Hybrid pricing for SaaS: combining platform fees with usage to stabilise revenue

Hybrid Pricing Models: Combining Subscription and Usage for Growth

For early-stage SaaS companies, pricing is a constant source of tension. Pure subscription models offer predictable revenue, a critical factor for managing cash flow and runway. However, they often leave money on the table when customers derive massive value from high usage. On the other hand, pure usage-based models can capture that value but create volatile, unpredictable billing cycles that make financial forecasting a nightmare. This is the core tension many founders face. Accurately forecasting revenue feels impossible when customer usage swings wildly month to month.

The solution lies in a hybrid approach: one that combines subscription and usage-based pricing into a single, cohesive strategy. This pricing model comparison shows how a platform fee plus usage structure offers the stability of recurring revenue models with the upside of metered billing. This guide breaks down how to combine subscription and usage pricing into a powerful, scalable model.

The Best of Both Worlds: A Foundation for Hybrid SaaS Pricing

A hybrid pricing model, often called 'platform plus usage', is exactly what it sounds like. Customers pay a recurring platform fee for access to the product, which often includes a baseline allowance of usage. Any consumption beyond that allowance is billed based on a specific metric. This structure is one of the most effective SaaS pricing strategies because it creates two distinct but complementary financial components that balance predictability with growth.

First, the platform fee acts as your 'Stability Layer'. This is the predictable, recurring revenue that covers your fixed costs and forms the foundation of your Annual Recurring Revenue (ARR). It gives you and your investors a reliable baseline for financial planning, ensuring you can operate confidently regardless of month-to-month fluctuations in customer consumption. This stability is essential for early-stage businesses managing their runway.

Second, your usage metric is the 'Growth Engine'. This component ensures that as your customers grow and derive more value from your product, your revenue grows with them. It is the primary driver of Net Revenue Retention (NRR), as successful customers naturally increase their spend over time. This model provides the customer billing flexibility to start small and scale, directly aligning your success with theirs.

Part 1: How to Combine Subscription and Usage Pricing With a Stability Layer

The platform fee is your revenue anchor. Its primary purpose is to guarantee a minimum level of revenue from every customer, ensuring predictability. When structuring this base fee, the goal is to provide clear value and an accessible entry point without overwhelming new customers. This is where a well-designed tiered structure becomes essential for your recurring revenue models.

Structuring Your Tiers for Clarity and Growth

What founders find actually works is creating a simple tiered structure that bundles features, support levels, and a baseline usage allowance. A tiered platform fee approach commonly uses two or three public tiers to avoid analysis paralysis for potential buyers. For example, a 'Starter' tier might offer core features for a small team, while a 'Pro' tier adds advanced functionality and priority support for a higher recurring fee. Each tier should be designed around a clear customer persona or use case, making the value proposition obvious.

This structure solves a key problem: it gives customers a predictable monthly or annual cost for core access. They know exactly what they are getting for their base fee, which builds trust and reduces friction during the sales process. The fee is not just an access charge; it is a value package that includes a specific set of capabilities and an initial amount of usage, setting the stage for the growth component.

Part 2: Choosing Your Growth Engine (The Usage Metric)

Selecting the right usage metric is the most critical decision in a hybrid model. The principle is simple: the metric must be a clear proxy for the value a customer receives from your product. If customers understand how the metric relates to their success, they will see the cost as fair and justified. Charging for an obscure or technical metric can create confusion and pushback, a common pitfall in metered billing.

There are two primary types of metrics to consider.

Transactional Metrics

These charge per discrete event or action. This model is straightforward and easy for customers to understand because it directly ties cost to activity. Each transaction represents a clear unit of value delivered.

• Twilio charges per API call or per message sent. For developers using its communication APIs, each call is a distinct, valuable event.
• Stripe charges a percentage per transaction. This perfectly aligns its revenue with its customers' revenue, making it a powerful growth partnership.
• SendGrid charges per email sent. For a marketing platform, each email represents a quantifiable output and a clear unit of consumption.

Capacity-Based Metrics

These charge based on the volume of a resource a customer uses or provisions. This is common in infrastructure and data products where storage, compute, or access is the core value being delivered.

• Snowflake charges based on compute resources used and gigabytes of data stored. As a customer’s data footprint and analysis needs grow, so does their bill.
• HubSpot uses the number of marketing contacts as a primary capacity metric. For a marketing or sales platform, the number of contacts in a customer's database is a direct indicator of the value they can extract from the tool.

Choosing between these depends entirely on your product's value proposition. The best metric feels like a natural extension of how your customers already measure their own success.

Part 3: Setting Rates and Thresholds for Your Hybrid Model

Once you have your stability layer and growth metric, the next step is to connect them with rates and thresholds. This involves deciding what usage allowance is included in each platform fee tier and how to charge for overages. The goal is to encourage growth with customer billing flexibility without punishing your best customers with unpredictable costs.

