Subscribed: Why the Subscription Model Will Be Your Company’s Future—and What to Do About It

by Tien Tzuo

Of course, this requires you to pick the right unit that ties consumption to value. There are a variety of factors to consider here. Some of them might include the need to keep it simple for the user, the ability to translate increased usage into revenue, or the importance of setting a usage “floor” and shaping that usage curve as consumption increases. Next you’ll need to consider the unit price, which can be as simple as price per unit, or it could be expressed in usage tiers. Finally, you’ll need to look for holes in your model, which usually happen at extremes—someone’s using your service too much or too little in relation to your price point. This is where a minimum or base fee can help you set a floor, and a subsequent tiered model can help you reduce the per unit fees at volume. As you can see, you have lots of levers to play with! It’s a big formula that you’re constantly tweaking—pricing is never finished.