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Estd 4.22.2023
Based on our saas pricing book, Price to Scale, there are several principles you can apply to keep usage-based pricing transparent and easy for customers to predict:
• Make the model simple and intuitive. One of the key attributes we emphasize is that your pricing model should be explainable in a short conversation or an “elevator pitch.” This means that despite underlying complexities (like usage growth in storage or data), the customer-facing structure must be straightforward.
• Use clear, quantifiable metrics. The book suggests that any usage metric should be:
- Predictable: Build in ways to anticipate usage growth so monthly bills don’t have sudden spikes.
- Measurable: Ensure that the units (whether it’s storage, bandwidth, or API calls) are clearly tracked.
- Scalable: Create a model that can adapt as usage increases without hidden complexity.
• Consider tiered or bucketed pricing. Instead of billing by a raw usage rate that could vary unpredictably, use tiers or defined buckets of usage. This approach not only aligns with internal cost structures but also gives customers a clear view of what to expect on their bills, reducing surprises.
• Ensure the alignment of pricing with customer expectations. Price to Scale emphasizes that a logical and easy-to-sell pricing model will also be acceptable to customers. This means avoiding overly granular pricing that might result in constantly fluctuating bills.
In summary, by combining a simple, measurable, and scalable pricing strategy with tiered or bucketed usage metrics, you can ensure that your model is both operationally sound and transparent enough for customers to predict their costs. This approach is discussed in detail across various chapters of Price to Scale, particularly where we cover the predictability of usage growth and the necessity of a simple pricing narrative.