The prices of products or services based on use (UBP, User Based Pricing) already form an important part of the transactional mode of companies.
SaaS companies have been abandoning traditional subscription pricing in favor of usage-based models that better align with modern purchasing behavior and the value delivered by their products. UBP connects how much a customer pays with how much they consume a given product or service.
This model for SaaS companies allows you to test the viability of your service without having to completely change your business model.
The Public Cloud Services Observation Company New Relic introduced its consumption-based pricing model in July 2020. Recently, the company doubled down on the model and decided to only pay distributors based on actual customer consumption rather than customer subscription commitments. The decision appears to be paying off, as New Relic has seen an accelerated increase in both account growth and data retention, two of the main indicators that the company.
Start-ups like Cypress, which started with the consumption-based pricing model in March 2021, have similarly redirected to the pricing model; companies like Kong, which announced a pay-as-you-go pricing tier in May 2021; and even companies like Autodesk, 40, which introduced pay-per-use pricing in September.
According to a usage-based pricing market report, which includes data from nearly 600 participants, 45% of SaaS companies had a UBP model in 2021. This figure is significantly higher compared to 34% in 2020 and 27% in 2018.
Trend in 2022
A quarter of companies currently using a UBP model say they have introduced it in the last 12 months. This year's UBP adoption exceeds that of 2019 and 2020 combined.
Meanwhile, most UBP resisters (61%) say they hope to launch or test usage-based pricing in the near future. If these trends continue, UBP will become the norm, not the exception, from 2022.
Subscription economics and UBP
The data show that UBP can, and generally does, co-exist with subscription pricing models, on the other hand already considered traditional. Those with a usage-based model are split evenly between those offering usage-based subscription tiers (23%) and those with a primarily usage-based or pay-per-use pricing model (23%). ).
Esro assumes that 46% of the income of these 600 respondents is based on the combination of these two models compared to the sales models of the service that, on the other hand, is in clear decline.
