Our product expert Verity Brain explains what usage-based pricing is, why it can support your subscription pricing and what pricing models you can use to grow your revenue.
Usage-based pricing (or billing) is a pricing model that links price to how a product or service is actually used rather than charging a fixed fee for access alone. Customers pay accordingly to how much they use a product or service and therefore also have control over the price. When designed well, this creates fairness, transparency, and closer alignment between customer success and revenue.
Many SaaS and digital businesses use usage-based pricing alongside subscriptions, driven by customer demand for flexibility and pricing that reflects real outcomes.
This article explains what usage-based billing really is, when it works best, and how different pricing models can be applied across industries using Frisbii.
What is usage-based pricing? #
At its core, usage-based pricing (also “usage-based billing” or “consumption-based billing“) means charging a customer based on measurable consumption rather than on a static price or subscription plan alone. Usage-based billing may also be called consumption-based pricing, metered billing, or pay-as-you-go pricing, depending on the industry.
That usage might be:
- transactions processed,
- units consumed,
- users activated,
- invoices generated,
- API calls made,
- or content accessed.
The metric itself matters less than whether it reflects meaningful customer value.
Usage-based pricing is most effective when the chosen metric correlates with outcomes rather than simple activity. Customers are far more willing to pay for signals of success than for metrics that feel arbitrary.
In most cases, usage-based pricing does not replace subscription plans and pricing for most businesses but rather complements them.
When to implement usage-based pricing #
Usage-based billing is particularly effective for products where value scales with activity.
This includes API-driven platforms, services where costs increase with usage, or products where customers experience value in bursts rather than at a steady rate. In these cases, flat subscriptions can either cap revenue or create additional costs for you when usage increases.
That does not mean that every product should move to pure consumption-based pricing. The goal is alignment between price and value, not rigid adherence to one model.
The six usage-based pricing models* in Frisbii #
Frisbii supports six core usage-based pricing models that can be used individually or combined. We help customers navigate these approaches to design pricing that reflects real value.
*These definitions are based on the Frisbii usage-based billing pricing models – other sources might define them differently
Flat pricing
What is flat pricing?
Price is based on the number of units, with a fixed price per unit within each quantity range. Once a different range is reached, a new price applies.
How can you use flat pricing?
Charging per SMS, per invoice, per API call, per user, per document.
What are the advantages of flat pricing?
Keeps pricing simple and directly linked to measurable usage.
Example
- 1–100 invoices = €0.20 each
- 101–500 invoices = €0.15 each
350 invoices = 350 × €0.15 = €52.50
Graduated pricing
What is graduated pricing?
Pricing applies progressively. As quantity increases through ranges, each block of units is charged at the rate for that range.
How can you use graduated pricing?
Email sends, SaaS licences, storage usage, notifications.
What are the advantages of graduated pricing?
Rewards growth while still charging fairly for earlier usage.
Example
- First 5 licences = free
- 6–10 licences = €5 each
- 11–20 licences = €4 each
17 licences = (5×0) + (5×5) + (7×4) = €53
Volume pricing
What is volume pricing?
Customers are charged a fixed price for the tier their usage falls into, regardless of where within that range their usage lies.
How can you use volume pricing?
API plans, support tiers, feature access bands, platform plans.
What are the advantages of volume pricing?
Creates predictable bills and clear plan-style pricing.
Example
- 0–5,000 API calls = free
- 5,001–8,000 = €20
- 8,001–10,000 = €30
9,000 calls = €30
Graduated volume pricing
What is graduated volume pricing?
Usage progresses through tiers, with each tier charged separately as customers move through them.
How can you use graduated volume pricing?
High-volume APIs, messaging platforms, data processing, infrastructure usage.
What are the advantages of volume pricing?
Avoids price jumps and allows smooth scaling as usage increases.
Example
- 0–5,000 calls = free
- 5,001–8,000 = €20
- 8,001–10,000 = €30
9,000 calls = €20 + €30 = €50
Percentage pricing
What is percentage pricing?
Charge a percentage of processed value based on the applicable value range.
How can you use percentage pricing?
Payments, marketplaces, ticketing, booking platforms.
What are the advantages of percentage pricing?
Pricing grows naturally with the value customers process.
Example
2.5% of value processed
€40,000 processed = €1,000
Graduated percentage pricing
What is graduated percentage pricing?
Different percentages apply to each portion of processed value across defined bands.
How can you use graduated percentage pricing?
Payment providers, marketplaces, commission-based platforms.
What are the advantages of graduated percentage pricing?
Balances margins while offering better effective rates to larger customers.
Example (from Frisbii logic)
- First €50,000 = 2.30%
- Next €100,000 = 1.85%
- Over €150,000 = 0.95%
€175,000 processed = €3,237.50
How usage-based billing applies across industries #
Usage-based billing takes different forms across industries, but the principle remains the same.
SaaS platforms often price based on active users/user seats, workflows executed, data records processed, or automations run, typically anchored by a platform fee.
E-commerce and retail businesses may tie usage to volume, by providing lower per-unit prices for higher volumes to increase the overall purchase volume.
Media and entertainment companies frequently price based on number of media streamed/downloaded and most prominently for parallel user accounts and screens used.
Payments platforms and marketplaces naturally align with per-transaction and percentage-based pricing, especially when combined with predictable base fees.
Across sectors, usage-based billing can also strengthen retention. Customers can scale usage down rather than churn entirely, supporting more resilient long-term relationships and stronger net revenue retention.
Why hybrid pricing models are the practical starting point #
In practice, very few businesses move to pure usage-based pricing overnight.
Hybrid usage-based billing combines a fixed base fee with one or more usage-based components. The base fee provides predictable recurring revenue, while usage layers allow revenue to grow in line with customer adoption and value.
- For customers, this lowers the barrier to entry and reduces perceived risk.
- For businesses, it preserves forecasting confidence while introducing flexibility.
This balance is why hybrid models have become the most common way to adopt usage-based billing.
Visibility builds confidence and trust #
For usage-based billing to succeed, customers need visibility into their usage.
Clear dashboards, summaries, and alerts help customers understand how they are using a product and what that means for their expenses/spending. When customers feel in control, they are more confident to adopt usage-based billing rather than holding back.
Usage insights also enable more proactive customer success. Teams can identify underutilisation or rapid growth early and engage customers with relevant guidance at the right time. Additionally, they can be used to counter churn risks by showing customers how often they actually use the product or service.
Usage-based pricing as a foundation for modern growth #
Usage-based billing is more than a pricing change. It is an operating model.
When product, sales, finance, and customer success work from shared usage signals, organisations become more adaptive and more customer-centric. Pricing becomes something you continuously learn from rather than revisit infrequently.
Implementing usage-based pricing with Frisbii #
Frisbii enables businesses to implement usage-based pricing without rebuilding their infrastructure.
- Usage can be tracked via API integrations or through the platform interface.
- Pricing models can be tested, adjusted, and refined without disrupting existing customers.
- Allowances, credits, and pilots make it possible to experiment safely while collecting real usage data.
This turns pricing into a feedback loop.
- Product teams learn how features are used.
- Finance gains clearer forecasting inputs.
- Sales and customer success align around real customer value rather than static plans.
Ready to explore usage-based pricing? #
Usage-based billing works best when it grows with your customers while supporting predictable revenue.
Frisbii helps merchants design hybrid and usage-based pricing models that are flexible, transparent, and built for European markets.
Explore how Frisbii supports usage-based billing by signing up today (already a customer? You can find usage-based billing options in your dashboard) or watch our webinar to see the six pricing models in action.
