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Learn how a usage fee revenue stream works, its benefits and challenges, plus real-world examples to help you decide if this model fits your business.
What if your revenue could grow in perfect sync with your customers' success? With traditional tiered subscriptions, you often hit a ceiling or create friction by forcing growing customers into expensive, one-size-fits-all plans. A usage fee revenue stream changes that dynamic by creating a true partnership. Your income is tied directly to the value and consumption your customers experience, meaning you win when they win. This model is a powerful engine for sustainable expansion, but it requires a strategic approach to implementation and customer relationships. Here, we’ll explore how this model can drive engagement and build a scalable foundation for long-term growth.
Ever paid for a cell phone plan based on the data you used or noticed your electricity bill change from month to month? If so, you’re already familiar with a usage fee revenue stream. This model connects what a customer pays directly to how much they use a product or service. It’s a flexible approach that’s gaining traction far beyond utilities, especially in the tech world. Let's break down what this model is all about.
At its core, a usage fee revenue model is a straightforward value exchange. It’s a way for businesses to make money based on how much a customer uses a service. Instead of a flat monthly fee, the cost is variable and tied to consumption. This "consumption" can be measured in many ways: the number of gigabytes used, minutes spent on a call, API calls made to a software, or the volume of transactions processed. The key is having a clear, measurable unit of value that your customers understand and that you can track accurately. This direct link between use and cost is the foundation of the entire model.
The defining trait of this model is its "pay-for-what-you-get" nature. The more a customer uses a service, the more they pay. This creates a direct relationship between the value a customer receives and the revenue you generate. Unlike a fixed subscription, customer bills can fluctuate each month, which offers flexibility but also introduces unpredictability. While usage-based pricing is transforming SaaS, it also brings new complexities, especially for revenue recognition. Accurately tracking consumption and aligning it with accounting standards is critical for financial health and compliance, turning a simple concept into a significant operational challenge.
You can find the usage fee model in more places than you might think. Classic examples include utility companies charging for electricity or water and logistics services like FedEx billing based on package weight and distance. In the digital space, it’s the engine behind major cloud services like Amazon Web Services, where you pay for the exact computing power and storage you consume. This model is also a staple for telecommunications companies with metered data plans. More recently, many SaaS companies have adopted it, charging for things like API calls, data processed, or active users, allowing them to scale their pricing alongside their customers' growth.
Usage-based pricing isn't a single, rigid formula. Instead, it’s a flexible approach that comes in several forms, all built on one core idea: customers pay for what they actually use. Think of it less like a fixed monthly gym membership and more like your home's electricity bill—the more you use, the more you pay. This direct link between consumption and cost is what makes the model so powerful.
This approach, also known as consumption-based pricing, is a model where customers are billed based on their actual usage rather than a flat subscription fee. It allows you to align your pricing directly with the value a customer receives. Let's look at the most common ways businesses structure this model.
Metered billing is the most straightforward version of usage-based pricing. Just like a utility meter tracks your water or electricity consumption, this model tracks a specific metric—like data storage in gigabytes, API calls made, or minutes used—and bills the customer accordingly. It’s a simple, transparent system where the cost is directly proportional to consumption. This works best when the value your customers get from your product can be easily measured by a single unit. It’s a fair and transparent way to charge, as customers can clearly see how their usage translates into their final bill.
The pay-as-you-go model is exactly what it sounds like: customers only pay for what they consume, with no upfront commitment or flat fee. This approach is popular with cloud services like Amazon Web Services, messaging platforms like Twilio, and payment processors like Stripe. It’s incredibly attractive to customers because it lowers the barrier to entry. A small startup can use the same powerful tools as a massive enterprise and simply pay for their smaller-scale usage. This flexibility allows your service to grow alongside your customers, making it a fantastic model for building long-term relationships and scaling your own revenue.
Tiered usage models offer a bit more structure by grouping usage levels into different packages or "tiers." You might see this as Basic, Premium, and Enterprise plans, where each tier includes a certain allowance of features or usage units. For example, a Basic plan might include 1,000 API calls per month, while an Enterprise plan includes 100,000. Customers who exceed their tier's limit can either pay overage fees or upgrade to the next level. This approach helps guide customers to the right plan for their needs and provides your business with a more predictable revenue stream than a pure pay-as-you-go model. It’s an effective way to segment your customer base and cater to different user profiles.
