A Framework for Evaluating the Right Strategy for Your Startup by @ttunguz

If your costs scale with usage then usage based pricing aligns your costs with your customers' spend. This prevents very large customers from being your worst customers, by generating lots of revenue, but costing you money because the account is gross-margin negative.

If you are pursuing a two step go-to-market strategy with which the first user has a low willingness to pay, but the ultimate buyer has a larger budget, consider usage pricing. This is a land-and-expand motion. 

If customers use the product intermittently and the value is intermittent, usage based pricing works well.

Madhavan tells that the most common pricing mistake in a land and expand motion is to cede too much value in the free/lesser product, scuttling any expansion opportunity.

There are many companies who employ a two-part tariff: a base platform fee and an ongoing usage fee to capture positive aspects of both types of pricing strategies. Segment is a good example of this.

The platform fee establishes a stable relationship and the usage pricing enables the customer to scale up or down as a function of their traffic which might vary throughout the year.