While consumption-based pricing has been a boon for infrastructure companies like Amazon and Rackspace, most SaaS companies have stuck with standard monthly or yearly subscription models.
Amazon’s cloud-services pricing is revolutionary. Quick primer: users only pay for every hour of server resources consumed. This means operations teams can scale up and down their server consumption in based on customer usage, and only pay for the exact resources consumed.
Most SaaS apps – particularly those oriented towards the enterprise, don’t take advantage of consumption-based pricing. While some businesses prefer predictable monthly pricing, consumption-based pricing lets users that have variable demand each month only pay when they receive value from your product.
For example, take 37Signal’s Basecamp. Its costs are very tightly correlated with the number of projects created by each user. Yet, there is only standard monthly pricing available for Basecamp customers. Great for business that like predictable pricing, but not ideal for businesses that may be running multiple projects one month and then none the next.
Imagine if Basecamp also offered pay-as-you-go pricing, such as $5/month per project. For example, marketing agencies that frequently have spikes in demand can pay for only the number of Basecamp projects they need each month.
Which companies are already doing this? Twilio provides simple, pay per message pricing. Twilio doesn’t require any minimum monthly subscription and even provides pricing discounts when its users exceed certain usage thresholds.
What are your thoughts on consumption-based pricing for SaaS products?