The backbone of any usage-based model is the ability to accurately track consumption. This isn't just about sending a correct bill; it's about data integrity and financial compliance. Recognizing revenue for usage-based pricing requires a system that can monitor how much of a product or service a customer uses and then account for that revenue in proportion to that usage. This means having the right technical infrastructure to collect and process usage data in real-time. This data then feeds directly into your billing and financial systems, ensuring that you can follow revenue recognition standards like ASC 606 accurately and efficiently.
Adopting a usage fee model can feel like a big shift, but the benefits often outweigh the initial learning curve. This approach isn’t just about changing how you bill—it’s about fundamentally rethinking your relationship with your customers and your own growth. When you tie revenue directly to the value a customer gets from your product, you create a powerful engine for sustainable success. From startups to established companies, businesses are finding that this model offers a more flexible and customer-friendly path forward. Let's look at some of the biggest advantages.
One of the most compelling reasons to consider a usage-based model is its natural ability to scale with your customers. As their business grows and they use your product more, your revenue grows right alongside them. This creates a true partnership where you’re invested in their success. This dynamic pricing isn't just for industry giants; the State of Usage-Based Pricing 2025 Report shows it's being adopted by nimble startups that need to align their costs with customer value from day one. Instead of hitting a ceiling with fixed subscription tiers, your revenue potential is directly linked to the value you provide, creating a clear path for expansion.
With a usage fee model, customers pay for what they actually use. This simple concept builds a tremendous amount of trust and transparency. It removes the friction of asking a small customer to pay for an enterprise-level plan they don’t need. This approach effectively aligns customer spending with the value they receive, making it an attractive choice for businesses seeking sustainable and scalable revenue streams. When customers feel the pricing is fair, they are more likely to stick around and increase their usage over time as their needs evolve.
When customers pay based on consumption, they have a vested interest in using your product effectively. This model encourages continuous interaction, which can lead to higher adoption rates and deeper engagement with your software’s features. Think about it: if a customer is paying for every API call or gigabyte of storage, they’re going to make sure they’re getting their money’s worth. This active use provides you with constant feedback and helps you understand what parts of your product are most valuable, leading to higher retention and a more loyal customer base.
In a market filled with rigid, one-size-fits-all subscription plans, offering a flexible usage-based option can be a powerful differentiator. This model is especially appealing to new customers who might be hesitant to commit to a high-priced annual contract. By allowing them to start small and pay only for what they consume, you lower the barrier to entry and make it easier to win their business. This flexibility shows that you understand your customers' needs and are confident enough in your product’s value to let it speak for itself.
Tracking usage is essential for billing, but it also generates a goldmine of data about customer behavior. You can see which features are most popular, identify power users, and spot trends in how your product is being used. This information is invaluable for making strategic decisions about your product roadmap, marketing, and sales efforts. By investing in platforms that help you track utilization, you can get a clear picture of your business performance and find new opportunities for growth. Having the right data integrations in place is key to making this data accessible and actionable.
While a usage fee model offers a ton of flexibility and potential for growth, it’s not without its hurdles. The good news is that every common challenge has a practical solution, especially when you have the right systems in place. This model’s dynamic nature means you need to be proactive about forecasting, customer relationships, and your technical setup. Let’s walk through the biggest obstacles you might face and how to handle them so you can focus on growing your business. By anticipating these issues, you can build a resilient revenue stream that works for you and your customers.
One of the trickiest parts of a usage-based model is its inherent volatility. When your income is tied directly to customer consumption, forecasting can feel like guesswork. Unlike a fixed subscription model, you can't just multiply your customer count by a set price. This unpredictability makes it challenging to plan your budget, allocate resources, and set growth targets.
The key to solving this is to lean heavily on data. By analyzing historical usage patterns, seasonality, and customer behavior, you can build more accurate predictive models. Using a platform with real-time analytics allows you to spot trends as they happen, not weeks later. This helps you move from reactive to proactive financial planning.
Usage-based pricing can be a double-edged sword for retention. On one hand, it keeps customers engaged with your product. On the other, if they don't see the value in their usage, they can easily scale down or leave entirely. Churn in this model isn't just about a customer canceling—it can also look like a slow decline in usage over time.
To manage this, you need to stay on top of customer engagement. Monitor usage data to identify customers whose activity is dropping off, as they may be at risk of churning. Proactively reach out to offer support, share best practices, or highlight features they aren't using. By continuously demonstrating your product's value, you give customers a compelling reason to keep using it and even increase their consumption over time.
