How do we handle very large customers in a usage model – should we cap their costs to give them predictability, offer bulk pricing, or negotiate a custom enterprise usage deal?

Below is a summary answer based on the frameworks discussed in our pricing strategy book, Price to Scale:

• Direct Answer
For very large customers, there isn’t a one-size-fits-all solution. Instead, the choice between cap costs for predictability, bulk pricing, or negotiating a custom enterprise usage deal depends on your ability to measure and forecast their usage and the customers’ tolerance for variability in billing.

• Guidance from Price to Scale
Our book explains that:
– If the usage metric is highly predictable and granular, you might favor a traditional “pay for what you use” model or even tiered pricing that mirrors cell phone plan models.
– When measurement isn’t as straightforward or when customers demand cost certainty, you may need to cap costs using a fixed pricing structure (like the T-shirt sizing method) that provides a generous buffer for potential overages.
– If neither option fully meets the customer’s needs, negotiating a custom enterprise usage deal is a typical response. Enterprise deals often involve significant discounts (up to 80% as noted in our book) and require tailored contract terms that account for the unique usage patterns and risk factors.

• Practical Application
– Assess the predictability and measurability of the key usage metric.
– Understand your customer’s appetite for cost certainty versus paying for occasional usage spikes.
– If your product instrumentation allows reliable metering, granular pricing might work; if not, consider tiered or capped plans.
– For very large deals that push the limits of standard plans, a custom enterprise agreement typically ensures both parties achieve a fair and predictable pricing model.

• Summary
Ultimately, for very large customers in a usage model, the approach should be situational. Price to Scale encourages you to balance the precision of your usage measurement with the customers’ need for predictability. Depending on these factors, you might cap costs, shift to bulk pricing, or negotiate a custom deal to best serve your enterprise clients.