[gizmo686]

Another thing to consider: does your usage based pricing reflect your costs.

If so, usage based pricing can allow you to offer a significantly cheaper product as A) expensive users no longer need to be subsidized by cheap users and B) users are incentived to use less resources.

This approach has some results that directly contradict what the article says:

> Question #1: Does value increase with usage? > Pricing should always align with business value.

No, cost to provide is relevant as well. If there is not sufficient margin between the business value and the cost to provide, then maybe the sale shouldn't happen. That is not to say you should never make such sales, as they might enable other more profitable sales (either directly, or by virtue of having a more popular pricing model).

> Question #2: If the customer throttles usage, is the value reduced?

If a customer can throttle usage without decreasing value, and the service has a non-negligible cost, you have a great candidate for usage based pricing. The customer looses nothing while your costs go down. You can even pass the saving onto the customer in the form of lower prices for those customers that choose to throttle.

> A customer could temporarily cache the result of an API call in memory

Caches are a good thing that can significantly reduce your hosting costs.

[phamilton]

A common scenario I see is "host based pricing". We went from 100+ 2xlarge instances to 10 24xlarge instances for our ECS cluster. This was pretty transparent to our application and team, but it meant that anything with host based pricing was much much much cheaper.

We produced the same data, we got the same value, we probably cost our providers the same, but we saved a ton of money.

[spockz]

This is where I’m really annoyed by vendors pricing models. An example would be cpu/core based licensing meaning that you need to lump systems on the same vm, even if architecturally it would make more sense to split them.

Then we have something like Kafka per topic pricing as a proxy for per use pricing which is even more annoying because now we get all kinds of shenanigans to reuse topics to avoid paying for having thousands of them and generated on the fly.

[ezekg]

I'm curious -- what kinds of businesses do cpu/core based licensing, in your experience?

[darrylb42]

Oracle DB and SQL Server are both licensed per cpu core. At least last time I priced them out.

[vanattab]

Also flight simulation image generation software ID often licensed per #cpu

[jonfw]

Openshift is one

[bluGill]

> Caches are a good thing that can significantly reduce your hosting costs.

Sometimes. Sometimes they are a bad thing because your hosting costs are nil and the customers gets more benefit than expected from the one call without paying for it.

Years ago there was a company that decided to save on costs by buying just one subscription to some trade magazine and share it between the 7 people who needed it. Problem was the magazine was very niche and so the lost of 6 subscribers was 10% of the total subscriber base and the magazine couldn't afford to run at all anymore.

If your result can be cached and reused then you need to figure out if that caching fits into your plan.

[k__]

"If there is not sufficient margin between the business value and the cost to provide, then maybe the sale shouldn't happen."

I had the impression, when people talk about value based pricing, they assume that the value is higher than the cost.

The idea being, the customer pays more without you ending up with higher costs.