What is Usage-Based Billing?
Usage-Based Billing is a type of pricing model where customers are charged based on their actual usage of a product or service. Instead of paying a fixed fee, the cost adjusts depending on the resources consumed, such as data, storage, or API calls.
This model is common in SaaS companies, cloud services, and utilities.
How It Differs from Subscription and Recurring Billing
In Subscription based billing customers pay a fixed, recurring fee over a set period.
In Recurring based billing businesses regularly charge customers at intervals but may include variable costs.
In Usage-based billing businesses charge depending solely on the amount used.
Why It’s Important
It encourages scalability by aligning costs with customer usage, Attracts startups and businesses seeking flexibility and provides clear cost-value alignment, fostering customer satisfaction and retention.
