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I work for a B2B business that offers a pay as you go model. It hasn't been a complete disaster... but I would now strongly recommend against it. - Most custo

I work for a B2B business that offers a pay as you go model. It hasn't been a complete disaster... but I would now strongly recommend against it. - Most customers want a fixed bill for budgeting purposes. They would often rather overpay a little bit than having to set aside a special budget that they may or may not need any given year. - It will make forecasting your revenue a real SoB. For a bigger company you may be able to annualize the payments and deal with liquidity crunches. But imagine being a smaller company and going through months at a time when you aren't getting any money in because of the cyclical nature of demand. - Customers feel punished for using the product more rather than "getting more value" out of it. - It's extremely punishing for your biggest customers. 10% of your customers will use 90% of your customer resources. Making them basically foot the entire bill for your company will make them not happy. You will have to find a way to cut them their own pricing or they will go to your competitor (or worse, stand up their own competitor instead of paying you).

netheril96 4y ago
You sound like that pay-as-you-go is the only model at your company. Why not both?
leros 4y ago
This is the answer. I worked on a product that started out as a fixed price and we were pretty successful. We switched to a pay as you go model, and it just about tanked the business, despite it being cheaper for most of our customers. We lost 90% of our customers within a few quarters. Its like you said: - Accounting greatly prefers fixed amounts for budgeting purposes - Pay as you go actually incentives people not to use your product to avoid being charged - Paying a fixed price for something encourages adoption since your company has already paid for it. Whereas, there is no pressure to adopt a pay as you go product since there is no cost to not using it. We ended up switching back to a fixed price model and actually drastically raised the price. We became much more successful after that.

netheril96 4y ago

You sound like that pay-as-you-go is the only model at your company. Why not both?

leros 4y ago

This is the answer. I worked on a product that started out as a fixed price and we were pretty successful. We switched to a pay as you go model, and it just about tanked the business, despite it being cheaper for most of our customers. We lost 90% of our customers within a few quarters. Its like you said: - Accounting greatly prefers fixed amounts for budgeting purposes - Pay as you go actually incentives people not to use your product to avoid being charged - Paying a fixed price for something encourages adoption since your company has already paid for it. Whereas, there is no pressure to adopt a pay as you go product since there is no cost to not using it. We ended up switching back to a fixed price model and actually drastically raised the price. We became much more successful after that.