Unpacking G2’s Newest Category: Usage-Based Billing

As a business, have you ever felt that the monthly, quarterly, or annual fees you're paying for your software subscriptions are too high relative to your actual usage? If so, you may have already overpaid—and until now, there’s been no efficient way to track and bill based on actual usage.

SaaS businesses are increasingly realizing the gap between what they pay for subscriptions and how much they actually use. As a result, many businesses are shifting toward more dynamic and scalable pricing models.

One such model gaining traction is usage-based pricing, or pay-as-you-go pricing, which charges customers based on their actual usage of a product or service rather than a fixed subscription or license fee. G2 is pleased to announce a new category to serve this growing market: Usage-Based Billing Software.

This model has become popular among SaaS companies, cloud providers, and other subscription-based services. A report published by Openview Partners in 2023 predicts that 61% of SaaS companies will adopt some form of usage-based pricing and another 21% in the years to come.

However, while this approach is gaining momentum, businesses face unique challenges in implementing it. That's why we decided to create a dedicated category on G2 to provide a space for companies to discover, evaluate, and select tools that can help them adopt this innovative pricing model with confidence.

The dilemma with the traditional pricing models

Traditional pricing models, such as flat-rate subscriptions and one-time fees, are the oldest methods of how companies bill their customers against the service they have bought. However, the most significant downside to these pricing models is their lack of flexibility and alignment with customers' actual usage. This disconnect between price and usage has always resulted in dissatisfaction.

While the flat-rate subscription model is the most suitable for heavy users, it’s inefficient for customers who use a service infrequently or occasionally. They need that software or service but also do not want to overpay concerning their usage.

In contrast, a one-time fee may seem straightforward, but it fails to capture ongoing value, where usage can vary significantly over time. This pricing model often makes customers feel locked into long-term contracts or subscriptions that no longer match their needs. It also makes customers pay a one-time larger up-front investment, leaving behind a lot of questions and hesitation.

Usage-based pricing models address all of the above concerns and allow customers to be billed based on their consumption, meaning customers pay only for the services they’ve used. This model also presents many scalability opportunities to businesses. 

As customer usage grows, the need for the service also grows, driving up costs. For example, a cloud storage service may charge a customer based on the number of gigabytes stored—if the customer increases their storage, the cost increases proportionally.

Let’s examine some of the key features of usage-based billing software and see how these features can benefit customers in setting up their SaaS tech stack.

Key features of usage-based billing software

Below are the key features that make usage-based billing software effective:

• Real-time data monitoring: Usage-based billing software can monitor and track customer usage in real time, which is essential for accurate billing. Businesses bill their customers based on the most current data, preventing discrepancies between actual usage and billed amounts.
• Automated billing and invoicing: The software ensures accurate and timely billing and reduces the risk of human error. It automates the entire billing cycle to generate accurate invoices based on fluctuating usage patterns.
• Flexible pricing models: The software supports various pricing models for each business need. This flexibility allows businesses to tailor pricing based on different factors, such as volume, tiered pricing, or metered usage.
• Usage analytics and reporting: It provides comprehensive analytics and reporting features to help understand usage patterns and provide insights into how customers consume their services. This data helps businesses further optimize their pricing models to achieve the best results.

• Integration: Usage-based billing software smoothly integrates with existing business systems such as CRM, payment gateways, and accounting software to automate customer onboarding, invoice management, financial reporting, payment, and renewals.

The state of usage-based billing software on G2

G2's Usage-Based Billing category, which launched just two months ago, is still in its early stages but has already grown to include 26 products. This rapid expansion is fueled by increasing demand, as G2 frequently receives requests to add new usage-based billing solutions.

The category has also garnered 606 reviews globally, with 78% of reviews coming from The Americas, 14% from the Asia-Pacific region, and 8% from EMEA. 

This geographic distribution suggests that the majority of usage-based billing product users are based in The Americas, further supporting the trend that subscription-based SaaS companies are predominantly concentrated in the U.S.

Trends show that many existing billing software providers are integrating usage-based pricing models into their platforms, and many companies are investing significantly in developing standalone usage-based billing solutions. These new platforms also incorporate advanced features powered by AI and automation, further accelerating the evolution of such software.

Pay for what you actually use

Reducing subscription costs is crucial for maintaining a healthy bottom line, and usage-based billing software plays a key role in this by ensuring businesses only pay for what they actually use. 

This approach helps organizations optimize their spending, making it easier to align costs with actual usage and avoid overpaying for any unused software and services.

Learn more about G2's Merchant of Record category and find the right tools for your business.

Edited by Jigmee Bhutia