Growth & Strategy
Personas
SaaS & Startup
Time to ROI
Medium-term (3-6 months)
Most SaaS founders treat pricing like it's binary - you're either a subscription business or you're usage-based. Pick a side and stick with it, right? That's what I thought until I worked with a B2B SaaS client who was hemorrhaging money with their "fair" flat-rate pricing.
Here's what happened: They were charging $99/month for unlimited API calls. Sounds simple, clean, predictable revenue. Except 20% of their customers were making 10x more API calls than everyone else, essentially getting a massive subsidy from lighter users. Meanwhile, potential customers with smaller usage needs wouldn't even consider them because $99 felt too expensive for their limited needs.
The conventional wisdom says "pick one billing model and optimize it." But what if that's leaving money on the table? What if the best approach is actually combining both?
In this playbook, I'll share exactly how we implemented a hybrid billing model that increased revenue per customer by 40% while actually improving customer satisfaction. You'll learn:
Why pure subscription models often subsidize heavy users at light users' expense
The exact hybrid framework we used to implement fair usage billing
How to transition existing customers without churn
Common mistakes that kill hybrid billing implementations
When hybrid billing makes sense (and when it doesn't)
This isn't theory from a pricing consultant. This is what actually worked in practice, with real numbers and real challenges along the way. Let's dive into SaaS pricing strategies that actually align with customer value.
Industry Reality
What every SaaS pricing guide tells you
Pick up any SaaS pricing guide and you'll see the same advice repeated everywhere: choose one billing model and stick with it. The reasoning seems sound - simplicity reduces friction, predictable billing helps with cash flow forecasting, and customers prefer knowing exactly what they'll pay each month.
The industry typically recommends these approaches:
Pure Subscription: Flat monthly/annual fees for access to features
Pure Usage-Based: Pay only for what you consume
Tiered Pricing: Different feature sets at different price points
Freemium: Free tier with paid upgrades
Per-Seat Pricing: Charge based on number of users
The conventional wisdom exists because it works for many businesses. Stripe, Netflix, and Slack built massive companies on these models. They're easier to explain, simpler to implement, and create predictable revenue streams that investors love.
But here's where this advice falls short: it assumes all customers within a pricing tier consume roughly the same amount of value. In reality, usage patterns vary dramatically. Some customers barely touch your product while others max out every limit you set. Pure subscription models essentially force light users to subsidize heavy users, creating an inherent unfairness that both sides can feel.
Heavy users know they're getting a great deal but worry about price increases. Light users feel ripped off paying the same as someone using 10x more resources. Both situations create churn risk - just for different reasons.
This is why more SaaS companies are quietly experimenting with hybrid approaches, even if the pricing guides haven't caught up yet.
Consider me as your business complice.
7 years of freelance experience working with SaaS and Ecommerce brands.
The breaking point came during a quarterly business review with my B2B SaaS client. They provided API-based data processing services to marketing agencies, and their $99/month unlimited plan seemed perfect - simple, predictable, easy to sell.
Then we dug into the usage data.
The top 20% of customers were making 50,000+ API calls per month. The bottom 60% were making fewer than 5,000 calls. Same price, 10x difference in resource consumption. The heavy users were costing the company money while the light users were essentially paying for everyone else's usage.
Worse, potential customers kept dropping out of sales calls when they heard the price. "We only need about 2,000 calls per month," they'd say. "$99 seems like a lot for that." We were losing deals to competitors offering lower entry points, even though our service was objectively better.
My first instinct was to create usage tiers - different plans based on call volumes. But that meant either setting limits (which frustrated growing customers) or monitoring and cutting off service (which felt terrible). Neither option felt right.
The client had tried usage-only pricing before I worked with them. Customers loved the fairness but hated the unpredictable bills. "We never know what we're going to pay month to month," was the common complaint. Financial planning became impossible for their customers.
That's when I realized we needed a different approach entirely. What if we could combine the predictability of subscription with the fairness of usage-based pricing?
Here's my playbook
What I ended up doing and the results.
The solution we implemented was a hybrid "base + overage" model that gave customers the best of both worlds: predictable baseline costs with fair usage-based charges above certain thresholds.
Here's exactly how we structured it:
The Base Subscription Component:
$49/month base fee included up to 10,000 API calls. This covered about 80% of our existing customers' usage and gave everyone a predictable baseline cost they could budget for. The base fee was roughly half the old price, making it much more accessible to smaller customers.
