Contained in the speedy rise of usage-based pricing – TechCrunch

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It’s not simply your creativeness — usage-based pricing (UBP) is seemingly all over the place in 2021.

SaaS corporations have been ditching conventional subscription pricing in favor of usage-based fashions that higher align with trendy shopping for habits and the worth delivered by their merchandise. UBP, also called consumption-based pricing, connects how a lot a buyer pays with how a lot they eat a given services or products.

Utilization-based subscriptions generally is a method for SaaS corporations to check the feasibility of UBP without having to utterly change their enterprise mannequin.

Public cloud observability firm New Relic launched its consumption-based pricing mannequin in July 2020. Extra lately the corporate doubled down on the mannequin, deciding to solely pay gross sales reps based mostly on prospects’ precise consumption slightly than subscription commitments. The choice seems to be paying off, as New Relic has seen a spurt in each account development and information retention, two main indicators the corporate tracks carefully.

Related pricing pivots have been made by startups like Cypress, which launched consumption-based pricing in March 2021; pre-IPO corporations like Kong, which introduced a pay-as-you-go pricing tier in Could 2021; and even longstanding corporations like 40-year-old Autodesk, which launched pay-as-you-go pricing in September.

Based on our State of Utilization-Primarily based Pricing Report, which incorporates information from almost 600 contributors, 45% of SaaS corporations had a UBP mannequin in 2021. This determine is up considerably in comparison with 34% in 2020 and 30% in 2019.

Graph depicting rise of usage-based pricing adoption 2018-2023

Picture Credit: OpenView Companions

The wave received’t decelerate in 2022

1 / 4 of corporations that at present use a UBP mannequin say they launched it throughout the final 12 months. This 12 months’s adoption of UBP exceeds that of each 2019 and 2020 mixed.

In the meantime a majority of the UBP holdouts (61%) say they count on to both launch or check usage-based pricing within the close to future. If these traits proceed, UBP will develop into the norm, not the exception, as early as 2022.

Subscriptions versus UBP isn’t an either-or choice

The information reveals that UBP can — and sometimes does — co-exist with conventional subscription pricing. These with a usage-based mannequin are divided equally between those that supply usage-based subscription tiers (23%) and people with a largely usage-based or pay-as-you-go pricing mannequin (23%).

Graph showing adoption of usage-based pricing alongside subscription and no usage based pricing

Picture Credit: OpenView Companions