What Pricing Leaders Are Getting Wrong About Usage-Based Pricing

Imagine if your gym charged you per treadmill minute.

At first, it sounds great—more “fair,” more aligned with how much you actually use. But over time, the experience changes. Every workout feels like it comes with a meter running. You start skipping sessions. You wonder if that 20-minute incline walk was worth $8.99.

That’s the trouble with usage-based pricing. It’s flexible, yes. But left unstructured, it can introduce anxiety, uncertainty, and value ambiguity.

And right now, a lot of pricing leaders are getting it wrong.

Usage-based pricing isn’t the problem—it’s how it’s applied

Usage-based pricing (UBP) has become the default monetization model for many modern SaaS and API-first businesses. And there’s good reason: it can align price with customer success, scale with adoption, and reduce barriers to entry.

But assuming usage-based pricing is a cure-all misses the nuance. And framing it as “what customers want” oversimplifies what customers actually respond to.

Most customers aren’t asking for usage-based billing. What they want is:

• Fairness
• Predictability
• A sense of control

UBP can support those things—but only when it’s designed with intention.

What’s going wrong

1. It’s treated as one-size-fits-all
Just because your product is technically measurable doesn’t mean you should meter it. Customers using your tool for mission-critical workflows don’t want to feel like they’re watching the odometer spin.

2. The value story is lost in the usage
If users can’t easily connect what they’re paying to the outcome they’re getting, you’ve just introduced friction. “We charge per event” is only helpful if the event clearly maps to a win.

3. Poor framing makes everything feel like a penalty
We’ve seen teams roll out UBP with no context: no thresholds, no buffers, no narratives around what good usage looks like. The result? Every monthly bill becomes a mini churn conversation.

The behavioral economics behind the backlash

In behavioral economics, we talk about loss aversion—the idea that people feel the pain of losses more acutely than the pleasure of gains.

UBP, when done poorly, activates this. Customers aren’t just paying. They’re watching the meter, feeling the drag, and mentally accounting for every increment.

Research shows that people dislike “pain of paying” models that are both frequent and unpredictable. They prefer pre-commitment: clear ceilings, opt-ins, and pricing they can plan around.

According to Dholakia (2022), unpredictable price changes can create “fluctuation anxiety”—where users become preoccupied with cost variation instead of value received. He notes that stable pricing supports long-term perceived fairness, especially in complex or B2B environments.

And from a structural perspective, customers often gravitate toward tiered pricing because of the “compromise effect.” When given structured choices, people prefer the middle option—something missing in purely usage-based models. Tiers create anchors. They reduce risk. And they let customers self-select.

We covered this kind of misperception in Psychological Pricing Mistakes. The same product, framed differently, can change how it’s experienced entirely.

What to do instead

1. Build pricing hybrids
You don’t have to choose between fixed and variable. Many of the best-performing pricing models combine them. Think: base tier + usage band, or pre-committed credits + top-up rates.

2. Frame usage with boundaries
Don’t just say “$0.004 per API call.” Say: “Most customers spend $89–149/month based on typical volume.” Anchoring. Value framing. Both will resonate and help your customers understand your pricing.

3. Offer pre-commitment options
Let customers prepay, choose soft ceilings, or receive prompts before hitting new thresholds. These reduce cognitive friction and build trust.

4. Normalize high-usage behavior
If someone’s bill increases because they’re getting more value, tell that story. Support should say: “That’s a sign you’re scaling,” not “Sorry, but…”

We go deep into these dynamics in a recent post. The short version: how you frame usage matters as much as how you bill it.

Final thought

Usage-based pricing isn’t broken. But the way it’s being deployed often is.

The goal isn’t to charge for activity. It’s to charge for outcomes. And to do that, you need to price for how customers feel about the experience—not just how they use the product.

Download the Behavioral Pricing Playbook, a guide to building pricing systems that align with product value, customer psychology, and real growth.

References

Dholakia, U. (2022). Priced to Influence, Sell & Satisfy: Lessons from Behavioral Economics for Pricing Success.