4 ms·

Ask HN: Usage-based pricing vs. tiered-pricing (SaaS)

Hi HN, I would really like to hear HN's experience with pure usage based pricing vs tiered pricing for a SaaS product. Background: when looking at SaaS products with a clear utility metric (e.g. # of API requests) many companies still do not provide pure usage based pricing á la ___ price = price per request * requests ___ but price in tiers (e.g. 10000 requests). Their tiers do not really segment users based on enterprisy feature like SSO but mainly focus on # of requests. I have personally paid for some of these services and it always bugged me that I only need say 500 requests per month but get charged for 10k. On the other hand I suspect there are also good arguments to be made for tiered pricing especially since I don't have experience as a buyer of software inside large companies. Would really appreciate input from 1) folks building SaaS having experimented with this 2) folks in large orgs buying software 3) buyers/users of software in general and how they feel about pure usage based pricing Thanks so much everyone!

whoiskatrin 3y ago
personally, really likes this read about usage-based pricing and margins https://medium.com/@tbragin/optimizing-usage-based-pricing-for-infrastructure-saas-83b6cec92d49 https://medium.com/@tbragin/optimizing-usage-based-pricing-f...
- gavin___belson 3y ago
  Thank you for this! The mentioned concept of “committed spend” for large orgs is unfamiliar to me but makes a lot of sense.
gerad 3y ago
Would you rather be paid upfront or in arrears? Simply the timing of the payments is a really big financial incentive to have tiered-pricing - which is why you see it so often in the wild.
- gavin___belson 3y ago
  Good point. I would argue that timing of payments makes a big difference if you have high costs on the units you sell, e.g. EasyPost with shipping labels via API request. But for other SaaS with high margins you would only front very limited money for like 30 days. Couple of counter-measures for this exact point I have seen in the wild: - companies letting you top up your account balance, then do usage based charges on the balance - companies having a billing-threshold where they trigger a payment (or multiple) during the month

whoiskatrin 3y ago

personally, really likes this read about usage-based pricing and margins https://medium.com/@tbragin/optimizing-usage-based-pricing-for-infrastructure-saas-83b6cec92d49 https://medium.com/@tbragin/optimizing-usage-based-pricing-f...

gavin___belson 3y ago
Thank you for this! The mentioned concept of “committed spend” for large orgs is unfamiliar to me but makes a lot of sense.

gerad 3y ago

Would you rather be paid upfront or in arrears? Simply the timing of the payments is a really big financial incentive to have tiered-pricing - which is why you see it so often in the wild.

gavin___belson 3y ago
Good point. I would argue that timing of payments makes a big difference if you have high costs on the units you sell, e.g. EasyPost with shipping labels via API request. But for other SaaS with high margins you would only front very limited money for like 30 days. Couple of counter-measures for this exact point I have seen in the wild: - companies letting you top up your account balance, then do usage based charges on the balance - companies having a billing-threshold where they trigger a payment (or multiple) during the month