Definition
Usage-based pricing charges customers based on consumption (for example API calls, GB processed). It can align price with value but can increase revenue variability.
How to use it
- Use clear value metrics and predictability guardrails (caps, tiers).
- Track retention and expansion by cohort; bill shock can increase churn.
Why this matters
This term matters because small changes compound in SaaS metrics. Use consistent definitions by cohort and segment so you can diagnose retention, payback, and growth quality.
Practical checklist
- Write a 1-line definition for "Usage-based Pricing" that your team will use consistently.
- Keep the time window consistent (weekly/monthly/quarterly) when comparing trends.
- Segment results (channel/plan/cohort) before drawing big conclusions from blended averages.
- Sanity-check with a related calculator from the same category on MetricKit.
- Read the related guide (e.g., Pricing guardrails: payback-based minimum price and max discount) for context and common pitfalls.
Where to use this on MetricKit
Calculators
- Required Pipeline Calculator: Estimate how much pipeline (and how many opportunities) you need to hit a revenue target given win rate and average deal size.
- Sales Capacity Calculator (with Ramp): Estimate period bookings capacity from team size, quota per rep, expected attainment, and ramped vs ramping mix.
- OTE & Commission Rate Calculator: Compute on-target earnings (OTE), commission rate, and compensation split from base salary, variable pay, and quota.
- Sales Funnel Targets Calculator: Translate a revenue target into required wins, opportunities, SQLs, MQLs, and leads using funnel conversion rates.
- Activation Rate Calculator: Compute activation rate: what % of new signups reach your activation event (and what you need to hit a target).
Guides
- Pricing guardrails: payback-based minimum price and max discount: A practical guide to pricing guardrails: compute minimum ARPA (or max discount) from CAC, margin, and a target payback to avoid breaking unit economics.
- Unit economics hub: CAC, LTV, payback, and runway (a practical stack): A practical hub for unit economics: CAC, fully-loaded CAC, LTV, payback, margin impacts, burn multiple, and runway planning.