Usage-based pricing charges customers based on what they consume — API calls, data volume, active seats, or compute hours — rather than a flat monthly fee. Also called consumption-based or metered pricing. It lowers the entry barrier because customers start small and pay more as they get more value.
UBP aligns vendor and customer incentives cleanly: as customers succeed, revenue grows. Companies like Stripe, Twilio, and Snowflake use UBP as a core growth engine because customers naturally expand as their business scales. The trade-off is revenue volatility — usage can spike or drop significantly month to month.