The RevOps gallery of pre-made, professionally created sales agreement templates is your go-to source for agreement templates. The gallery enables anyone to find a template that fits their pricing model and get started customizing it right away, for free. In this series of articles, we’ll be doing a deep dive into each individual template – who they are for, what benefits they provide, and how best to leverage them.
First up is Usage-Based Pricing.
Usage-Based pricing is a powerful way for software businesses to maximize revenue while providing greater flexibility to their customers.
Why Should You Consider Usage-Based Pricing?
In the modern enterprise SaaS world, products that are priced and packaged with a usage-based model enable companies to establish a competitive advantage with their pricing.
Usage-based pricing empowers customers to feel that they can grow with the product, it becomes the perfect way to execute a “land and expand” strategy for growth.
However, creating a sales agreement for this model can be tricky as there can be greater complexity in agreeing on pricing around overages.
RevOps enables businesses to easily create proposals for usage-based pricing with built-in overage rates, allowing for a seamless transition to usage-based billing and invoicing.
The Usage-Based Pricing proposal template from RevOps’s gallery will enable you to easily implement a usage-based model with metered overage pricing built-in.
Let’s take a deeper dive into Usage-Based Pricing and what you get with this template.
Usage-Based Pricing Template
Let’s consider a widely known example of Usage-Based Pricing, the calling card.
In this use-case, you pay upfront for a set limit of minutes the cost of which is deducted from your card as you use them. When your card has been depleted, you add more minutes.
This model is a simple, “pay-as-you-go” structure for usage pricing. The cost of a set allotment of usage is paid upfront and, in this case, there is an option for a “top-up” when the allotment has been depleted.
Pay-as-you-go usage pricing is a great tool for Product-Led Growth but is not conducive to an upmarket enterprise sales motion.
RevOps’s usage-based sales agreement template lets you go well beyond this, though.
Sales teams need the flexibility to create customized sales agreements while having the guardrails needed to make sure that incorrect quotes do not get sent out.
With these templated sales agreements, deals are streamlined while enabling parameters to be set that empowers sales reps to be flexible in their pricing and experiment with different pricing and packaging.
To access this template, head over to the RevOps Template Gallery and choose “Usage-Based Pricing” from the menu.
As you can see, the template has two main parts:
- Pre-Paid Usage
- Metered Usage
Let’s look a bit deeper into these SKUs:
Pre-Paid Usage SKU
This template includes two costs, the first being an upfront payment for a set limit of usage. In this case, that limit defaults to 5,000.
With this SKU, you are able to set a minimum commitment of usage to be paid upfront at an agreed-upon price. This is an ideal structure for companies looking to move away from a pure pay-as-you-go model, which is not conducive to an enterprise customer, and towards a contractual relationship with your customer that captures more value for both parties.
Metered Usage SKU
While getting an upfront payment for an agreed-upon commitment of usage is a good start to a usage-based pricing agreement, there needs to be flexibility built in for customers.
Including a metered usage SKU in your contract is a great way to accomplish this.
In our Usage-Based Pricing template, there is a SKU that shows tiers of prices based on usage over the initially paid for allotment.
In this case, overage costs begin when you hit 1000 sessions above the pre-paid allotment.
This SKU is flexible and can be priced and structured any way you’d like in order to fit your business needs.
Having an agreement that includes two SKUs enables you to create a minimum commitment of usage.
Due to the difficulty in accounting for spikes in usage, a standard metered pricing structure is not ideal when moving upmarket. Instead, moving towards a minimum commitment model, in which a customer prepays for a committed amount of usage and price, should be considered.
As you move upmarket, higher commitments on volume should be sought, enabling the customer to pay upfront at a price that would be more desirable to them than a true-up.
As you can see in the Usage-Based template we have created, as usage overages go up, the price per usage goes down.
This is called a volume discount.
In the Usage-Based pricing template from the RevOps gallery, the contract lays out the costs for going over the prepaid quantity in tiers of usage. As you can see, the cost of usage from 10001 – 50,000 cost $0.05 per session, but the cost per unit decreases as the quantity decreases.
This metered structure helps alleviate some concerns of wild spikes in usage as it lays out exactly what the costs will be. In addition, as the sessions increase, the marginal cost will decrease to eventually becoming a mere $0.05 per session.
Volume discounts are a great way to incentivize customers to use your product more while capturing a great amount of value. It’s a win-win arraignment because the customer is not paying a flat fee per usage that could cause a huge spike in their bill and you are likely to have a happier and higher value customer in the long term.
The flexibility of having these two SKUs as part of your usage-based pricing contract enables your sales reps to customize sales agreements in a way that makes them more desirable to a potential customer. In doing so, you are able to establish a competitive advantage with pricing.
Ready to Try it For Yourself?
Head over to our Template Gallery and choose the Usage-Based Pricing template, or find another one of our professionally created templates that fit your pricing needs!