Balancing Complexity and Profitability: Why Choosing a Usage Pricing Model is a Challenge for SaaS
Updated: May 23
The decision to adopt usage-based pricing requires careful consideration of customer needs, business profitability, competition, and customer satisfaction. While usage-based pricing can offer benefits such as flexibility and cost-effectiveness, it can be a difficult decision for businesses due to its complexity.
One common issue many customers face is balancing customer needs with business profitability. Usage-based pricing models are often attractive to customers because they allow them to pay only for what they use rather than for features or services they don't need. However, from a business perspective, setting usage-based pricing at a level that covers costs and generates a profit can be difficult.
Although usage-based pricing can lead to unpredictable revenue streams, studies show that usage-based models result in better business metrics like LTV, YoY growth, and net dollar retention. Many companies embark on this journey with a "build" first mentality without having a concrete plan, as there are no tools in the market that enable companies to make a business strategy before embarking on this journey.
At Paliq, we help companies eliminate guesswork from one of the most critical business transformation decisions they have made in a long time. By developing a sound strategy, businesses can reduce the risks associated with making hasty decisions, better align their actions with long-term goals, and increase the likelihood of success.