To bill based on usage, you first have to track it accurately. This requires a solid technical infrastructure that can monitor every relevant action a customer takes. For many businesses, this data lives in different places—your CRM, your product database, your payment processor. Piecing it all together manually is not only time-consuming but also prone to errors that can lead to incorrect bills and frustrated customers.
The solution is to automate this process with a system built to handle complex data. Investing in a platform with seamless integrations can pull all your usage data into one place. This ensures every bill is accurate and frees up your team to focus on more strategic work.
As your business grows, you might introduce hybrid models that combine a base subscription with usage fees or offer multiple tiers of service. While this gives customers more options, it also makes your billing process much more complex. Confusing invoices, unexpected charges, and billing errors can quickly damage customer trust and create a support nightmare for your team.
To avoid this, streamline your billing with an automated system that can handle your specific pricing rules. A clear, itemized invoice that shows customers exactly what they’re paying for goes a long way. When your billing is automated, you reduce the risk of human error and ensure a consistent, professional experience for every customer, no matter how complex their plan is.
Revenue recognition for usage-based models isn't as simple as booking the cash when it comes in. Accounting standards like ASC 606 have specific rules for how and when you can recognize revenue, especially when it’s earned over time. Getting this wrong can lead to major headaches during an audit and give you a skewed view of your company’s financial health.
The most effective way to stay compliant is to use an automated revenue recognition solution. These tools are designed to apply the correct accounting rules to complex revenue streams, ensuring your financials are always accurate and audit-ready. This removes the guesswork and manual calculations, giving you confidence in your numbers.
Switching to a usage-based model is more than a simple pricing update—it’s a fundamental change in how your business operates. It requires a solid strategy and the right technology to ensure it runs smoothly for both your team and your customers. Getting it right means you can create a more flexible, customer-friendly service that grows with your users. But a hasty implementation can lead to billing errors, confused customers, and a messy back office.
The key is to approach it methodically. You need to build a foundation that can handle the complexities of variable revenue. This involves setting up precise tracking systems, integrating your billing and financial software, and establishing clear rules for recognizing revenue. It also means rethinking how you communicate with customers and what metrics you use to define success. By breaking the process down into these core steps, you can build a usage-fee model that is scalable, profitable, and sustainable for the long haul.
Before you can bill for usage, you have to measure it accurately. This is the absolute foundation of your model. Your first step is to define the specific "unit of value" you'll be tracking—whether it's data storage, API calls, hours used, or another metric that aligns with how customers use your product. Recognizing revenue for usage-based pricing requires you to track and account for the amount of a product or service a customer uses. Your tracking system must be reliable and auditable, as this data will directly impact your invoices and financial statements. Any inaccuracies here will cause problems down the line, so invest the time to get this right from the start.
Once you're tracking usage, that data needs to flow seamlessly into your billing system. A manual process of exporting and importing data is prone to errors and won't scale as your business grows. Your billing platform must be able to handle variable, metered invoicing, which is a big step up from standard fixed subscriptions. This requires robust integrations between your product, your tracking system, and your accounting software. The goal is to create an automated workflow where usage data is converted into an accurate invoice without manual intervention, ensuring a smooth experience for your customers and your finance team.
This is where usage-based models get tricky from an accounting perspective. With subscriptions, revenue is typically recognized evenly over the contract term. But in usage-based models, revenue recognition should mirror how the customer actually receives value, which means recognizing revenue only when usage occurs. This variability makes ASC 606 compliance more complex, especially for high-volume businesses. You need a clear, documented process for how you will recognize this revenue each month. Automating this process is crucial to close your books quickly and accurately, which is why many businesses turn to specialized solutions to manage it.
Transparency is everything in a usage-based model. Customers should never be surprised by their bill. To succeed, you need to balance operational efficiency with customer satisfaction. This means planning your communication strategy from day one. Provide customers with a dashboard where they can monitor their own usage in real time. Set up automated alerts to notify them when they are approaching a tier limit or if their usage spikes unexpectedly. Clear, proactive communication builds trust and helps customers feel in control of their spending, which ultimately reduces churn.
Success with a usage fee model is measured by more than just monthly recurring revenue (MRR). You need to track a different set of metrics to understand the health of your business. Net Revenue Retention (NRR) becomes critical, as it shows if your existing customers are spending more over time. Other important metrics include customer lifetime value (CLV), average revenue per user (ARPU), and churn rate. Investing in platforms that can help you track software utilization will give you the insights needed to spot trends, refine your pricing, and make strategic decisions to drive sustainable growth.
