Pricing Strategy Insights & Research | GTM Pricing Innovations

Usage-Based Pricing is a hot topic. It fits well with Product-Led Growth (PLG) and is a critical step on the way to Outcome-Based Pricing. Ibbaka and OpenView Venture Partners have been documenting what you need to do before, during and after you introduce Usage-Based Pricing.

Usage-Based Pricing and Value-Based Pricing are (or should be) two sides of the same coin. One should be able to draw a direct connection between the value metric and usage metric and then these should inform the choice of a pricing metric.

Usage metrics should capture more than just usage data. It is the usage that correlates with value that matters. The best way to do this is to design your usage-based pricing metric around the completion of value paths.

Value path: A sequence of actions taken by a user that culminates with something of value to the user.

To win with Usage-Based Pricing, it requires careful planning, precise execution and then a commitment to managing value as part of pricing.

Planning

Make sure you have all of your ducks in a row.

Systems (especially billing)

Messaging (consider all channels)

Business function alignment (marketing, sales, customer success — product and finance)

Product (usage-based pricing often has implications for the product and packaging, especially for what metrics are tracked and reported by the product and who can see that data)

Introduction

Communicate early and clearly.

Communicate the value-based logic of the new pricing

Be ready to deflect misrepresentations by customers

Have a detailed plan for how to migrate current customers

Prepare sales, account reps, customer success and customer support with messages and objection handling

Execution

Pricing is not once and done, especially usage-based pricing.

Track usage; learn to predict usage

Document value delivered

Adjust pricing as necessary

To reflect value delivered