Should I charge per use or have fixed price options?

Pricing is hard. If you’re a developer like me you probably think writing 10 000 lines of code is much easier than determining how you should price your product.

Today I’m going to talk about two different pricing strategies and why you probably should pick fixed price instead of charging per use (also called metered pricing).

Reason 1: It makes it easier for the customer

If pricing is hard for you it is equally hard for the customer. Deciding what plan to pick should be as easy as possible. If you can you should limit your plans to 3. One is even better.

By having metered pricing, i.e. when the customer is paying per use they have to do the math themselves. Most people don’t like to do maths, especially not when they’re trying to sign up for a service.

Reason 2: Budgeting and predictability

A customer wants to know how much a service costs. They often have a budget to stick to, and most people with a budget prefer to pay a slightly higher price to know exactly how much things are going to cost.

Take your phone bill for example. More and more people that use their phone a lot prefer to pay a fixed monthly price with all-you-can-eat text messaging and calls included.

“Okay, my phone bill will be $49 each month. I can afford that.”

Make it easy for your customer to plan their expenses.

Reason 3: Avoid hit-and-run customers

Having one-off customers that sign up for your app, uses it for a couple of days and then leaves never to return again makes it hard to run a business. Since they’re only paying for usage they are not bound to your service in any way.

Hit-and-run customers are not loyal per definition. You want to have loyal customers. Is that a good enough reason?

So what should I do?

Without knowing anything about your app I suggest you stick with 1-3 fixed price plans. You’ll have to make sure you have a margin on each of these plans, and you can limit usage in each plan.

In each plan you can limit things like ‘storage space’ or ‘number of users’, but paying for Number of logins in a month, or having $0.02 per megabyte is not a good idea. People will get nervous when they can not control the costs.

Leave a comment if you want som additional help with pricing.