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Frameworks, core principles and top case studies for SaaS pricing, learnt and refined over 28+ years of SaaS-monetization experience.
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The electric vehicle (EV) charging market is growing exponentially, with the global market expected to reach $264 billion by 2030, according to Fortune Business Insights. For SaaS companies serving this sector, selecting the right pricing strategy is crucial for sustainable growth. Usage-based pricing (UBP) has emerged as a popular model, but is it always the right choice for EV charging networks SaaS providers? This article explores when usage-based pricing works effectively and when it might actually harm your business.
Understanding Usage-Based Pricing in EV Charging Networks SaaS
Usage-based pricing is a billing model where customers pay based on their actual consumption of a service rather than a flat subscription fee. For EV charging networks SaaS, this could mean charging based on:
- Number of charging sessions facilitated
- Kilowatt-hours (kWh) of energy delivered through the platform
- Number of active charging stations managed
- Transaction volume processed
According to OpenView Partners' 2022 SaaS Benchmarks Report, companies with usage-based pricing models grow revenue 38% faster than their counterparts with pure subscription models. This suggests significant potential for EV charging SaaS providers considering this approach.
When Usage-Based Pricing Works for EV Charging Networks SaaS
1. When Customer Usage Patterns Vary Significantly
For charging networks with diverse customers—from small municipal deployments to large enterprise fleets—usage-based pricing provides fairness. A small network with five charging stations shouldn't pay the same as an operator with hundreds of stations.
2. When Aligning with Customer Value Creation
Usage-based pricing works exceptionally well when it directly correlates with how customers generate revenue or value. If your SaaS platform helps charging networks monetize each charging session, pricing based on session volume creates natural alignment between your costs and their revenue.
"The most successful pricing metrics are the ones that directly tie to the customer's value metric," notes Kyle Poyar, Partner at OpenView. "For EV charging networks, this creates a growth partnership rather than just a vendor relationship."
3. When Lowering Barriers to Entry
New or small charging networks may hesitate to invest in expensive software. Usage-based pricing with low or no upfront costs can significantly lower adoption barriers, allowing you to capture market share that might otherwise be unavailable.
4. When Combined with Effective Price Fences
Price fences—rules that segment customers into different pricing categories—complement usage-based pricing effectively. For instance, differentiating between public charging operators and private fleet managers can optimize revenue while maintaining competitiveness across segments.
When Usage-Based Pricing Backfires for EV Charging SaaS
1. When Predictability Matters More Than Flexibility
Enterprise customers, particularly large charging network operators, often prefer predictable costs for budgeting purposes. According to a survey by Paddle, 55% of software buyers cite "budget predictability" as a key factor in purchasing decisions.
In such cases, pure usage-based pricing creates uncertainty that may push customers toward competitors with more predictable pricing models.
2. When Implementation Costs Are High
If your EV charging SaaS platform requires significant onboarding, integration, or customization, recovering these costs through gradual usage-based fees can be challenging. This is especially problematic for customers with initially low usage who might churn before you recoup implementation investments.
3. When It Doesn't Match Your Cost Structure
If your costs as a SaaS provider are largely fixed (development, support, infrastructure), but your revenue becomes highly variable with usage-based pricing, you could face cash flow challenges during periods of low customer usage.
4. When It Complicates Enterprise Sales
Enterprise sales cycles for EV charging networks often involve multiple stakeholders and procurement processes. Usage-based pricing can complicate these negotiations when approvers need clear cost projections for budget allocation and ROI calculations.
Finding Balance: Hybrid Pricing Approaches
Most successful EV charging network SaaS providers adopt hybrid pricing strategies that combine elements of both subscription and usage-based models:
Tiered Usage-Based Pricing
Implementing tiers (e.g., 0-100 charging sessions, 101-500 sessions, etc.) with declining per-unit costs as usage increases provides both the flexibility of usage-based pricing and some predictability for customers.
Base + Usage Model
A base subscription fee covers core functionality, support, and a minimum usage amount, with additional usage billed incrementally. According to 2023 research by ProfitWell, this hybrid approach results in 30% lower churn rates compared to pure usage-based models.
Value-Based Pricing Components
Some EV charging SaaS providers successfully incorporate value-based pricing elements, charging premium fees for features that deliver measurable ROI, such as advanced analytics that increase charger utilization rates or reduce maintenance costs.
Avoiding Common Pricing Pitfalls
Excessive Discounting
Heavy discounting to win deals can undermine your pricing strategy. Research from Pricing Intelligently shows that SaaS companies that frequently discount see 30% lower growth rates than those that maintain pricing discipline.
Instead, consider offering limited-time promotions on usage commitments rather than permanent price reductions.
Overlooking Customer Acquisition Cost (CAC)
With usage-based pricing, CAC recovery can take longer if customers start small. Calculate your CAC payback period carefully, and consider minimum commitment terms for customers with high acquisition costs.
Neglecting Price Communication
How you communicate your pricing is as important as the pricing itself. Unclear pricing can reduce conversions by up to 25%, according to a study by ConversionXL. Ensure your usage-based pricing is transparent and clearly communicates value.
Conclusion: Making the Right Pricing Decision
Usage-based pricing can be highly effective for EV charging networks SaaS when it aligns with customer value creation, accommodates varying usage patterns, and reduces adoption barriers. However, it can backfire when predictability matters more than flexibility, implementation costs are high, or it complicates enterprise sales processes.
The most successful approach typically involves hybrid models that balance usage-based components with subscription elements, carefully designed tiers, and strategic price fences. Monitor key metrics like customer acquisition cost payback period, churn rate, and expansion revenue to continuously refine your pricing strategy as the EV charging market evolves.
Remember that pricing is not a one-time decision but an ongoing strategic process that should evolve with your product capabilities, customer needs, and market dynamics.