Usage-Based Pricing Simulator
Model metered billing strategies. Compare linear vs. tiered volume discounts to optimize revenue while encouraging heavy usage.
Pricing Logic
Tiers
Usage Cost Curve
Scaling Economics
Volume Discount: 50%
The Crossover
At 1000 units, the pricing curve bends. This is where your volume discount kicks in, making you more attractive to power users.
Customer Savings
A user consuming 2000 units saves $50.00 compared to a flat linear rate.
Revenue Floor
Your Base Fee ensures you earn at least $0 even from low-usage accounts.
Execution Steps
Define your usage unit (e.g., Credits, GBs, API Calls).
Set a 'Base Fee' (monthly platform fee).
Configure Tier 1 (standard rate) and Tier 2 (volume discount rate).
The chart visualizes the Total Bill for customers and their Effective Rate per unit as they scale.
Pro Strategy
- Always charge a small Base Fee to cover support/infrastructure costs for low-usage customers (dormant accounts).
- Ensure the discount in Tier 2 is significant enough (20%+) to incentivize bulk usage, but not so deep that it destroys margin.
- Consider 'Prepaid Commitments' where users buy a block of usage upfront for a larger discount (Cash flow positive).
Core Concepts
Metered Billing
Charging based on actual consumption (e.g., AWS, Twilio, Snowflake). Best for products where value metrics align perfectly with costs.
Graduated Pricing
Pricing that decreases as volume increases (e.g., first 100 units at $1, next 100 at $0.80). This encourages customers to scale without fear of linear cost explosions.
Effective Rate
The average price per unit paid. In tiered models, the effective rate drops as usage grows, which is a powerful retention mechanic for enterprise users.
What is Usage-Based Pricing Simulator?
This simulator uses a graduated tier logic (progressive pricing). It calculates the cumulative cost across tiers rather than applying a single rate to the whole volume. It contrasts this with a 'Linear' model to show the savings curve for high-volume users.
Best For
- • Designing API pricing.
- • Launching a storage or compute product.
- • Moving from flat-rate to consumption-based models.
Limitations
- • Simulates only 2 tiers.
- • Does not model 'rollover' of unused credits.
- • Assumes continuous scaling.
Alternative Methods
Hybrid Model
Combining a large flat subscription with smaller usage fees.
Tier Optimizer
For feature-gated flat rate pricing.
Industry Applications
See how this methodology generates real revenue uplift in different sectors.
Twilio
Competing with telecom contracts.
Pure usage-based SMS pricing.
Snowflake
Server costs.
Separated Compute vs Storage pricing.