Usage based pricing typically means that billing amounts will vary month-to-month, making it much harder to forecast revenue. Do your users really care about the number of API requests they generate? Or do they care more about seamlessly integrating two crucial pieces of software?

With fixed price packages, there’s always the risk of “heavy” users taking up a disproportionate amount of your delivery resource, without compensating for it with increased spend. There are no big up-front costs with usage based pricing, and even the smallest startups can get started with your product, safe in the knowledge that prices will only increase alongside their usage. It makes sense to correlate usage and price: if you have volatile demand, and use less of a service in a given month, why should you expect to pay the same amount as a boom month? Usage based pricing works particularly well for recurring billing platforms like Chargify: by directly correlating price with revenue, you can guarantee that price increases only happen alongside periods of increased revenue, ensuring that customers will always be able to afford and justify the change in price: Increasingly though, SaaS companies are finding new ways to adapt the model, like social media tools that charge for scheduled posts, or accounting tools that charge per invoice.

In practice, this pricing strategy is most common within infrastructure- and platform-related software companies (like Amazon Web Services), where companies are charged based on the number of API requests, transactions processed, or gigabytes of data used. Also known as the Pay As You Go model, this type of pricing strategy directly relates the cost of a SaaS product to its usage: if you use more of the service, your bill goes up use less, and your spend decreases.

Dropbox pricing tiers