UBP Hybrid Model: Future Pricing Strategy for SaaS

In Brief:

• The UBP hybrid model combines subscription fees with pay-per-use charges.
• It ensures predictable revenue for the company and fair pricing for the customer.
• Customers pay only for value-creating transactions, not fixed limits.
• Due to this balance, the hybrid model is the most popular pricing strategy in the SaaS industry.

Usage-based pricing (UBP), or transaction-based pricing model, is a billing method where the customer pays based on how much they use the service and its features. Its most popular form—the hybrid model—combines a fixed subscription fee with variable charges based on usage. Large companies like Hubspot and Dropbox already use it.

The transaction-based pricing model has four other types: Pure Usage-Based, Tiered Usage-Based, Credit-Based, and Outcome-Based models. Each has its own advantages, and every company must evaluate which will provide the greatest benefit to both clients and the business.

However, the hybrid model is the most common choice for SaaS companies (Wingback, 2024). Let's examine its structure and advantages to understand what makes it particularly appealing in this industry.

What is the UBP Hybrid Model or Transaction-Based Pricing Model?

The UBP hybrid model, or transaction-based pricing model, has a very simple structure. It consists of a fixed subscription fee that remains unchanged each month and charges for used features based on their usage frequency, collectively referred to as transactions.

To better understand what can constitute a transaction and what usage can be tracked, let's look at its types.

Most Common Types of Transactions:

• API Request (API call): each request to the server = 1 transaction. For example, data retrieval, validation, etc.
• Financial Transaction: card payment, transfer, refund, etc. Such transactions are encountered when using services in fintech or e-commerce sectors.
• User Action That Creates Value: order creation, booking, document signing, message sending. Only actions that generate business results are considered transactions.
• Data Processing Unit: processed record, file import, calculation, AI usage.
• Event-Based Transaction: counts each specific action or event in the system.

What Should Not Be Set as Transactions:

• Click
• Login
• Session
• Internal system operation

Tip:

To understand what can be considered a transaction, a company should ask itself four questions:

• Does the customer understand what is being counted?
• Can the customer influence this count?
• Does it correlate with the value the customer receives?
• Does it incur costs for the company?

The company must be able to explain each transaction and ensure that it is understandable to the customer as well. This helps avoid unpleasant surprises and build better long-term relationships.

Advantages of the UBP Hybrid Model or Transaction-Based Model

The hybrid model or transaction-based pricing model brings benefits to both the company and its customers. While the fundamental relationship remains unchanged—offering a good product/service and earning from it—this pricing method helps create fairer and more flexible collaboration. Let's explore the main benefits for both sides.

Advantages of the Transaction-Based Pricing Model for Companies

• Stability and Predictability

The fixed subscription component ensures baseline revenue, even if usage fluctuates monthly. This, in turn, allows better budgeting, investments, and resource planning. Zuora's Subscription Economy Index study found that companies using this pricing model experience 15% lower revenue fluctuations and 28% better quarterly revenue predictability.

• Opportunity to Monetize Heavy Users

Customers who use more than average automatically pay more. This ensures that revenue isn't lost, as it would be with a subscription-only model. SEG Annual SaaS Report 2025 showed that companies using the hybrid model see an average profit increase of 19%.

• Flexibility in Introducing New Products

By tracking product/service usage, it's possible to see what customers use most and when. This helps better understand customer needs and offer more suitable services. Moreover, prices don't need to be raised—it can be highlighted as a separate transaction.

• Reduced Churn Risk

Customers clearly see where, when, how much, and what they use. This transparently demonstrates the added value of the product/service and creates a sense of fairness in paying for actual usage. As a result, fewer customers leave in the long term. This is also proven by ProfitWell research, which concluded that companies using the transaction-based pricing model experienced a 40% lower churn risk.

Advantages of the Transaction-Based Pricing Model for Customers

• Pay Only for What You Use

Often, customers need a specific product/service for just one or a few features. The ability to pay a small subscription fee and have the rest of the cost determined by usage is very appealing, as they don't pay for unused resources.

• Scalability Flexibility

Every company starts with a small team and volume, growing over time if successful. Consequently, the need for product/service usage grows gradually. The transaction model allows even the smallest companies to start using it, as the initial price is accessible to them.

• Fairness and Transparency

Clearly defined transactions and their tracking allow customers to see what they are paying for, increasing trust in the long term. No hidden costs or incomprehensible invoices—usage is clearly visible, and the subscription fee is fixed. Gartner research shows that B2B customers rank pricing transparency as the second most important factor in choosing a supplier. Companies using transparent usage-based billing models report 34% higher customer satisfaction rates, 28% faster sales cycle closures, and 41% higher deal closure rates.

• Encourages Efficient Usage

The transaction-based pricing model clearly shows how the product/service is used and how many unnecessary actions are performed. This encourages customers to reflect and optimize processes. It not only helps reduce costs but also promotes productivity.

Transaction Model: The Future Pricing Strategy

The transaction model is the future of SaaS companies, not just a trend. While it is still new in Latvia, many businesses worldwide have been using it for years. Their experience proves that it is one of the best solutions.

The hybrid model is convincingly the most popular choice. OpenView research revealed that approximately 61% of SaaS companies have already implemented or are testing this pricing model. If done gradually, carefully weighing all benefits and potential risks, and regularly communicating with customers, it can be an excellent choice for continued growth.

Initially, it's important to understand whether the transaction-based pricing model can be applied to a specific product/service. Based on Coatue Partners survey, this is the hardest part—identifying measurable transactions that also bring added value to the customer.

Frequently Asked Questions (FAQ)

What is the usage-based pricing (UBP) hybrid model or transaction-based model?

The UBP hybrid model is a pricing model where the customer pays a fixed subscription fee for access to the product and an additional fee for used features or resources based on actual usage (transactions).

What are the main transactions that can be tracked?

• API requests – each request to the server
• Financial transactions – payments, transfers, refunds
• User actions that create value – orders, bookings, document signatures
• Data processing units – record processing, AI model usage
• Event-based transactions – specific events in the system

What should not be tracked: clicks, logins, sessions, internal system operations.

Why is the hybrid model more popular than other UBP types?

The hybrid model combines subscription stability with usage-based fairness. It is the most popular among SaaS companies because it allows:

• predicting revenue
• monetizing large clients
• reducing churn risk
• offering flexible pricing for new feature introductions

Does the UBP hybrid model suit all products?

No. Not all products and services allow for extracting specific, measurable actions—transactions. This is the most crucial factor for this pricing model to work and bring benefits.