Sales & Conversion
Personas
SaaS & Startup
Time to ROI
Medium-term (3-6 months)
Here's something that's been bugging me for months now. I keep seeing SaaS founders obsessing over finding the "perfect" flat-rate pricing tier, spending weeks debating whether to charge $29 or $39 per month, while completely ignoring what their customers actually value.
Last month, I had three different SaaS clients ask me the same question: "Why are we losing customers who love our product but say it's too expensive?" The answer wasn't about lowering prices—it was about completely rethinking how we price.
The traditional SaaS pricing playbook tells you to create three tiers, slap some feature limits on each, and call it a day. But here's what I've observed working with dozens of SaaS companies: most successful products today are moving toward usage-based pricing, and for good reason.
In this playbook, you'll discover:
Why flat-rate pricing is killing your conversion rates (and retention)
The exact framework I use to calculate usage-based pricing models
How to identify the right usage metrics that customers actually care about
Real examples of usage pricing that increased revenue by 40-60%
When NOT to use usage-based pricing (it's not for everyone)
Ready to build a pricing model that scales with your customers' success? Let's dive into what actually works in 2025.
Industry Reality
What every SaaS pricing guide tells you
Walk into any SaaS pricing discussion, and you'll hear the same advice repeated like gospel. The "experts" will tell you to follow the classic three-tier model:
The Standard Playbook:
Starter Plan: Basic features, low price point to hook customers
Professional Plan: Most popular tier with 80% of features
Enterprise Plan: Everything included, premium support, custom pricing
They'll tell you to create artificial scarcity—limit the number of users, projects, or storage. Add a "most popular" badge to push people toward the middle tier. Price anchor with that expensive enterprise plan to make everything else look reasonable.
This advice exists because it's simple and it worked... in 2015. Back when SaaS was newer, customers were willing to pay for features they might use someday. But here's what's changed: your customers have gotten smarter about what they actually need.
The problem with feature-based pricing is that it creates this weird dynamic where you're incentivized to withhold value to maintain pricing tiers. You end up with customers who love your product but feel ripped off because they're paying for features they don't use.
Plus, in a world where every tool claims to be "essential," customers are getting pickier about what deserves a monthly recurring charge. They want to pay for results, not potential.
Consider me as your business complice.
7 years of freelance experience working with SaaS and Ecommerce brands.
I'll be honest—I used to be one of those consultants pushing the three-tier model religiously. It was clean, it was proven, and frankly, it was easier to implement than thinking about usage patterns.
But then I started noticing a pattern across my SaaS clients. The ones struggling with retention weren't the ones with bad products—they were the ones where customers felt like they were overpaying for what they actually used.
I remember working with a project management SaaS that was losing customers left and right. Their "Professional" plan was $49/month for up to 10 users. Sounds reasonable, right? But when we dug into the data, most of their customers were small teams of 3-4 people who only used the tool for specific projects, not daily operations.
These customers loved the product when they used it, but paying $49 every month for something they used 10 days out of 30 felt like highway robbery. They'd downgrade to the limited free plan or churn entirely.
That's when I started questioning everything about traditional SaaS pricing. Why are we charging for time periods instead of value delivered? Why are we creating artificial limits that frustrate customers?
I began researching companies that had successfully implemented usage-based pricing. SaaS companies like Stripe (per transaction), SendGrid (per email), and AWS (per resource consumed) were seeing higher satisfaction and better retention because customers only paid for what they actually used.
The more I studied this model, the more I realized it wasn't just about fairness—it was about aligning your revenue with your customers' success. When customers get more value from your product, they use it more, and you make more money. It's a win-win that flat-rate pricing can't replicate.
Here's my playbook
What I ended up doing and the results.
OK, so here's the framework I've developed for calculating usage-based pricing that actually works. This isn't theory—this is the exact process I walk clients through when we're restructuring their pricing models.
Step 1: Identify Your Core Value Metric
First, you need to figure out what customers actually value about your product. This isn't about features—it's about outcomes. For a marketing automation tool, it might be emails sent or leads generated. For a project management tool, it could be active projects or tasks completed.
