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

by Tien Tzuo

In the software sector, for example, a company that grows less than 20 percent annually has a 92 percent chance of failure (McKinsey).

For B2C companies, net user growth is the key metric.

According to McKinsey, only 28 percent of internet services companies reach $100 million in revenue.

The best pricing strategy will let you put a number on the metric that customers value most, based on how they actually use your service. This is commonly called a “value metric.” Simply put, a value metric should do three things: align to customer needs, grow with customers, and be predictable (both for the customers and the organization).

across the board, companies employing usage-based billing had higher upsell rates (12 to 13 percent), in comparison with companies that did not employ usage-based billing (which had an average upsell rate of only 4 percent).

The churn rate for companies employing usage-based billing is about 10 percent less on an annual basis: 26 percent for usage-based billers in comparison with 37 percent for non-usage-based billing companies.