Has anyone successfully mixed a subscription and usage-based model (for example, a base subscription that includes some usage quota, then pay-as-you-go for overages)? How well did that work?

Yes, many companies have successfully implemented a mixed model that combines a base subscription with usage-based overages—often referred to in our pricing strategy book Price to Scale as a "3-Part Tariff" or the "cell phone plan model." This approach typically involves offering customers a set number of units or usage quota for a fixed monthly fee, with additional usage billed on a pay-as-you-go basis.

Key points from Price to Scale include:

• Advantages:
– The model provides predictability and simplicity for customers while still capturing additional value as usage grows.
– It aligns well with customer needs by offering a baseline service along with flexible usage options for peaks beyond the standard quota.

• Considerations:
– Careful structuring is needed to balance value for customers with revenue growth.
– Pricing thresholds and overage fees must be set appropriately to avoid customer shock or a plateau in usage, which can limit further revenue opportunities.

In practical terms, this hybrid model works well when the base subscription addresses the core customer needs, and the overage pricing incentivizes customers to scale usage without sacrificing a steady revenue stream. As discussed in our book Price to Scale, thoroughly understanding customer consumption patterns and calibrating your pricing metrics is essential for success.

In summary, yes—it can work very well if executed properly, offering both stability and the flexibility to capture additional value as customer usage increases.