A guide to consumption-based pricing models – definition and examples

Published on March 30, 2023

Embrace a pricing strategy that improves customer adoption, aligns value with willingness to pay, and helps with customer retention.

What is consumption-based pricing?

Put simply: a consumption, pay-as-you-go, or usage-based pricing model is one where customers are charged based on their actual usage of a product or service.

Usage is generally tracked by different metrics. Take, for instance, compute capacity by the hour or second as is the case with Amazon Web Service (AWS) EC2. Or the number of emails sent, as it is with Mailchimp. It’s a commonly utilized model in as a Service (XaaS) companies that can offer subscriptions for varying usage needs.

While this model works well for power users, it offers better value to sporadic users, since they only pay for actual usage. A good consumer analogy would be the Nespresso Subscription where buyers can…

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