What’s all the Fuss about Outcome-Based Pricing?
And how it relates to usage and value-based pricing
Lately in pricing circles you hear a lot of buzz about outcome-based pricing. All the cool kids (oxymoron?) are talking about it. Don’t feel too bad if you haven’t heard because according to new research by Kyle Poyer’s Growth Unhinged, only 5% of companies use it today; though it’s expected to become more common in the SaaS industry over the next few years.
Btw, Growth Unhinged is highly recommended by me because it has the best pricing intel about SaaS companies.
What’s New is Old
Outcome-based pricing really isn’t a new concept. In essence, it is a version of value-based pricing which has been around for 40+ years. My definition of value-based pricing is a pricing strategy designed on quantified customer value. Customer value meaning:
Whatever the customer thinks it is
A combination of logic (80%) and emotion (20%) for b2b products
Primarily an economic argument that is accepted by the customer in terms of potential incremental margin gain from cost savings, revenue growth, or asset efficiency
What is new here is that technology has evolved to make it easier to measure and link product use to product outcome. Outcome-based pricing is essentially the marriage of usage with outcome. So for example, pricing an AI-agent by the number of successful customer issues resolved. In this case, quantifying value is straight-forward - just estimate the cost savings versus the current human-centric process.
Attribution has long been the Achilles heel of value-based pricing. Precisely measuring a solution’s business outcome costs too much time and money. Therefore, a strong business case (see point 3 in my customer value definition above) is the foundation of a value-based approach. Having a stronger causal link of usage to outcomes knocks down this traditional obstacle.
AI is driving hyper-automation of complex tasks and therefore future adoption of outcome-based pricing. But what I find really interesting - and a bit counter-intuitive - is that outcome-based pricing is actually being driven by an old fashioned pricing approach, namely cost-based pricing!
What’s Old is New Again
AI has had a profound impact on SaaS economics. Because implementing AI technology has higher variable costs than traditional SaaS, this has pushed companies to reconsider a more cost-based approach, i.e., usage-based pricing.
PLG (Product Led Growth) companies helped revive usage-based pricing a few years ago. It works for PLG companies because of the strong alignment of usage, value, and price metrics, which is the holy trifecta of pricing. A key principle of PLG is to demonstrate value quickly at the freemium stage without the intervention of a human salesperson. Conversion to a paid plan becomes frictionless because the user already has a clear idea of what value they can expect as they use the app more.
Usage based pricing also eliminates the non-active user issue that has long bedeviled per user based pricing plans. It allows companies to provide unlimited access to the app without worrying about waste. User adoption therefore has room to grow organically inside the client’s ecosystem, provided the app continues to serve end user needs - the very essence of the PLG philosophy.
However as of 2025, adoption of pure usage-based pricing is declining, according to the recent Growth Unhinged study cited above. Instead, more and more companies are moving toward a hybrid pricing approach that combines fixed, credit, and usage pricing components. Hybrid pricing strikes the right balance of predictability (for customers) and profitability (for providers)
Usage Doesn’t Always Lead to Good Business Outcomes
Obviously, not all usage is so easily linked to business outcomes. It is fair to say that the initial outcome examples like AI-resolved customer issues are of the “low-hanging fruit” variety. Attribution of value outcomes remains a challenge, though a doable one for more complex solutions that require a SLG (Sales Led Growth) motion.
I have no doubt that AI will continue to push the boundaries of what can be automated and measured. How far and how soon are open questions. It is true that pure outcome-based pricing does enable companies to capture a higher portion of value. My point of view is that for the majority of companies that can be best accomplished today by adopting a value-based pricing and sales approach.