The 3 levels of Deploying Usage-Based Pricing
Level 1: Pay As You Grow
This model increased product adoption by allowing first-time customers to try their service with no commitment for the first 3 months.
Level 2: Pay For Actual Consumption
This model allows companies to keep their services simple, cost-effective, and price-eficient, without missing out on the complexity needed to cover their own operating costs.
Level 3: Hourly Measurements / Hybrid Monthly-Hourly
This pricing model is the epitome of true value-based pricing because their customers are only paying for exactly what they use.
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When to use usage based pricing
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.
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