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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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Based on our pricing framework in Price to Scale, when dealing with customers who exhibit unpredictable or spiky usage patterns, the key is to ensure both pricing predictability and cost coverage by moving away from highly granular, usage-by-usage pricing. Here are the main points to consider:
• Larger Buckets for Unpredictable Usage:
Our book explains that if usage isn’t easily predictable or measured, it makes sense to use larger "buckets" or aggregated pricing levels rather than trying to capture every spike. For instance, instead of charging per individual minute or unit which could lead to volatile bills, adopting models that bundle usage (similar to cellphone block pricing or t-shirt sizing approaches) helps smooth out the fluctuations.
• Balancing Predictability and Flexibility:
The goal is to keep bills consistent enough for customers while still protecting your revenue model from the risks associated with rapid usage bursts. By grouping usage into defined blocks, you provide customers with a more stable cost structure while also preparing for significant, albeit infrequent, surges in usage.
• Practical Implementation:
- Consider setting up pricing tiers or packages that anticipate a base level of usage with additional blocks for overage.
- Communicate clearly how these tiers work, so customers understand that a certain level of spikiness is already factored into their pricing.
- Use this structure as a buffer both for cost forecasting on your end and for providing your customers with predictability in their bills.
In summary, our approach in Price to Scale emphasizes that for customers with unpredictable or spiky usage, adopting larger usage buckets not only ensures pricing consistency but also protects revenue against unforeseen cost pressures. This method creates a balanced, scalable pricing strategy that aligns well with both customer expectations and operational needs.