Scale based on product usage
If your core value metric is based on how much of your service your customers use each month, you should be charging based on utilization. Metrics like the number of mailing list subscribers, database records, or network bandwidth are all great options for scaling your pricing.
Email service provider ConvertKit, for example, scales its pricing based on the number of email subscribers:
ConvertKit scales pricing based on product usage.
As customers expand, there are two different options for scaling prices even further. You can choose either tiered usage pricing, so once you fill up a tier, all units from the next tier cost less, or you can choose volume pricing, so once you hit a particular number, all units cost less.
Pricing based on utilization can be highly profitable, but it hasn’t caught on as a popular pricing strategy for most SaaS companies. The usage model works best for companies where more use equals more value, like email service providers or hosting companies, but it isn’t super common in SaaS. Because usage-based pricing disconnects the value of your service from the product itself, though, it’s harder to see how valuable your product really is to customers. For that, we turn to scaling based on willingness to pay.