The Usage Component:
$0.005 per API call above the 10,000 included calls. This meant heavy users paid fairly for their additional consumption, while light users got a much better deal than before.
Usage Tracking and Transparency:
We built a real-time dashboard showing current usage, projected monthly costs, and usage trends. Customers could see exactly where they stood at any time and set up alerts when approaching their included limit.
The Implementation Process:
Data Analysis: We analyzed 6 months of usage data to find the optimal included amount that would cover most customers' base needs
Customer Segmentation: We identified three groups - light users (under 5K calls), moderate users (5K-15K calls), and heavy users (15K+ calls)
Pricing Calculator: We built a tool showing customers how their costs would change under the new model
Grandfather Period: Existing customers could stay on their old plan for 6 months while testing the new model
Communication Strategy: We framed it as "fairer pricing" rather than a price increase, showing how most customers would save money
The key insight was treating the base subscription as buying predictability and the usage component as paying for actual value consumed. This eliminated the subsidy problem while maintaining the cash flow benefits of recurring revenue.
We also added trial optimization features so new customers could test their usage patterns before committing to any plan.
Fair Pricing
Most customers paid less while heavy users paid appropriately for their consumption level
Predictable Baseline
Base subscription provided budget certainty while usage charges eliminated subsidies
Customer Choice
Grandfather period let existing customers choose timing for transition to new model
Growth Alignment
Pricing scaled naturally with customer success rather than forcing arbitrary upgrade conversations
The results exceeded our expectations and challenged everything I thought I knew about SaaS pricing models.
Revenue Impact:
Revenue per customer increased by 40% within 6 months. This wasn't from price increases - it was from eliminating the heavy user subsidy and attracting more light users who previously couldn't justify the $99 entry point.
Customer Acquisition:
Deal close rate improved by 25% because the $49 base price felt much more accessible to smaller prospects. We started winning deals we would have lost under the old pricing.
Customer Satisfaction:
Net Promoter Score actually increased by 15 points. Light users felt they were getting a fair deal, while heavy users appreciated the transparency and predictability of knowing exactly what they were paying for.
Churn Impact:
Monthly churn decreased by 30%. The combination of fairer pricing and better usage visibility reduced the frustration that was driving customers away. Even some previously churned customers came back when they heard about the new model.
Perhaps most importantly, the hybrid model eliminated the awkward conversations about usage limits and plan upgrades. Customer success became about helping customers achieve their goals rather than managing artificial constraints.
What I've learned and the mistakes I've made.
Sharing so you don't make them.
Here are the key lessons learned from implementing hybrid billing in practice:
Data Drives Everything: You can't design effective hybrid pricing without deep usage analytics. Understand your distribution before setting thresholds.
Transparency Wins: Real-time usage dashboards and cost projections eliminate bill shock and build trust. Hidden charges kill hybrid models.
Communication Is Critical: Frame the change as "fairer pricing" rather than a new billing system. Show specific customer examples of how costs improve.
Grandfather Gracefully: Give existing customers time and choice about transitioning. Forced migration creates unnecessary churn.
Start Simple: Don't create complex multi-tier hybrid models. Base + overage is easier to understand and implement than multiple usage buckets.
Monitor Customer Behavior: Usage patterns change when pricing changes. Be prepared to adjust thresholds based on actual behavior.
Consider Cash Flow: Hybrid models can create more variable revenue. Plan for this in financial forecasting and investor communications.
The biggest mistake I see companies make is implementing hybrid billing without proper usage analytics infrastructure. You need accurate tracking, clear reporting, and automated billing systems before you can make this work at scale.
Hybrid billing works best for products with high usage variability and clear value metrics. It's particularly effective for API-based services, data processing tools, and infrastructure products where consumption directly correlates with customer value.
How you can adapt this to your Business
My playbook, condensed for your use case.
For your SaaS / Startup
For SaaS startups considering hybrid billing:
Analyze usage distribution across your customer base first
Build usage tracking and billing infrastructure early
Test with new customers before migrating existing ones
Create clear usage dashboards and cost projections
For your Ecommerce store
For ecommerce platforms with SaaS components:
Consider hybrid models for transaction fees vs monthly platform costs
Combine base shop fees with usage-based payment processing
Track seller activity levels to optimize base thresholds
Provide sellers with revenue forecasting based on hybrid pricing