Article · 10 min read

Usage-based pricing is a company-wide effort

Kyle Poyar · TechCrunch Free Advanced

The net retention numbers by pricing model (122 percent top quartile for usage-based versus 109 percent without) plus the warning that switching is an org change, not a pricing page change.

  • Top-quartile net retention was 122 percent with largely usage-based pricing, versus 110 percent for usage tiers and 109 percent for none.
  • About 85 percent of Twilio's net expansion comes from more usage, only 15 percent from new products.
  • Usage-based companies spend more on R&D than on sales: median ratio 1.5x, against 0.8x for companies without usage pricing.
  • Usage pricing shows up most where gross margins are thin (median 72 percent, bottom quartile 51 percent or lower).
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It answers 3 questions

  1. How do I spot which accounts are actually ready to expand?
  2. How did Snowflake reach 158 percent net revenue retention, and what is actually copyable?
  3. Does usage-based pricing really lift expansion, and should we switch?

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