Pay-per-use

Pay-per-use, also known as usage-based pricing, is a business model where customers are charged based on the actual amount of a service or product they consume. This contrasts with subscription models, which involve a fixed fee, regardless of consumption. The 'pay-per-use' model offers flexibility and can be advantageous for services with fluctuating demand. It's often found in utilities, cloud computing, and certain software services. Charges are calculated based on various metrics, such as the number of transactions, amount of data used, or the duration of service.

Pay-per-use meaning with examples

• A cloud computing provider offers storage, charging customers based on the gigabytes of data stored per month. A business only needs to pay for what it uses. Another example is a metered taxi service, where fares are calculated based on the distance traveled. Similarly, a software service charges customers per API request, scaling the bill relative to activity. A car-sharing service could also have pay-per-use pricing, charging by the hour or mile.
• Imagine an online document editor that charges a small fee for each document created, regardless of the features used or the editing time. In a digital music store, pay-per-use could entail paying per song downloaded, rather than a monthly subscription. Additionally, consider a printer that charges customers by the number of pages printed. This model would be beneficial for businesses with irregular printing needs. Finally, a toll road's fee is directly proportional to its usage.
• A consulting firm employing a pay-per-use model might charge clients only for the hours of expert advice consumed. Also, a language translation service could bill users based on the number of words translated. Similarly, an online gaming platform could offer access to additional game features on a pay-per-use basis. Lastly, a shipping service could calculate costs by weight and distance, which is a core example of pay-per-use.
• In the case of video streaming, pay-per-use might apply to accessing specific movies or shows, as an alternative to a subscription. Another case might include a data analytics service that bills based on the volume of data processed. For a phone app, a customer might pay for a specific in-app purchase, rather than a subscription for all features. Finally, think of a utility like water or electricity: You only pay for what you consume and use.