Structuring Consumption-based SaaS Pricing

For SaaS products with usage-based pricing, it’s crucial to structure your pricing effectively to optimize revenue and customer satisfaction.

Types of Consumption-based Pricing

• Linear Pricing: Charges a fixed price per unit of consumption.

• Two-Part Tariff: Includes a base fee plus an additional usage charge.

• Three-Part Tariff: Offers a fixed bundle with usage caps, additional charges apply if the usage exceeds the bundle limit.

  
  

Pros and Cons of Each Structure

• Linear Pricing: Simple but can leave revenue on the table.

• Two-Part Tariff: Balances predictability and flexibility.

• Three-Part Tariff: Best for maximizing predictable revenue but can be complex for customers.

  
  

Implementing Block Pricing Structures Effectively

Segment consumption into meaningful blocks, offering volume discounts clearly, and communicate the structure transparently to customers.

Practical Tip: Regularly analyze customer usage data to refine your block pricing structure to match customer expectations and business goals.