Here's how to find yours: Look at your most successful customers and ask yourself, "What do they do more of when they're getting the most value?" That's usually your usage metric.
Step 2: Calculate Your Unit Economics
You need to know your costs per unit of usage. If you're charging per API call, what does each call cost you in infrastructure? Include server costs, data processing, customer support allocation—everything.
Then add your desired margin. I typically recommend starting with a 3-5x markup on direct costs to account for sales, marketing, and product development expenses.
Step 3: Set Usage Tiers with Volume Discounts
This is where most people mess up. They create linear pricing—same cost per unit regardless of volume. But your biggest customers should get better rates because they're more valuable and cost less to serve per unit.
I usually structure it like this:
First 1,000 units: $0.10 each
Next 9,000 units: $0.08 each
Next 40,000 units: $0.06 each
50,000+ units: $0.04 each
Step 4: Add a Minimum Commitment
Pure usage pricing can create revenue volatility that'll keep your CFO awake at night. I recommend adding a minimum monthly commitment—maybe $50 or $100—that gets credited against usage. This ensures predictable baseline revenue while still maintaining the usage-based structure.
Step 5: Include Usage Caps and Overages
You need protection against customers who might abuse the system or have sudden usage spikes that could hurt your margins. Set reasonable caps with clear overage pricing. Most customers will never hit these limits, but having them protects your business model.
The key is making the caps generous enough that normal usage never triggers them, but clear enough that enterprise customers know what to expect.
Value Metric
Finding what customers actually pay for—outcomes, not features. Map usage to business value.
Unit Economics
Calculate true cost per usage unit including infrastructure, support, and desired margins.
Tiered Pricing
Volume discounts that reward your biggest customers while maintaining healthy margins.
Safety Measures
Minimum commitments and usage caps to protect revenue predictability and margins.
When done right, usage-based pricing creates this beautiful alignment between your success and your customers' success. I've seen SaaS companies increase their average revenue per customer by 40-60% within six months of switching to usage-based models.
More importantly, customer satisfaction typically goes up because they feel like they're getting fair value. They're not paying for features they don't use or worrying about hitting arbitrary limits.
The companies that implement this correctly also see better retention because customers who use the product more (and pay more) are naturally more invested in making it work.
But here's the thing—this isn't a magic bullet. The transition period can be rough as you figure out the right metrics and pricing points. Some customers will initially pay less (which is fine if they weren't your ideal customers anyway).
The real win comes after 6-12 months when you see the compounding effects: higher customer lifetime value, better product-market fit signals, and a revenue model that scales naturally with customer success.
What I've learned and the mistakes I've made.
Sharing so you don't make them.
After helping multiple SaaS companies implement usage-based pricing, here are the most important lessons I've learned:
Don't try to boil the ocean. Start with one core usage metric. You can always add complexity later, but starting simple lets you test and iterate quickly.
Your first pricing model will be wrong. Plan for this. Build systems that let you adjust pricing without rebuilding everything from scratch.
Customer education is crucial. Usage-based pricing requires more explanation than flat-rate plans. Invest in calculators, examples, and clear documentation.
Monitor cash flow closely. Usage-based revenue can be more volatile, especially in the first few months. Make sure you have enough runway to smooth out the transition.
Not every SaaS should use usage pricing. If your customers use your product consistently regardless of business size or success, flat-rate pricing might actually be simpler and more profitable.
Enterprise customers need special handling. Large customers often want predictable costs and may prefer negotiated flat rates even within a usage-based model.
Your billing system becomes critical. You'll need robust usage tracking and billing infrastructure. Don't underestimate this technical complexity.
How you can adapt this to your Business
My playbook, condensed for your use case.
For your SaaS / Startup
For SaaS startups considering usage-based pricing:
Start with one clear usage metric tied to customer value
Include minimum monthly commitments for revenue predictability
Build volume discounts to retain enterprise customers
Invest in robust usage tracking and billing systems early
For your Ecommerce store
For ecommerce businesses with SaaS elements:
Consider transaction-based pricing for payment processing or fulfillment tools
Usage models work well for inventory management or analytics platforms
Seasonal businesses especially benefit from pay-per-use structures
Combine with flat-rate base plans for predictable revenue