As more new users become active, there’s a stronger foundation for future customer growth. They invest in a frictionless customer onboarding experience and high quality support so that new users get hooked on the platform. Top-performing companies open up the top of the funnel by making it free to sign up for their products. Some of those will pay off spectacularly-and the company will directly share in that success. Like a VC firm, usage-based companies are making a portfolio of bets.

Many of these free users won’t become profitable, and that’s okay. Products like Snowflake and Google Cloud Platform take this a step further and even offer $300+ in free usage credits for new developers to test drive their products. From the customer’s perspective, this means that there’s no risk to try-before-they-buy. In a usage-based model a company doesn’t get paid until after the customer has adopted the product. Public SaaS companies that have adopted usage-based pricing grow faster because they’re better at landing new customers, growing with them, and keeping them as customers. This pricing change allowed HubSpot to share in the success of its customers.ĭownload The Usage-Based Pricing Playbookīy the time HubSpot went public in 2014, net revenue retention had jumped to nearly 100%-all without hurting the company’s ability to acquire new customers. As customers used the software to generate more leads, they would proportionally increase their spend with HubSpot. So in 2011, they introduced usage-based pricing. Net revenue retention was near 70%, a far cry from the 100%+ that most SaaS companies aim to achieve. The company struggled with poor churn and anemic expansion revenue. But HubSpot wasn’t always on the IPO trajectory.įor their first five years in business, HubSpot offered three subscription packages ranging in price from $3,000 to $18,000 per year.

Today we know of HubSpot-the maker of marketing, sales, and service software products-as a preeminent public company with a market cap above $17B.

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