{"id":24450,"date":"2025-07-24T16:53:45","date_gmt":"2025-07-24T20:53:45","guid":{"rendered":"https:\/\/www.insightpartners.com\/?p=24450"},"modified":"2025-10-31T09:37:52","modified_gmt":"2025-10-31T13:37:52","slug":"what-it-takes-to-get-usage-based-pricing-right","status":"publish","type":"post","link":"https:\/\/www.insightpartners.com\/ideas\/what-it-takes-to-get-usage-based-pricing-right\/","title":{"rendered":"What it takes to get usage-based pricing right"},"content":{"rendered":"

Adopting a usage-based pricing model<\/a> isn\u2019t just a tweak to how you charge customers \u2014 it\u2019s often a fundamental shift in how your business creates, delivers, and captures value. As more companies seek scalable pricing strategies that align cost with customer outcomes, usage-based pricing is becoming a compelling option.<\/p>\n

Whether you\u2019re in the early stages of exploration or actively designing a new model, the path to usage-based pricing is as much about operational readiness as it is about pricing strategy<\/a>.<\/p>\n

This piece comes from Onsite Hour<\/a>, a weekly tactical series for portfolio companies, created by Insight\u2019s 130+ in-house experts. Led by Insight\u2019s Ethan Desilva<\/a>, the panel included Trengo\u2018s Helene Ekkers<\/a>, m3ter\u2018s Griffin Parry<\/a>, and Keyfactor\u2019s Ellen Kindley<\/a>.<\/strong><\/p>\n

Below are some of the top insights from that conversation.<\/p>\n

Don\u2019t underestimate the scale of change<\/h2>\n

As Desilva put it: \u201cMany companies underestimate the degree of change necessary.\u201d That\u2019s because usage-based pricing doesn\u2019t just affect how customers are billed. It has implications for forecasting, sales compensation, systems, data infrastructure, and customer relationships.<\/p>\n

At Trengo, a customer engagement platform, the shift started when CSMs hesitated to recommend powerful automation tools, fearing it might reduce seat counts and lower revenue. \u201cThat was a big red flag,\u201d said Ekkers. \u201cWhen you\u2019re delivering more value to your customers, you should be able to monetize that better.\u201d<\/p>\n

Start with the right metric<\/h2>\n

One of the first decisions in a usage-based pricing transformation is choosing the right usage metric. At Trengo, the team had already aligned around a North Star metric: conversations. That clarity made the transition easier. \u201cWe really see a very strong correlation between the volume of our customers that go through our platform and retention,\u201d said Ekkers. From that data, it made sense to monetize the metric.<\/p>\n

Keyfactor, a cybersecurity company, chose certificates issued as its core metric. During a diligence process tied to bringing in new investors, the team discovered that their flagship product had poor net retention \u2014 despite strong customer adoption. The culprit was an unlimited usage model that limited expansion opportunities. \u201cWhat we needed to do was build out a robust telemetry tracking\u2026we actually had to do a big project of development work to start tracking that metric,\u201d said Kindley.<\/p>\n

The team chose certificates \u2014 the digital credentials that secure connected devices \u2014 as their usage metric. As customers grow, they naturally use more certs, making it a clear, value-linked measure. To support the change, Keyfactor built telemetry from scratch and equipped its sales team to act on usage data, offering upsell packs instead of triggering automatic overages. The result: more flexibility for customers, and new pathways for revenue growth.<\/p>\n

Hybrid pricing is often the best starting point<\/h2>\n

All panelists agreed: Few companies should go \u201cpure\u201d usage-based right away.<\/p>\n

“The hybrid model, like I mentioned, is where I\u2019ve seen most companies go to that are trying to shift to usage-based pricing, because it balances a little bit of the old world [and] the new world,\u201d said Desilva.<\/p>\n

Ekkers explained that Trengo adopted a hybrid model \u2014 charging a platform fee, users, and conversations \u2014 because a subset of their customers had setups that required multiple users but relatively low message volume. This approach gave the company room to evolve gradually toward a more usage-heavy model.<\/p>\n

For Kindley\u2019s team at Keyfactor, the hybrid approach provided a way to maintain customer price predictability \u2014 a critical factor in enterprise sales \u2014 while creating upsell opportunities<\/a> through usage \u201cpacks.\u201d<\/p>\n

Align the business \u2014 then build the systems<\/h2>\n

Transitioning to UBP isn\u2019t just a pricing project \u2014 it\u2019s a company-wide initiative. “It’s very cross-functional,\u201d said Kindley. \u201cIt’s going to touch your marketing team, it’s going to touch your product team. It’s going to touch your sales team, your SES.\u201d<\/p>\n

Systems are often the breaking point. Parry, whose company m3ter helps businesses implement billing infrastructure, warned against both extremes: using a fragile \u201cspreadsheet of doom\u201d or over-investing in big middleware platforms. His advice: \u201cWhat they need to do is just focus on what\u2019s missing, and implement it in a way that disrupts existing workflows and processes as little as possible.\u201d<\/p>\n

Both Trengo and Keyfactor eventually moved to more scalable systems, but not without lessons. Like many teams implementing new billing infrastructure, Trengo entered the project with a long list of must-haves. The team had a clear vision for how the system should work and pushed hard for custom configurations. But looking back, Ekkers sees that approach differently: \u201cAnd in hindsight, we would follow the system a bit more and maybe forsake some functionality, but then have a lot more simplicity,\u201d she said.<\/p>\n

Sales enablement is non-negotiable<\/h2>\n

Surprisingly, none of the companies on the panel changed their core sales comp plans. Instead, they leaned into messaging, education, and tools to help sales reps succeed.<\/p>\n

At Keyfactor, a specialized team was created to lead backbook migrations. \u201cThey weren\u2019t hunting whales,\u201d said Kindley. \u201cThey were focused on uplifting usage and ARR over time.\u201d The company also invested heavily in enablement, from kickoff training and talk tracks to objection handling.<\/p>\n

Trengo took a similar path. Ekkers noted that while the sales team was on board, conversations \u2014 Trengo\u2019s usage metric \u2014 were difficult to forecast. \u201cNot all our customers know exactly how many tickets they get in on a monthly basis,\u201d she said. \u201cSo we had a lot of calculators\u2026 and also a lot of communication on how to explain the pricing<\/a>.\u201d<\/p>\n

Set the right expectations with customers<\/h2>\n

One of the biggest objections to usage-based pricing? Fear of unpredictability. Customers don\u2019t want to be surprised by their bills.<\/p>\n

The panelists shared several strategies to manage this:<\/p>\n