My experience with offering usage based pricing was not positive, mostly because we didn't impose a time limit on the consumption of the prepaid credits, which resulted in a a huge cash flow problem. We've now switched to a more standard tiered subscription model with some optional packages, where each tier also imposes limits on the usage, and this works way better.
(Of course, n=1, so YMMV)
Questions to Ask Before Adopting Usage Based Pricing
21–30 of 39 posts
Re: Questions to Ask Before Adopting Usage Based Pricing
#22Earlier quoted context omitted.
That's the general issue with subscriptions too. I'm fine with paying Adobe a subscription for a program that I use on a regular basis. I'm not fine with paying Adobe a subscription for a program that I might pull out to do something with once or twice a year.
Wouldn't that be an issue with a $500 photoshop license too? You'd only get to use it a handful of times before the software stops being compatible with your OS (probably). Subscription seems better because you can just subscribe multiple times for shorter periods.
The compatibility with my OS is my problem, not Adobe's. At a certain point I'll need to buy another copy, but Creative Suite 2 runs just fine on Windows 10 ("the last version of Windows"), so that date is likely far in the future.
Re: Questions to Ask Before Adopting Usage Based Pricing
#23Another thing to consider: does your usage based pricing reflect your costs. If so, usage based pricing can allow you to offer a significantly cheaper product as A) expensive users no longer need to be subsidized by cheap users and B) users are incentived to use less resources. This approach has some results that directly contradict what the article says: > Question #1: Does value increase with usage? > Pricing shoul…
> Caches are a good thing that can significantly reduce your hosting costs.
Sometimes. Sometimes they are a bad thing because your hosting costs are nil and the customers gets more benefit than expected from the one call without paying for it.
Years ago there was a company that decided to save on costs by buying just one subscription to some trade magazine and share it between the 7 people who needed it. Problem was the magazine was very niche and so the lost of 6 subscribers was 10% of the total subscriber base and the magazine couldn't afford to run at all anymore.
If your result can be cached and reused then you need to figure out if that caching fits into your plan.
Re: Questions to Ask Before Adopting Usage Based Pricing
#24Earlier quoted context omitted.
Wouldn't that be an issue with a $500 photoshop license too? You'd only get to use it a handful of times before the software stops being compatible with your OS (probably). Subscription seems better because you can just subscribe multiple times for shorter periods.
I don’t want the mental overhead of this. Not to mention the dark patterns for cancellation that are prominent outside the iOS subscription ecosystem.
Yeah that's definitely an issue. I'm not sure how Adobe's subscription system works, I doubt it's too bad though.
Re: Questions to Ask Before Adopting Usage Based Pricing
#25Earlier quoted context omitted.
I don’t want the mental overhead of this. Not to mention the dark patterns for cancellation that are prominent outside the iOS subscription ecosystem.
Yeah that's definitely an issue. I'm not sure how Adobe's subscription system works, I doubt it's too bad though.
I got a trial subscription to Adobe Acrobat to do some PDF optimization I needed done. After I did the task just went to manage subscriptions and canceled it. Was very straightforward.
Re: Questions to Ask Before Adopting Usage Based Pricing
#26AWS has what they call a cost-following strategy, where their pricing actually exposes the architecture of the system to the point where you can understand how it's implemented and the data structures used if you look at the pricing. I've heard it being described as an alternative the kind of speculation and navel gazing that precedes all other kinds of pricing and is ultimately useless anyway. However you choose to…
>I've always been skeptical about how consumer pricing is done
Consumers seem to mostly favor memberships/subscriptions. Even utilities like electricity and water and pretty much predictable in practice. Pair per view/pay per listen/pay per read seem a lot less popular in general for media. The counterexample may be books, but then most people don't read a lot of books per month/year.
Which makes sense. A lot of people want to budget fairly tightly and subscriptions are better for that.
Re: Questions to Ask Before Adopting Usage Based Pricing
#27Another thing to consider: does your usage based pricing reflect your costs. If so, usage based pricing can allow you to offer a significantly cheaper product as A) expensive users no longer need to be subsidized by cheap users and B) users are incentived to use less resources. This approach has some results that directly contradict what the article says: > Question #1: Does value increase with usage? > Pricing shoul…
A common scenario I see is "host based pricing". We went from 100+ 2xlarge instances to 10 24xlarge instances for our ECS cluster. This was pretty transparent to our application and team, but it meant that anything with host based pricing was much much much cheaper. We produced the same data, we got the same value, we probably cost our providers the same, but we saved a ton of money.
This is where I’m really annoyed by vendors pricing models. An example would be cpu/core based licensing meaning that you need to lump systems on the same vm, even if architecturally it would make more sense to split them.
Then we have something like Kafka per topic pricing as a proxy for per use pricing which is even more annoying because now we get all kinds of shenanigans to reuse topics to avoid paying for having thousands of them and generated on the fly.
Re: Questions to Ask Before Adopting Usage Based Pricing
#28Is Slack's active user pricing actually usage based pricing?
I think this is a reasonable question. Usage based pricing seems like a trending topic lately and I hear Slack called out as a good example. Monthly seat licenses were a practice that existed long before more obvious "usage based pricing" models became prominent.
I'd love to hear more thoughts on the topic.
Re: Questions to Ask Before Adopting Usage Based Pricing
#29No mention of competition. This is an obvious one: Will we be more expensive than the competition if we change our pricing? And another: Will we create an opportunity for a competitor to jump in?
Re: Questions to Ask Before Adopting Usage Based Pricing
#30Earlier quoted context omitted.
A common scenario I see is "host based pricing". We went from 100+ 2xlarge instances to 10 24xlarge instances for our ECS cluster. This was pretty transparent to our application and team, but it meant that anything with host based pricing was much much much cheaper. We produced the same data, we got the same value, we probably cost our providers the same, but we saved a ton of money.
This is where I’m really annoyed by vendors pricing models. An example would be cpu/core based licensing meaning that you need to lump systems on the same vm, even if architecturally it would make more sense to split them. Then we have something like Kafka per topic pricing as a proxy for per use pricing which is even more annoying because now we get all kinds of shenanigans to reuse topics to avoid paying for having…
I'm curious -- what kinds of businesses do cpu/core based licensing, in your experience?