What is Pricing Model?
Definition
The strategy a subscription service uses to structure its pricing, including flat-rate, tiered, usage-based, or hybrid approaches.
Understanding Pricing Model
Choosing the right pricing model is crucial for subscription success. Common models include: flat-rate (one price for all features), tiered (multiple plans at different price points), per-seat (price per user), usage-based (pay for what you use), and hybrid (base fee plus usage). Each has trade-offs — flat-rate is simple but doesn't capture different willingness to pay, tiered allows segmentation but requires careful design, and usage-based aligns cost with value but makes budgeting difficult.
For consumers, understanding the pricing model helps predict future costs and choose the most cost-effective option.
Related Terms
Tiered Pricing
A pricing strategy where a service offers multiple plan levels with different feature sets and price points to serve different customer segments.
Usage-Based Pricing
A pricing model where customers pay based on how much they use a service rather than a fixed subscription fee.
Seat-Based Pricing
A pricing model where subscription cost is determined by the number of individual users (seats) who access the service.
Subscription
A recurring payment arrangement where a customer pays at regular intervals to access a product or service.