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Advanced Concepts

Usage-Based Pricing

A pricing model where customers pay based on how much they use the product rather than a fixed subscription.

Definition

Usage-based pricing (also called consumption-based or metered billing) charges customers based on actual usage rather than flat subscription fees. Examples include API calls, storage consumed, emails sent, or compute time. This model aligns pricing with value delivered but creates unique email communication needs around usage visibility and billing predictability.

Why It Matters

Usage-based pricing is growing because it lowers barriers to entry and scales with customer success. However, it requires proactive email communication. Customers need visibility into their usage before they get surprise bills. Usage alerts, consumption reports, and billing previews become essential parts of the customer experience.

How It Works

Track customer consumption in real-time. Send regular usage reports so customers understand their consumption patterns. Alert customers when they approach or exceed usage thresholds. Provide billing previews before charges occur. Make it easy to understand and predict costs.

Best Practices

  • 1Send regular usage summaries (weekly or monthly)
  • 2Alert customers at meaningful usage thresholds (50%, 80%, 100%)
  • 3Provide billing previews before charges hit
  • 4Make usage data accessible in-product and via email
  • 5Explain how costs are calculated clearly
  • 6Offer volume discounts or committed use discounts for predictability
  • 7Use usage data for upsell conversations about prepaid packages

Usage-Based Email Triggers

Trigger emails based on usage thresholds. Send consumption reports, billing previews, and alerts when customers approach limits.

Learn More

Frequently Asked Questions

Weekly summaries work well for active users. Monthly reports are a minimum. Real-time or daily alerts make sense when approaching limits. Match frequency to how predictable customer usage patterns are and how important cost visibility is to them.

Current usage level and percentage of any limits. Projected usage for the billing period. Cost implications. Options to manage usage or upgrade to a higher tier. Make it easy to understand impact and take action.

Proactive communication is everything. Send alerts before limits are hit. Provide billing previews. Offer spending caps or alerts. Make real-time usage visible in-product. Surprises create churn. Transparency builds trust.