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Estd 4.22.2023
Based on the insights in our pricing strategy book, Price to Scale, the answer is yes—you can, and in many cases should, let heavy users pay more than light users by adopting usage-based charges or higher tiers. Here are some key points from our book that support this approach:
• Direct Alignment with Value:
The book highlights that pricing models tied to usage can more directly reflect the value that customers derive from your product. Heavy users typically gain more value and, in turn, can justify higher charges. This “pay for what you use” philosophy ensures that customers only pay in proportion to how much they benefit from your service.
• Cost-Reflective Pricing:
Usage-based pricing is particularly beneficial when there are inherent costs that scale with customer usage (for example, compute power or storage). By aligning pricing with these costs, you create a sustainable model where heavy usage is appropriately covered without penalizing light users.
• Flexibility in Structure:
Our book discusses different structures—from granular consumption-based models (with precise metrics) to more simplified tiered or “t-shirt sizing” models (M, L, XL, etc.). Whether you opt for strict metering or bundled tiers, both approaches allow you to capture value from heavy users while still keeping the barrier low for lighter users.
• Considerations for Implementation:
When implementing this approach, it’s important to ensure that the usage metric you choose is both predictable and measurable. This improves transparency and makes it easier for your customers to understand and trust the pricing model.
In summary, as discussed in Price to Scale, adopting a pricing strategy where heavy users pay more through usage-based charges or higher tiers can align closely with both the value delivered and the costs incurred by the provider. This model not only provides fairness but also allows for flexibility in pricing as your customers’ usage grows over time.