What is UBP (usage-based pricing)?
Usage-based pricing (UBP) is a billing method where a client pays for the extent to which they use a service and its features, rather than for access to it as a whole. The monthly invoice reflects the actual value the client receives, which is why it is often referred to as a "pay-for-value" model.
We are accustomed to traditional subscription fees, where we receive the same invoice every month, regardless of how much or how extensively the tool has been used. Vendr SaaS reports indicate that approximately one-third of fixed software costs for companies are unnecessary—this occurs because not all features and licenses are fully utilized. The reasons for this vary, such as the company being unaware of these features or the features simply not being necessary for the business.
This is precisely why a usage-based pricing model is a benefit for both the company and the client—it offers fair, transparent pricing where it is clearly visible how costs are generated and how they change based on usage. UBP can be implemented in various ways—let's look at how they differ.
What are the types of usage-based pricing (UBP)?
Usage-based pricing has several types that differ based on how usage is measured and billed. It can be measured, for example, by how many times a specific feature is used or the volume of data required, and fees can also be charged for the use of very specific features. Every business is based on its product and how the client uses it. The most common types of UBP are:
- Pure Usage-Based. The price depends entirely on actual usage—for example, per document, transaction, or API call. Currently, this is used by companies such as AWS, Twilio, Snowflake.
- Hybrid Pricing. Combines a fixed fee (e.g., system access) with a variable component based on usage. This is already used by HubSpot, Dropbox.
- Tiered Usage-Based. The price increases in "steps" depending on the volume of usage. This option is used by Mailchimp, Zoom.
- Credit-Based. The client purchases credits, which are used as needed. A very popular model for AI tools, such as OpenAI API, Databricks, Google Cloud.
- Outcome-Based Model. Pricing is determined by the results achieved rather than the volume of usage. A popular choice in the consulting business.
Benefits of UBP for the company
A usage-based pricing model is more than just a way to bill for your product or service. It is a way to transform your relationship with the end consumer—the client. Let us take a closer look at the benefits of the UBP model from a company perspective.
- Revenue scalability and growth
The more a client uses the product, the more they pay accordingly—there is no need to change fixed plan fees or sign new contracts. Growth happens naturally, without unnecessary bureaucracy. Companies with usage-based pricing models report an average growth of 44%, compared to traditional subscription models, which grow by an average of ~25%. (HiBob, 2025) - Lower barrier to entry and broader market reach
A single product or service can be useful for clients of various sizes. UBP allows them to start using it at a lower cost, with expenses increasing only as the client's business grows. This makes it easier to attract new clients without requiring a large upfront investment. - Greater client trust and long-term cooperation
When pricing is fair and aligned with usage, the risk of the client feeling they are overpaying and subsequently seeking alternatives is reduced. Implementing UBP models can reduce customer churn by 15–20% compared to fixed-plan models. ( SaaS Playbooks, 2024 ) - Usage data for better strategy and product development
The UBP model requires metering and tracking, which provides the company with data on how clients use the product, allowing for feature improvements and the creation of truly useful products.
Tip: When choosing a UBP model, first determine what exactly reflects the usage of your service—units, volume, or features. This will help you evaluate which model is most effective later on.
Benefits of UBP for clients
When a company changes to a pricing model that is unfamiliar or initially seems confusing, the client may feel that costs will inevitably rise and that they will not benefit. This is not the reality in most cases, and in the long run, the client gains more than just a change in the pricing model.
- Fairness and transparency - pay only for what you use
Clients no longer have to pay for "unused potential" - costs accurately reflect actual needs. UBP allows clients to avoid overpaying and better plan their budgets, especially in cases of seasonal or irregular usage. - Flexibility - the ability to scale usage up or down
Users can adjust their volume of activity without additional administrative steps or plan changes. This is particularly valuable for accounting service providers or consultants whose client numbers and workload intensity fluctuate from month to month. - Better ROI perception - a clear link between value and cost
The client sees that their payment increases only when the actual value they derive from the tool increases. McKinsey data shows that companies with consumption-based models achieve higher customer satisfaction (CSAT +15%) on average than those with fixed pricing. - Predictability and control
In practice, UBP allows for better cost control because the client can see usage dynamics and optimize them. Modern systems (with reports, calculators, etc.) provide the ability to immediately review where costs are generated and how to reduce them. The result is more control and fewer surprises, especially when alerts or limit settings are used.
Tip: when choosing a service with a UBP model, pay only for what you actually use - nothing more. This is especially advantageous if usage volume fluctuates seasonally or on demand.
Future prospects of UBP
At a time when information and various service providers are accessible with a single click, it is especially important to build close and trusting relationships with clients. As prices for products and services rise, customer expectations regarding the value received are also increasing. This is precisely why GetMonetizely predicts that UBP will soon become the dominant monetization strategy for SaaS companies. Especially now, as artificial intelligence enters all processes and helps analyze usage data, it will allow for even more precise price adjustments based on actual consumption.
While a usage-based pricing model is not the right answer for every business or client, the SaaS sector is one where it can be the perfect choice. By choosing a UBP pricing model, both parties benefit. Companies see not only the link between price and value but also which features are most relevant and the direction in which to head. Meanwhile, clients have the opportunity to pay only for what they actually use and optimize their processes. As a result, the UBP pricing model will change the relationship between company and client in the future - from a subscription-based one to a "partnership."
Frequently asked questions
What is UBP and how does it differ from a subscription model?
UBP - usage-based pricing - is a pricing model where the client pays for how much they use a service and its features, rather than simply for access to it. Accordingly, the more and more extensively the client uses the service, the higher the costs, and conversely - the less and less frequently, the lower the costs. A subscription model is a fixed monthly fee, regardless of how much or how extensively the service is used.
Why is UBP becoming popular specifically among SaaS companies?
SaaS companies are among the primary beneficiaries of the UBP model. It allows a company to grow alongside its clients—as usage increases, so does revenue. This creates a fairer and more flexible partnership, providing smaller businesses with access to the service. Furthermore, the UBP model provides SaaS companies with valuable data on usage patterns, which helps in better aligning product and pricing strategies with actual needs.
Does the UBP model help reduce costs for clients?
Yes, it can help a client reduce costs. This is particularly true if the client has previously made limited use of the service or only utilized a few of its features. Similarly, if costs increase initially, it may be due to inefficient usage. Therefore, cost increases can be mitigated by optimizing the number of users and eliminating unnecessary activities.
