01-08-2025
The Proven Playbook For Shifting To Usage-Based Pricing
Software pricing has evolved, and fast. We started with perpetual licenses, moved to SaaS subscriptions, and now we're in the era of usage-based pricing (UBP).
UBP (and its cousin, outcome-based pricing) isn't just another trend. It's a better model for modern software—especially AI-native and infrastructure-heavy products. It aligns cost with value, supports customer-centric growth, and helps businesses scale with stronger margins.
But switching isn't simple. You're not just changing how you bill. You're rearchitecting your monetization engine. That's why most companies get stuck, stall out, or take years to make the leap.
At Metronome, we've helped many companies navigate this shift. Here's the four-part playbook we've seen work again and again.
Pricing transitions fail more from misalignment than miscalculation. UBP touches every part of the business: finance, product, sales, customer success. Without executive sponsorship and clear ownership, it's easy for momentum to stall.
At companies that succeed, we've seen someone step in as what I like to think of as the Chief Alignment Officer. This is often a senior operator or strategy lead who reports directly to the CEO. Their job: keep the company pointed in the same direction.
New Relic is a great example. In 2020, the company shifted from host-based pricing to a usage-based model centered on data ingestion. They rewrote sales comp plans to reward usage growth. Product leaders became accountable for revenue. CEO Lew Cirne called it 'the most important moment in New Relic's history.' Leadership alignment made the shift possible.
Most pricing elements, like packaging, billing units, or migration strategy, can be reversed. But your value metric is a one-way, non-reversible door.
It's the foundation of your entire model. It defines what customers are actually paying for. If you get it wrong, everything else will feel off. Misaligned value metrics can confuse buyers, discourage usage, or block product momentum.
The good news is that you don't have to get every metric perfect on day one. Usage metrics (what customers do) and billable metrics (what you charge for) are mutable. You can experiment with credits, bundles, or hybrid models. But they should all ladder up to a value metric that makes sense.
Example: If you're selling a support chatbot, charging by total messages sent misses the point. What the customer really values is total issues resolved. That's your value metric.
Treat your pricing change like a product launch. Pilot it, iterate, and scale with intention.
Autodesk offers a great playbook. They introduced a token-based Flex model alongside subscriptions, tested it with large accounts, and built forecasting tools to help customers understand their spend. It wasn't a rip-and-replace. It was a carefully managed rollout that drove adoption and minimized churn.
How to phase your rollout:
The biggest risk in pricing changes is poor communication. Customers fear surprise costs. If they don't understand the change or hear about it too late, you risk breaking trust.
Unity's 2023 rollout is a cautionary tale. They introduced a runtime fee without clear communication, and developers blasted them across social media. The backlash was immediate—and lasting.
Slack's 2022 pricing update, on the other hand, was a masterclass. Six weeks' notice. A clear option to lock in old pricing. Feature upgrades to accompany the change. The result was a smooth rollout and stronger customer goodwill.
A few communication best practices:
UBP isn't just a billing update. It's a business model shift. Done right, it aligns incentives, improves retention, and scales with your product. But it takes real leadership to get it right. You need a clear point of ownership, a strong foundation in your value metric, a phased rollout strategy, and crisp, honest communication.
If you're going through this shift, or even just thinking about it, don't treat it like a finance project. Treat it like a product transformation. Because that's what it is.