A usage fee model transforms your customer relationship into an ongoing partnership. Instead of a one-and-done transaction, you’re on a journey together. Your success is tied to their success, which means nurturing that relationship is key. When customers feel supported and see the value they’re getting, they’re more likely to stick with you and grow their usage over time. This requires a proactive approach centered on transparency, education, and excellent support. It's about more than just billing; it's about building a sustainable foundation where both you and your customers can thrive.
Think of it this way: with a traditional fixed-price model, the relationship can feel transactional. The sale is the finish line. With a usage-based model, the sale is just the starting point. Your focus shifts from closing a deal to ensuring the customer continuously gets value from your product. This ongoing engagement creates more touchpoints and opportunities to understand your customers' needs, solve their problems, and guide them toward better outcomes. Managing this relationship effectively means being a guide, not just a vendor. You're helping them optimize their usage, celebrate their wins, and find new ways to leverage your service. By focusing on these core elements, you can turn a potentially complex pricing model into a powerful tool for building lasting loyalty and predictable, scalable revenue.
Nothing erodes trust faster than a surprise bill. With a usage-based model, transparency in pricing is non-negotiable. Customers need to clearly understand how their usage translates into cost. This model works because it aligns what a customer pays with the value they receive, but that connection has to be crystal clear from the start. Make your pricing information easy to find and even easier to understand. Use simple language, provide clear examples, and avoid jargon. When customers feel confident they know what they’re paying for, you build a strong foundation of trust that encourages long-term partnership.
Empowerment is a powerful retention tool. Give your customers the ability to track their own usage in real time. When they can see how their actions impact their bill, they feel in control of their spending rather than at the mercy of it. A customer dashboard with clear visualizations and usage alerts can prevent bill shock and help them make informed decisions. Investing in platforms that help customers manage their spending can also alert them to unusual patterns before they become a problem, turning a potential complaint into a moment of proactive support and building deeper trust.
Your customers may not immediately grasp all the benefits of a usage-based model, especially if they’re used to fixed subscriptions. It’s your job to connect the dots for them. Create helpful resources that show them how to get the most value from your service. This could include tutorials, case studies, or best-practice guides found in places like the HubiFi blog. By providing clear information, you help them understand how to use your product more effectively, which ultimately leads to them seeing a greater return on their investment and becoming more successful, loyal advocates for your brand.
When a customer’s bill can change from month to month, questions are inevitable. A responsive and knowledgeable support system is essential to guide them. Your support team should be well-versed in your pricing structure and able to explain billing details clearly and patiently. Transitioning to a recurring revenue model often involves changes across a company, and a robust support system is crucial for guiding customers through that shift. Make it easy for customers to get help, whether it’s through chat, email, or a phone call. Quick, helpful answers turn moments of confusion into opportunities to reinforce your value.
The usage fee model is designed for the long haul. Its ability to provide consistent revenue is directly linked to its power to foster customer loyalty. Instead of focusing on a single sale, your goal is to build a relationship that grows over time. Check in with your customers regularly, ask for their feedback, and be genuinely invested in their success. When customers see you as a partner in their growth, they’re not just buying a service—they’re investing in a relationship. This focus on long-term partnership is what enhances customer retention and creates sustainable growth for your business.
Launching a usage fee model is just the beginning. The real magic happens when you start optimizing it. Think of your model not as a static rulebook but as a living strategy that evolves with your business and your customers. Fine-tuning your approach helps you stay competitive, keep customers happy, and maintain a healthy revenue stream. It’s about making small, consistent adjustments based on data and feedback. By regularly revisiting your strategy, you can ensure your pricing aligns with the value you provide and that your internal processes can handle the complexities that come with growth. Let's walk through the key areas to focus on for continuous improvement.
Your pricing isn't set in stone. The most successful companies regularly review and adjust their pricing to reflect the value customers receive. A usage-based model is powerful because it directly links cost to value, but you need to make sure your pricing tiers or rates still make sense as your product and market evolve. Start by gathering customer feedback and analyzing usage data to see which features are most valued. This information can help you adjust your tiers, introduce new pricing metrics, or even create bundled offerings. The goal is to find the sweet spot where customers feel they’re getting a great deal and your business remains profitable and sustainable.
One of the biggest operational hurdles of a usage-based model is revenue recognition. Because revenue is tied to consumption, you have to accurately track customer usage and recognize that income in the correct accounting period to stay compliant. This process can get complicated fast, especially as you scale. Automating this workflow is key. An effective system for automated revenue recognition ensures you can close your books quickly and accurately every month. It removes the risk of human error from manual spreadsheet tracking and gives you a clear, audit-ready financial picture at all times.
