The UBP hybrid model: the future pricing strategy for SaaS

In brief:

• The UBP hybrid model combines a subscription fee with pay-per-use billing.
• This ensures predictable revenue for the company and fair pricing for the customer.
• Customers pay only for value-creating transactions rather than fixed limits.
• This balance makes the hybrid model the most popular pricing strategy in the SaaS industry.
  

Usage-based pricing (UBP) or the transaction-based pricing model is a billing method where the customer pays based on their usage of a service and its features. Its most popular form—the hybrid model—combines a fixed subscription fee with a variable fee based on usage. It is already used by major companies such as HubSpot and Dropbox.

There are four other types of transaction-based pricing models: pure usage-based, tiered usage-based, credit-based, and outcome-based. Each type has its own advantages, and every company must evaluate which one will provide the greatest benefit to both its customers and the business.

However, the hybrid model is the most common choice for SaaS companies (Wingback, 2024). Let us examine its structure and advantages to understand exactly what makes it so attractive 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 subscription fee, which is fixed and remains constant each month, and a fee for utilized features based on the volume of usage, collectively referred to as transactions.

To better understand what constitutes a transaction and what usage can be tracked, let us look at the different types.

Most common transaction types:

• API request: each request to the server = 1 transaction. For example, data retrieval, validation, etc.
• Financial transaction: card payment, transfer, refund, etc. You will encounter such transactions when using services in the fintech and e-commerce sectors.
• User action that creates value: creating an order, making a reservation, signing a document, sending a message. Only that which produces a business result is a transaction.
• Data processing unit: a processed record, file import, calculation, or AI usage.
• Event-based transaction: counts every specific action or event within the system.

What should not be set as a transaction:

• Clicks;
• Logins;
• “Sessions”;
• Internal system operations.
  

Tip:

To understand what can be considered a transaction, it is important for a company to ask itself 4 questions:

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

A company must be able to explain every transaction and ensure that it is also understood by the client. This will help avoid unpleasant surprises and build better long-term relationships.

Advantages of the UBP hybrid model or transaction model

The hybrid model, or transaction-based pricing model, brings benefits to both the company and its clients. While the foundation of the relationship remains unchanged—offering a good product/service and earning from it—this type of pricing helps build a fairer and more flexible partnership. Let’s look at the key benefits for both sides.

Advantages of a transaction-based pricing model for businesses

• Stability and predictability

A fixed subscription component ensures baseline revenue, even when monthly usage fluctuates. This, in turn, allows for better planning of budgets, investments, and resources. Zuora’s Subscription Economy Index study concluded that companies using this pricing model experience 15% lower revenue volatility and 28% better quarterly revenue predictability.

• Opportunity to monetize high-volume users

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

• Flexibility in launching new products

By tracking product/service usage, it is possible to see exactly what customers use most and when. This allows for a better understanding of customer needs and the ability to offer more relevant services. Furthermore, there is no need to raise prices—it can be highlighted as a separate transaction.

• Reduced churn risk

Customers clearly see where, when, how much, and what they are using. This transparently demonstrates the value added by 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 the ProfitWell study, which concluded that companies using a transaction-based pricing model experienced a 40% lower churn risk.

Benefits of a transaction-based pricing model for customers

• Pay only for what you use

Often, customers only need a specific product or service for one or a few features. The ability to pay a small subscription fee with the remaining amount based on usage is very attractive, as there is no need to pay for unused resources.

• Scalability

Every company starts with a small team and low volume, growing over time as they succeed. Consequently, the need for product/service usage increases gradually. The transaction model allows even the smallest companies to start using the service, as the entry price is accessible to them.

• Honesty and transparency

Clearly defined transactions and their tracking allow the client to see exactly what they are paying for, which increases trust in the long term. No hidden costs or incomprehensible invoices—just clear usage visibility and a fixed subscription. Gartner research shows that B2B clients rank price transparency as the second most important factor when choosing a supplier. Companies that use a transparent, usage-based billing model report 34% higher customer satisfaction, 28% faster sales cycles, and a 41% higher deal closure rate.

• Encourages efficient usage

A transactional pricing model clearly demonstrates how a product or service is being used and highlights any unnecessary actions. This encourages clients to reflect on and optimize their processes, which not only helps reduce costs but also boosts productivity.

The transactional model: the future of pricing strategy

The transactional model is the future of SaaS companies, not just a passing trend. While it is still a novelty in Latvia, many businesses worldwide have been using it for years. Their experience proves that it is one of the most effective solutions available.

The hybrid model is by far the most popular choice. OpenView research revealed that approximately 61% of SaaS companies have already implemented or are currently testing this pricing model. When introduced gradually, with careful consideration of all benefits and potential risks, and supported by regular communication with clients, it can be an excellent choice for continued company growth.

First, it is necessary to determine whether a transactional pricing model can be applied to your specific product or service. Based on Coatue Partners research, this is the most challenging part—identifying measurable transactions that also provide added value to the client.

Frequently Asked Questions (FAQ)

What is a usage-based pricing (UBP) hybrid model, or transactional model?

A UBP hybrid model is a pricing structure where the client pays a fixed subscription fee for access to the product, plus an additional fee for features or resources based on actual usage (transactions).

What are the main types of transactions that can be tracked?

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

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

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

The hybrid model combines the stability of a subscription with the fairness of usage-based pricing. It is the most popular choice for SaaS companies because it allows them to:

• forecast revenue;
• monetize large-scale clients;
• reduce churn risk;
• offer flexible pricing for the introduction of new features.

Is the UBP hybrid model suitable for all products?

No. Not all products and services allow for the extraction of specific, measurable actions—transactions. This is the most critical requirement for this pricing model to function and deliver benefits.