Sales & Conversion
Personas
SaaS & Startup
Time to ROI
Medium-term (3-6 months)
Here's the thing about SaaS pricing that nobody wants to admit: most founders are shooting themselves in the foot with their pricing model, and they don't even realize it.
I was working with a B2B SaaS client recently who came to me frustrated. They had a solid product, decent traffic, good trial signups. But something was fundamentally broken in their conversion funnel. After digging into their analytics, the problem wasn't their product or their marketing - it was their pricing model.
They were using the classic "one-size-fits-all" subscription pricing that every SaaS guru preaches. Small customers felt overcharged, big customers felt like they were getting a steal, and medium customers couldn't figure out which plan to choose. Sound familiar?
The reality is that fixed subscription pricing only works when your customers have predictable, similar usage patterns. But most SaaS products today don't work that way. Some customers might use your API 100 times a month, others might hit it 10,000 times. Some need one user seat, others need 500.
Here's what you'll learn from my experience implementing usage-based pricing for multiple SaaS clients:
Why the "simple pricing" advice is actually killing your revenue
The three usage-based models that actually work (and when to use each)
How to transition from fixed to usage pricing without losing customers
The billing infrastructure you need (it's simpler than you think)
Real metrics from companies that made the switch
This isn't theory - this is what actually happens when you align your pricing with how customers actually use your product. Let's dive into why most SaaS pricing strategies miss the mark.
Industry Reality
What every pricing expert tells you to do
Walk into any SaaS conference or scroll through pricing advice online, and you'll hear the same tired playbook repeated over and over:
"Keep it simple. Three tiers max. Easy to understand. Predictable monthly revenue."
The conventional wisdom goes like this:
Tiered subscriptions are king - Basic, Pro, Enterprise with clear feature differentiation
Predictability beats everything - Customers want to know exactly what they'll pay each month
Usage-based pricing is too complex - It confuses customers and makes forecasting impossible
Annual contracts solve everything - Lock customers in early and worry about usage later
Freemium or free trial, then upgrade - Give them a taste, then force them into a monthly plan
This advice exists because it worked in 2010 when SaaS was simpler. Back then, most software was just "software as a service" - replacing desktop apps with web versions. Usage patterns were predictable because the software did basically the same thing for everyone.
But here's where this conventional wisdom falls apart in 2025: most modern SaaS products aren't simple software replacements. They're API-driven platforms, data processing services, or infrastructure tools where usage can vary by 100x between customers.
When you force a one-size-fits-all pricing model onto a product with wildly different usage patterns, you create three problems:
Under-monetization - Heavy users get incredible value for a flat fee
Barrier to entry - Light users won't pay a high flat fee for minimal usage
Pricing confusion - Medium users can't figure out which tier makes sense
The result? You're leaving money on the table while simultaneously making it harder for customers to say yes. But there's a better way that aligns your revenue with the actual value you're delivering.
Consider me as your business complice.
7 years of freelance experience working with SaaS and Ecommerce brands.
Let me be honest about something: I used to be one of those people preaching "simple pricing." It was easier to implement, easier to explain to clients, and honestly, easier for me as a consultant to set up and forget about.
But then I started working with clients whose businesses didn't fit the textbook model. One client had an API that some customers called 50 times a day, while others called 50,000 times. Another had a data processing service where small businesses might process 100 records monthly, but enterprises processed millions.
Forcing these businesses into "Basic/Pro/Enterprise" tiers was like trying to sell shoes in only size 8. Sure, some people could make it work, but most would either not buy at all or feel ripped off.
The turning point came when I was working with a client whose churn was through the roof. Good product, happy customers during trials, but terrible conversion and retention. We dug into the data and found something interesting:
Light users (less than 500 API calls/month) churned within 2 months - they felt overcharged
Heavy users (over 10,000 calls/month) had incredible retention - they were getting massive value
Medium users took forever to convert - they couldn't predict their usage
This is when I realized that "simple pricing" was actually the complex option. We were creating artificial complexity by forcing natural usage patterns into arbitrary tiers.
The real problem with fixed pricing isn't that it's hard to understand - it's that it doesn't match how customers actually think about value. When someone uses your API 10x more, they expect to pay more. When they use it 10x less, they expect to pay less. Fighting this natural instinct creates friction.
I started researching companies that had moved to usage-based pricing and found a pattern: almost all of them saw improved customer satisfaction alongside revenue growth. Not because usage pricing is magic, but because it aligns incentives properly.
That's when I developed my framework for evaluating when and how to implement usage-based pricing. It's not right for every SaaS, but when it fits, it solves problems that fixed pricing can't.
Here's my playbook
What I ended up doing and the results.
