/08\/clearbit-pricing-slider-720x251@2x.png 1440w, https:\/\/chartmogul.com\/blog\/wp-content\/uploads\/2016\/08\/clearbit-pricing-slider-300x105@2x.png 600w\" sizes=\"auto, (max-width: 720px) 100vw, 720px\" \/><figcaption id=\"caption-attachment-5276\" class=\"wp-caption-text\">Source: clearbit.com<\/figcaption><\/figure>\n<p class=\"qtext_para\">Clearbit is an API-based product, i.e. the value of their product is not delivered through a user interface to a user, but through an API connected to a machine. For these types of transactional products, you\u2019ll almost always find pricing based on \u201cnumber of requests\u201d made to the API.<\/p>\n<h3 class=\"qtext_para\"><b>Example 2: Stripe<\/b><\/h3>\n<figure id=\"attachment_5277\" aria-describedby=\"caption-attachment-5277\" style=\"width: 720px\" class=\"wp-caption alignnone\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-5277 size-full-column\" src=\"https:\/\/chartmogul.com\/blog\/wp-content\/uploads\/2016\/08\/stripe-pricing-720x244.png\" alt=\"Stripe pricing\" width=\"720\" height=\"244\" srcset=\"https:\/\/chartmogul.com\/blog\/wp-content\/uploads\/2016\/08\/stripe-pricing-720x244.png 720w, https:\/\/chartmogul.com\/blog\/wp-content\/uploads\/2016\/08\/stripe-pricing-300x101.png 300w, https:\/\/chartmogul.com\/blog\/wp-content\/uploads\/2016\/08\/stripe-pricing-768x260.png 768w, https:\/\/chartmogul.com\/blog\/wp-content\/uploads\/2016\/08\/stripe-pricing-1024x346.png 1024w, https:\/\/chartmogul.com\/blog\/wp-content\/uploads\/2016\/08\/stripe-pricing.png 1478w, https:\/\/chartmogul.com\/blog\/wp-content\/uploads\/2016\/08\/stripe-pricing-720x244@2x.png 1440w, https:\/\/chartmogul.com\/blog\/wp-content\/uploads\/2016\/08\/stripe-pricing-300x101@2x.png 600w\" sizes=\"auto, (max-width: 720px) 100vw, 720px\" \/><figcaption id=\"caption-attachment-5277\" class=\"wp-caption-text\">Source: stripe.com<\/figcaption><\/figure>\n<p class=\"qtext_para\">Stripe is a payment solution &#8211; a great example of a transactional business. Most Stripe\u00a0customers\u00a0would agree that the value they get from the product\u00a0is on a \u2018per-transaction\u2019 basis. And that\u2019s exactly how they charge for the product: <b>\u201cper successful card charge\u201d<\/b>. This actually allows a great deal of simplicity for customers.<\/p>\n<h3 class=\"qtext_para\"><b>Example 3: Twilio<\/b><\/h3>\n<figure id=\"attachment_5278\" aria-describedby=\"caption-attachment-5278\" style=\"width: 720px\" class=\"wp-caption alignnone\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-5278 size-full-column\" src=\"https:\/\/chartmogul.com\/blog\/wp-content\/uploads\/2016\/08\/Twilio-pricing-720x218.png\" alt=\"Twilio pricing\" width=\"720\" height=\"218\" srcset=\"https:\/\/chartmogul.com\/blog\/wp-content\/uploads\/2016\/08\/Twilio-pricing-720x218.png 720w, https:\/\/chartmogul.com\/blog\/wp-content\/uploads\/2016\/08\/Twilio-pricing-300x91.png 300w, https:\/\/chartmogul.com\/blog\/wp-content\/uploads\/2016\/08\/Twilio-pricing-768x232.png 768w, https:\/\/chartmogul.com\/blog\/wp-content\/uploads\/2016\/08\/Twilio-pricing-1024x310.png 1024w, https:\/\/chartmogul.com\/blog\/wp-content\/uploads\/2016\/08\/Twilio-pricing.png 1058w, https:\/\/chartmogul.com\/blog\/wp-content\/uploads\/2016\/08\/Twilio-pricing-300x91@2x.png 600w\" sizes=\"auto, (max-width: 720px) 100vw, 720px\" \/><figcaption id=\"caption-attachment-5278\" class=\"wp-caption-text\">Source: twilio.com<\/figcaption><\/figure>\n<p class=\"qtext_para\">Twilio allows anyone to program telephony-based features into their application, through an API. Their SMS product is entirely transactional, and as such, the pricing is \u201cper SMS\u201d. Once again, this is the best way for them to measure value for the customer \u2014 and also to measure costs to deliver the service.<\/p>\n<h2 class=\"qtext_para\"><b>In Conclusion<\/b><\/h2>\n<p class=\"qtext_para\">Usage-based pricing is fairly common when you look at more infrastructure-based SaaS products \u2014 things you might integrate into your platform to build out powerful functionality (like payments) more quickly and easily. All of the above examples are relatively simple to explain to customers.<\/p>\n<hr \/>\n<p class=\"qtext_para\"><em>This post originated as an answer on Quora &#8212; Read the full thread <a href=\"https:\/\/www.quora.com\/What-are-some-usage-based-SaaS-pricing-models-that-are-not-based-upon-user-licensing-fees-but-are-simple-to-understand-explain\/answer\/Ed-Shelley\">here<\/a>.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Usage-based pricing may not be the obvious way to bill your customers, but if your product has certain characteristics you may want to consider such a model&#8230;<\/p>\n","protected":false},"author":9,"featured_media":5284,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[151,158],"class_list":["post-5275","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-pricing","tag-saas-pricing","tag-saas-qa"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.8 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>SaaS Q&amp;A: What are some examples of usage-based pricing models?<\/title>\n<meta name=\"description\" content=\"Usage-based pricing may not be the obvious way to bill your customers, but if your product has certain characteristics you may want to consider such a model...\" \/>\n<meta name=\"robots\" content=\"index, follow\" \/>\n<link rel=\"canonical\" href=\"https:\/\/chartmogul.com\/blog\/usage-based-pricing-models\/\" \/>\n<meta property=\"og:locale\" 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