A hybrid pricing model is a strategy that combines two or more different pricing structures. Most commonly, it blends a recurring subscription fee with a variable, usage-based component. This approach gives businesses the revenue predictability of subscriptions while allowing them to charge customers based on their actual consumption of a service.

Think of it like a cell phone plan from a few years ago. You paid a fixed amount each month for a certain number of minutes and texts (the subscription), and if you went over your allowance, you paid an extra fee for each additional minute or text (the usage-based part). Today, this model is rapidly gaining traction in software, especially for AI services, developer tools, and platforms where customer usage can vary widely.

Implementing a hybrid model involves setting a recurring base price for access to the product, which often includes a generous allowance for core features. On top of that, you charge for consumption beyond that allowance or for specific, resource-intensive features.

Here are the core components:

• Recurring Base Fee: This is a predictable, fixed charge that a customer pays monthly or annually. It provides access to the platform and typically includes a set amount of usage (e.g., 1,000 API calls, 10 GB of storage, 5 team seats). This creates a stable revenue floor.
• Value Metric: This is the unit of consumption you charge for. It must be something the customer understands and sees value in. Examples include API requests, data processed, active users, or compute hours.
• Usage Tiers or Overages: You then bill for consumption based on this value metric. This can be structured as:
  • Pay-as-you-go: A flat rate for every unit consumed above the base allowance.
  • Tiered Pricing: The price per unit decreases as volume increases, encouraging more usage.

For example, a marketing automation platform might charge a $99/month subscription that includes up to 2,000 contacts. If the customer exceeds that, they might pay an additional $10 for every 500 contacts thereafter.

Hybrid models are a natural fit for products where the value a customer gets directly scales with how much they use it.

While powerful, this model introduces complexity that businesses must manage carefully.

• Difficult Revenue Forecasting: The variable nature of usage-based components makes it harder to predict monthly recurring revenue (MRR) compared to a pure subscription model.
• Customer “Bill Shock”: Users can be surprised by unexpectedly high bills if they aren’t monitoring their consumption. This can lead to churn if not handled proactively.
• Complex Billing Infrastructure: You need systems that can accurately meter usage, calculate charges based on potentially complex pricing tiers, and generate clear, itemized invoices.
• Communication Overhead: Your pricing page must be crystal clear. Customers need to easily understand what’s included in their subscription and how much extra usage will cost.

To succeed with a hybrid model, focus on transparency and customer alignment.

• Choose the right value metric: The metric you charge for should be directly tied to the value your customer receives. If your customers succeed by processing more data, then charging for data processing aligns your revenue with their success.
• Provide cost-control tools: Give customers a dashboard to monitor their usage in real-time. Offer the ability to set spending limits or receive automated alerts as they approach their plan’s allowances. This builds trust and prevents bill shock.
• Keep the structure simple: Avoid having too many different metered components. It’s often better to have one or two clear value metrics than a dozen confusing ones. Start simple and add more complexity only if necessary.
• Generous base allowances: The subscription portion should provide enough value on its own. The usage-based component should feel like a fair way to pay for scaled-up success, not a penalty for using the product.

Implementing a hybrid pricing strategy requires a billing system that can handle both fixed and variable charges seamlessly. Kinde is designed to support this model out of the box.

Within Kinde, you can construct plans that combine a recurring subscription fee with metered features. This allows you to set a stable base price for your plans while also billing customers for their specific consumption of features like API calls, data storage, or user seats. You can configure per-unit or tiered pricing for the usage-based components, giving you the flexibility to design a hybrid model that fits your product and customers.

For more information on how to configure these models, you can explore Kinde’s documentation on pricing structures.

• Pricing models