We previously used a package plan, which was not fair.
At first, it may seem that the change to a use-based system is financially bad for Bybrand. But, not! Usage-based is a win-win, fair, and value-adding model. Now, when I was reading the Usage-based pricing 2.0, I make sure we did the right thing.
Totally agreed on the Customer Success part, I also think that Product & Product Marketing has a large part to play too. With usage-based companies, it is important to have solid reporting in the platform to help customers monitor their usage. In the same way that usage makes it easy to get started, it can also blow out, which can be a big problem. I also think about the product documentation that is super important in ensuring customers understand the cost levers in what drives the billing metric.
Hi Kyle! Thank you for your thought leadership on the topic and being so transparent with your thoughts. What particularly resonates with me is that transaction based pricing is the best at aligning you with your customer's value. And I also appreciate how it's like compound interest that grows revenue exponentially over time. One thing I've struggled with though is I've worked at large B2B companies where we have multiple line items on a contract. Think of typically having ~7-8 products on a contract from different business units and all are >$250K. And it becomes near impossible to link these 7-8 products with a single value metric. I get PM's who read your work and point out that we should move to transaction pricing. But I think of just how complex this would get for our customers who would be purchasing 7-8 products all on different value meters. Have you seen anyone do this well where they are selling lots of different products to customers?
Great insights. I especially like the easy to understand graphs ... and Pareto is again starring in this movie (70:10) ... As part of a small SaaS wen introduced usage-basewd pricing in form of a feature to let user buy credits to extend their usage if they run out of credits. However, Account Admin can manage who of his coworkers is eligible to buy extra credits.
Love this article and like you I hate the word “overages” :) penalizing the client for seeing growth doesn’t make any sense and creates a bad experience. Puts the CSM in a bad spot. “On demand” does sound much better
Hi Kyle,
In June 2020, we updated Bybrand's (https://www.bybrand.io) pricing to usage-based, after reading the: https://openviewpartners.com/blog/revisit-your-pricing/ (item 9)
We previously used a package plan, which was not fair.
At first, it may seem that the change to a use-based system is financially bad for Bybrand. But, not! Usage-based is a win-win, fair, and value-adding model. Now, when I was reading the Usage-based pricing 2.0, I make sure we did the right thing.
Thanks.
Hey Kyle - great article, it inspired me to do a writeup on usage-based pricing too:
https://techlifetravels.substack.com/p/the-rising-tide-of-usage-based-pricing
Totally agreed on the Customer Success part, I also think that Product & Product Marketing has a large part to play too. With usage-based companies, it is important to have solid reporting in the platform to help customers monitor their usage. In the same way that usage makes it easy to get started, it can also blow out, which can be a big problem. I also think about the product documentation that is super important in ensuring customers understand the cost levers in what drives the billing metric.
Hi Kyle! Thank you for your thought leadership on the topic and being so transparent with your thoughts. What particularly resonates with me is that transaction based pricing is the best at aligning you with your customer's value. And I also appreciate how it's like compound interest that grows revenue exponentially over time. One thing I've struggled with though is I've worked at large B2B companies where we have multiple line items on a contract. Think of typically having ~7-8 products on a contract from different business units and all are >$250K. And it becomes near impossible to link these 7-8 products with a single value metric. I get PM's who read your work and point out that we should move to transaction pricing. But I think of just how complex this would get for our customers who would be purchasing 7-8 products all on different value meters. Have you seen anyone do this well where they are selling lots of different products to customers?
Great insights. I especially like the easy to understand graphs ... and Pareto is again starring in this movie (70:10) ... As part of a small SaaS wen introduced usage-basewd pricing in form of a feature to let user buy credits to extend their usage if they run out of credits. However, Account Admin can manage who of his coworkers is eligible to buy extra credits.
Love this article and like you I hate the word “overages” :) penalizing the client for seeing growth doesn’t make any sense and creates a bad experience. Puts the CSM in a bad spot. “On demand” does sound much better
Great stuff, Kyle. I really enjoyed the customer success is an org-wide commitment. Obviously being in CS I am a bit biased.