Your usage-based model relies on data flowing smoothly between different systems. Your billing platform needs to talk to your product usage tracker, which needs to connect to your CRM and your accounting software. Without seamless integrations, you’ll end up with data silos and a lot of manual work. Map out your entire tech stack and identify any gaps. Investing in platforms that connect easily with the tools you already use will save you countless hours and prevent costly mistakes. This creates a single source of truth for your customer and financial data, making everything from billing to analysis much simpler.
You can't optimize what you don't measure. While usage-based models can sometimes make revenue forecasting tricky due to their inherent volatility, tracking the right metrics will give you the clarity you need. Go beyond top-line revenue and monitor metrics like Average Revenue Per User (ARPU), customer churn rate, and Customer Lifetime Value (CLV). Analyzing these numbers helps you understand customer behavior, identify your most profitable segments, and spot potential issues before they grow. These insights are your guide to making smarter decisions about your pricing, product, and customer success strategies.
The market is always changing, and so are your customers' needs. That’s why continuous improvement should be part of your company’s DNA. Some of the fastest-growing SaaS companies update their pricing as often as once a quarter. You don’t have to move that fast, but you should create a regular cycle for reviewing your model’s performance. Set aside time to analyze your data, talk to your customers, and see what your competitors are doing. This proactive approach ensures your usage fee model remains a powerful engine for growth instead of becoming a roadblock. If you're ever unsure about the next steps, you can always schedule a demo to discuss your specific challenges.
Choosing a revenue model is one of the most foundational decisions you'll make for your business. While usage-based pricing offers incredible flexibility and scalability, it’s not the only option out there. Understanding how it stacks up against more traditional models like subscriptions and fixed pricing can help you decide if it’s the right fit for your company, your product, and your customers.
It’s also worth noting that you don’t have to be a purist. Many successful companies are finding a sweet spot by blending elements from different models. The key is to find a structure that aligns your pricing with the value you deliver, creating a win-win for both you and your customers. Let's break down the most common comparisons to see where usage fees fit in.
The main difference here comes down to predictability versus flexibility. A subscription model charges customers a flat, recurring fee—like monthly or yearly—for access to a service. This is great for businesses that need predictable monthly recurring revenue (MRR) and for customers who have consistent usage patterns. Think Netflix or Spotify.
In contrast, a usage-based model charges customers based on their actual consumption. If their usage varies month to month, so will their bill. This approach is ideal for services where customer needs fluctuate, as it ensures they only pay for the value they receive. This flexibility can be a major selling point, but it does make revenue forecasting a bit more complex.
Fixed pricing is the simplest model of all: you charge a single, one-time price for a product or service. This is common for standalone software licenses or project-based work. The price is set, it doesn’t change, and the transaction is straightforward. There’s no ongoing relationship or billing to manage.
A usage fee model, however, is built around an ongoing relationship where the customer pays based on their consumption over time. This can feel more equitable to customers, as the cost is directly tied to how much they use the service. For businesses, it creates a continuous revenue stream and encourages deeper customer engagement beyond a one-off purchase.
You don't have to choose just one. Many SaaS companies are now adopting a hybrid model that combines the stability of subscriptions with the scalability of usage fees. This often looks like a base subscription fee that includes a certain amount of usage, with overage charges for anything beyond that allowance.
This approach gives you the best of both worlds: a predictable revenue floor from the subscription component and unlimited growth potential from the usage component. While this model offers great flexibility, it can make revenue recognition more complicated. You have to accurately track usage and correctly account for two different revenue streams, which is where having a robust financial system becomes critical.
The right choice depends entirely on your business and your customers. Start by analyzing how your customers use your product. If their needs are consistent and predictable, a simple subscription might be perfect. If their usage varies wildly, a pay-as-you-go model could be a better fit and a stronger selling point.
Also, consider your own business goals. Do you need highly predictable revenue to satisfy investors, or are you focused on maximizing growth and aligning price with value? Answering these questions will point you in the right direction. If you’re still unsure, modeling out different scenarios with your own data can bring a lot of clarity. Getting expert advice can also help you see how each model impacts your financial operations and long-term strategy.