Most hybrid models include a generous usage allowance in their platform tiers. A 'Pro' plan, for example, might include 1,000 units of usage per month. This gives customers cost predictability for their typical operations. The magic happens when they exceed this allowance. There are two common ways to handle overages:

1. Pay-As-You-Go (PAYG): The simplest model. Every unit used above the allowance is charged at a flat rate. This is easy to implement and understand but can lead to bill shock if a customer's usage spikes unexpectedly.
2. Tiered or Volume-Based: A more sophisticated approach where the per-unit price decreases as usage increases. For example, the first 1,000 overage units might cost $0.10 each, while the next 5,000 cost $0.08 each. This model rewards scale and incentivizes higher consumption.

To avoid overwhelming customers, it is recommended not to offer more than two or three public usage tiers. Consider a marketing automation platform as an example. Its 'Pro' plan is $200 per month and includes 10,000 contacts. Overage pricing could be tiered: contacts 10,001 to 50,000 are billed at $0.01 each, while any contacts above 50,000 are billed at a lower rate of $0.008 each. This structure is clear, predictable, and scales fairly.

Part 4: The 'Good Enough' Tech Stack to Make It Work

Integrating real-time usage tracking with billing can seem daunting, especially for a startup without a dedicated engineering team. The reality for most early-stage startups is more pragmatic: you do not need an enterprise-grade solution from day one. Your billing technology can and should evolve with your company's scale.

The Manual Stack: Your First 50 Customers (Pre-Seed and Seed)

At this stage, manual processes are perfectly acceptable and often preferable. A simple tech stack consisting of your product database, Stripe for payments, and a spreadsheet can work for the first 10 to 50 customers. The workflow is straightforward: at the end of each billing cycle, you query your database for each customer's usage, calculate overages in a spreadsheet like Google Sheets, and then manually create or update an invoice in Stripe. In the US, this data can be reconciled against your books in QuickBooks; in the UK, you would typically use Xero. It is important to note that usage-based fees can create variable consideration under accounting standards like ASC 606 in the US and IFRS 15 internationally, which requires careful revenue recognition.

The Automated Stack: Scaling Past the Bottleneck (Series A)

As your customer base grows, manual invoicing becomes a significant operational bottleneck prone to human error. This is the time to adopt a dedicated billing platform like Stripe Billing or Chargebee. These tools connect to your product via an API to automate usage tracking, proration, and invoicing. This automation dramatically reduces manual work, prevents costly errors, and allows your team to focus on growth instead of administration. You can review Stripe's implementation guide for metered billing to understand the technical requirements.

The Specialized Stack: Billing at Enterprise Scale (Series B+)

For companies with very high transaction volumes or complex pricing models, such as multi-dimensional metered billing, specialized platforms like Metronome or Orb become necessary. These tools are purpose-built to handle billing at massive scale, provide deep financial insights, and manage sophisticated pricing logic that general platforms cannot.

Key Principles for a Successful Hybrid Pricing Strategy

Successfully implementing one of these hybrid SaaS pricing strategies comes down to a few core principles. This approach offers a powerful balance of recurring revenue and usage-based growth, but its success depends on thoughtful design and clear execution.

First, anchor your business with the 'Stability Layer'. Your platform fee should provide a predictable revenue floor that covers your core costs and gives you confidence in your financial forecasts. Structure this with two or three clear tiers that offer distinct value to different customer segments.

Second, choose your 'Growth Engine' carefully. The usage metric you bill on must be directly and obviously aligned with the value your customers receive. When customers see their bill grow, they should see it as a reflection of their own success, not an arbitrary penalty.

Third, don't over-engineer your initial solution. A simple stack using your production database, a spreadsheet, and Stripe is enough to get you to your first 50 customers. You can and should invest in more sophisticated metered billing automation as your revenue and complexity grow.

Finally, communicate with complete transparency. Provide customers with dashboards or notifications that allow them to track their usage against their allowances in real time. This helps prevent bill shock and builds the trust needed for a long-term partnership. By combining stability and growth, this pricing model can become a powerful and sustainable driver for your SaaS business.

Frequently Asked Questions

Q: What is the main difference between hybrid pricing and pure usage-based pricing?
A: A hybrid model includes a recurring platform fee that provides a stable revenue base (ARR), whereas a pure usage-based model has no recurring fee, making revenue entirely dependent on consumption. This can lead to zero-dollar bills for inactive customers and highly volatile financial forecasts, a significant risk for early-stage companies.

Q: What is the biggest mistake companies make when choosing a usage metric?
A: The most common mistake is choosing a metric that is not directly tied to the value the customer receives. Billing for an obscure technical metric, like API calls for a non-technical user, creates confusion and friction. The best metrics, such as "per user" or "per transaction," are simple, predictable, and clearly reflect the customer's success.

Q: How can a SaaS business transition from a pure subscription to a hybrid model?
A: The transition should be gradual. Start by introducing usage-based overages for new customers on a specific tier. For existing customers, you can grandfather them into their current plans or offer incentives to switch to the new model. Clear communication about the benefits, such as greater flexibility and paying only for what they use, is crucial for a smooth transition.