After implementing usage-based pricing for multiple clients, I've developed a systematic approach that avoids the common pitfalls. Here's the exact framework I use:
Step 1: Audit Your Current Usage Patterns
Before changing anything, you need to understand how customers actually use your product. I set up analytics to track:
API calls per customer per month
Data processed or stored
Active user sessions
Features used and frequency
The goal is to find your "unit of value" - the thing customers care most about that correlates with the value they get. For one client, it was processed transactions. For another, it was storage space. For a third, it was monthly active users.
Step 2: Identify Your Pricing Model Type
Based on usage patterns, I recommend one of three models:
Pure Usage - Pay only for what you use (best for APIs, data processing)
Base + Usage - Monthly base fee plus usage charges (best for platforms with core features + variable usage)
Tiered Usage - Different rates at different usage levels (best for encouraging growth)
Step 3: Set Your Pricing Structure
Here's where most people get stuck. The key is starting with your current revenue and working backwards:
Calculate average monthly usage per customer segment
Set pricing so current customers pay roughly the same initially
Build in growth incentives (lower per-unit cost at higher volumes)
Add reasonable minimums to cover base costs
Step 4: Build Billing Infrastructure
This is simpler than you think. I typically recommend:
Stripe for payment processing (supports usage-based billing natively)
Usage tracking in your existing analytics system
Monthly billing cycles with clear usage dashboards
Automated billing with manual override capabilities
Step 5: Transition Strategy
Never force existing customers to switch immediately. Instead:
Offer usage pricing as an option for new customers
Show existing customers their usage patterns and potential savings
Allow opt-in switching with grandfathering for those who prefer fixed pricing
Use contract renewals as natural transition points
The key insight is that usage-based pricing isn't about maximizing revenue from every customer - it's about removing friction from the buying process and aligning your success with your customers' success. When implemented correctly, both sides win.
Billing Setup
Simple infrastructure for tracking and charging based on actual usage patterns
Customer Transition
Proven method for moving existing customers from fixed to usage without churn
Pricing Psychology
Why customers actually prefer paying for what they use over flat fees
Revenue Impact
How usage alignment typically affects monthly recurring revenue and growth
The results from implementing usage-based pricing consistently surprised me. I expected some improvement, but the actual impact across multiple client implementations was significant:
Customer Acquisition
The most immediate change was in trial-to-paid conversion. With usage-based pricing, customers could start small and scale up naturally. One client saw their conversion rate improve from 12% to 24% simply because the barrier to entry was lower.
New customers no longer had to predict their usage or commit to a plan that might be too expensive. They could start with minimal usage and grow into the platform organically.
Revenue Growth
Counterintuitively, revenue per customer actually increased over time. While some light users paid less initially, heavy users paid significantly more than they would have under fixed pricing. The net effect was positive revenue growth.
More importantly, revenue became directly tied to customer success. As customers grew their businesses and used the platform more, monthly payments increased automatically. This created a sustainable growth loop.
Customer Satisfaction
The most surprising result was improved customer satisfaction scores. Usage-based pricing felt fairer to customers because they were paying for value received. Support tickets about pricing decreased dramatically.
Customers also became more engaged with usage dashboards and analytics, leading to better adoption of platform features. When people pay for what they use, they pay attention to their usage.
What I've learned and the mistakes I've made.
Sharing so you don't make them.
After implementing usage-based pricing across multiple SaaS products, here are the most important lessons I learned:
Start with your unit of value, not your unit of cost - Charge for what customers care about, not what's easiest for you to measure
Transparency beats simplicity - Customers prefer understanding exactly what they're paying for over "simple" pricing that feels arbitrary
Build usage dashboards first - Customers need to see their usage patterns before they'll trust usage-based pricing
Always include reasonable minimums - You need to cover base costs even for light users
Volume discounts encourage growth - Lower per-unit costs at higher usage levels align incentives
Migration is easier than you think - Most customers will switch if the math works in their favor
Billing infrastructure is a competitive advantage - Good usage tracking and reporting builds trust
The biggest mistake I see is overthinking the complexity. Usage-based pricing isn't complex for customers - it's actually more intuitive than artificial tiers. The complexity is usually in our own assumptions about what customers want.
Remember: if your product's value scales with usage, your pricing should too. Fighting this natural alignment creates unnecessary friction in your sales process and leaves money on the table.
How you can adapt this to your Business
My playbook, condensed for your use case.
For your SaaS / Startup
For SaaS startups implementing usage-based pricing:
Start with usage analytics before changing pricing
Test with new customers first, migrate existing ones gradually
Use Stripe or similar for automated usage billing
Build transparent usage dashboards early
For your Ecommerce store
For ecommerce stores considering usage pricing:
Focus on API usage, transaction volume, or storage needs
Consider hybrid models with base fees plus usage
Implement for B2B services, not direct consumer sales
Track merchant success metrics alongside usage