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What is Tiers + Usage-Based Pricing?

This pricing model combines a recurring fee for a specific pricing tier with a usage-based fee. Pricing Tiers are different packages your customers can choose from that contain a certain set of features, typically a set of three packages like Standard, Gold, and Platinum. Instead of offering just one pricing plan, you segment the pricing of your product into different packages. This allows customers to choose the option that best accommodates their needs. Usage-based pricing means that your customers get charged based on how much they used your product or a specific feature of your product during a billing cycle. This is always a unit of measure, such as the number of lookups, the amount of storage, etc. This means your customers start paying relatively little when they first start using your product, but you still preserve the ability to increase your revenue over time because the price is ideally directly tied with the value a customer receives.

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Why this model?

You are targeting different customer profiles, so it’s a great idea to have different pricing tiers that are targeted toward these different customer segments. Having a base fee for each tier and adding a usage-based fee on top of that allows you to charge for the base value of your product as well as for the value that increases with usage. Make sure that your price and value are aligned and watch out if the value of your product really scales with the number of seats. In order to make Usage-Based Pricing work, you have to find one or several usage metrics that are tied to the value your customers receive. You have to be careful when choosing these metrics since you don’t want to choose any metrics that actively discourage your customers from using your product. Example: Deel, Pilot, Rebrandly, Fauna, Wonderment, Spendesk