The usage-based model isn't just a passing trend; it's quickly becoming a fundamental way of doing business. As more companies adopt this approach, the technology and strategies supporting it are also evolving. Staying aware of these changes is key to building a model that not only works today but is also ready for what’s ahead. From widespread adoption across industries to the growing role of AI, the future of usage-based revenue is all about becoming more dynamic, customer-centric, and data-driven. Let's look at the key trends shaping this landscape.
Usage-based pricing is officially mainstream. What was once a strategy for nimble startups is now a core part of the business model for established enterprise companies. In fact, the State of Usage-Based Pricing 2025 Report found that 77% of the largest software companies now incorporate consumption-based pricing. This shift shows that businesses of all sizes recognize the need for pricing that directly reflects the value a customer receives. As more companies make the switch, customers will increasingly expect this kind of flexibility, making it a competitive advantage for those who adopt it and a potential risk for those who don't.
While usage-based models offer incredible flexibility, they also introduce new layers of complexity, especially when it comes to finance. The technology that powers these models is evolving to meet these challenges head-on. The core principle is that revenue recognition should mirror how and when the customer gets value. This means recognizing revenue only as usage occurs, which can be a major shift for accounting teams. As one guide to revenue recognition explains, this alignment is critical for compliance and accurate reporting. Automated platforms are becoming essential for tracking usage data, managing billing, and ensuring your financials are always audit-ready.
The future of usage-based revenue is closely tied to advancements in artificial intelligence. AI is creating new ways to refine and manage these complex models. For instance, AI-powered spend management platforms can help your customers track their software use and avoid unexpected costs, building trust and transparency. For your business, AI can analyze usage patterns to predict future revenue, identify customers at risk of churning, and even suggest personalized pricing tiers. This move toward smarter, more predictive technology will help you make better strategic decisions and create a more seamless experience for your customers.
The SaaS industry, in particular, continues to lead the charge in innovating with usage-based models. The growth is happening fast—78% of companies with a usage-based model adopted it within the last five years. This rapid adoption highlights how quickly the market is moving. One platform that processes payments for these companies saw an 8x year-over-year increase in the revenue it handled, underscoring the massive shift toward this model. This isn't just about changing a pricing page; it's about fundamentally rethinking how software and services are sold. As top industries refine their approaches, they set new standards for customer value and operational efficiency that others will follow.
Is a usage fee model only for tech companies? Not at all. While it’s very popular in the software world, the model’s roots are in traditional industries. Think about your electricity bill or how shipping costs are calculated—that’s usage-based pricing in action. The core idea of paying for what you consume is versatile and can be adapted for any business where you can clearly measure the value a customer uses, from logistics and utilities to telecommunications and digital services.
How do I keep my revenue from being too unpredictable? This is a common concern, but you can manage the variability with good data. Instead of guessing, you can build reliable forecasts by analyzing your customers' historical usage patterns. A system with real-time analytics is your best friend here, as it helps you spot trends and understand consumption habits. This data-driven approach allows you to anticipate revenue with much greater accuracy and plan your resources with confidence.
What's the first step I should take if I want to implement this model? Before you do anything else, you must have a reliable way to track customer usage. This is the absolute foundation of the entire model. You need to define exactly what unit of value you're measuring—be it API calls, data stored, or hours used—and have the technical infrastructure to monitor it accurately and automatically. If your tracking isn't solid, your billing and financial reporting will have serious problems down the line.
Can I combine a usage fee model with my current subscription plan? Yes, and this is actually a very popular strategy. A hybrid model gives you the best of both worlds: the predictable income of a base subscription fee and the growth potential of usage-based charges. This often looks like a plan that includes a certain allowance of usage, with customers paying for any overages. It’s a great way to offer flexibility while maintaining a stable revenue floor.
How does this model change my relationship with customers? It shifts the dynamic from a simple transaction to a long-term partnership. With a fixed subscription, the main goal is often just the initial sale. In a usage-based model, your success is directly tied to your customers' success and ongoing use of your product. This encourages you to stay engaged, provide excellent support, and continuously demonstrate value, which builds much deeper loyalty over time.
Former Root, EVP of Finance/Data at multiple FinTech startups
Jason Kyle Berwanger: An accomplished two-time entrepreneur, polyglot in finance, data & tech with 15 years of expertise. Builder, practitioner, leader—pioneering multiple ERP implementations and data solutions. Catalyst behind a 6% gross margin improvement with a sub-90-day IPO at Root insurance, powered by his vision & platform. Having held virtually every role from accountant to finance systems to finance exec, he brings a rare and noteworthy perspective in rethinking the finance tooling landscape.
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