Aanchal ParmarAanchal ParmarHow to Migrate From Subscription to Usage-Based Pricing (The Complete Checklist)
How to Migrate From Subscription to Usage-Based Pricing (The Complete Checklist)
How to Migrate From Subscription to Usage-Based Pricing (The Complete Checklist)
How to Migrate From Subscription to Usage-Based Pricing (The Complete Checklist)
Feb 7, 2026
Feb 7, 2026
Feb 7, 2026
12 min
12 min
Aanchal Parmar
Product Marketing Manager, Flexprice
Product Marketing Manager, Flexprice
SaaS pricing was supposed to be the simple part. But the moment your product's value starts scaling differently per customer, one account running 50,000 API calls while another barely touches 200, that simplicity becomes the problem.
78% of API and infrastructure companies already price on consumption. Buyers now prefer usage-based models over traditional subscriptions. And hybrid pricing is outgrowing pure subscription models across every growth metric that matters.
Feel the FOMO yet?
But knowing you need to migrate and actually pulling it off are two very different things. 73% of AI companies test an average of 3.2 pricing approaches in their first 18 months.
Not because usage-based pricing is complicated in theory, but because nobody handed them a concrete playbook for the transition.
The real challenge isn't the model. It's moving live customers off fixed plans, rewiring billing infrastructure, retraining sales teams, and keeping revenue steady while everything underneath changes.
In 2026, for AI companies looking to migrate from subscription to usage-based pricing, tools like Flexprice stand out as open-source, built for real-time metering, credits, entitlements, and pricing experimentation. Not legacy subscription logic with a usage add-on.
This is that playbook. Strategy, infrastructure, org alignment, customer communication, and the technical decisions most guides skip.
TL;DR
Usage-based pricing works when customer value scales with usage, costs are variable, and subscriptions are creating friction
Don’t jump to pure pay-as-you-go, most successful migrations use hybrid models (base fee, credits, minimum commitments)
Your value metric is a one-way door charge on what drives customer value, not what drives your costs
Model revenue impact for every customer before launch; aim for most customers staying within ±15% of current spend
Grandfather existing customers aggressively (12+ months) to avoid involuntary churn
Roll out in phases: new customers → opt-in → cohort-based migration → full rollout
Usage pricing demands real-time metering, entitlements, enforcement rules, and usage visibility billing infra is critical
Build customer trust with live usage dashboards, alerts, and transparent invoices before switching pricing
Sales comp must reward land-and-expand, not just upfront bookings
Customer Success becomes a revenue driver, not just churn prevention
Finance needs new forecasting models and ASC-606-ready usage data
Shadow bill first to catch edge cases before charging real money
Expect short-term volatility but higher net revenue retention long-term
Open-source billing infrastructure (like Flexprice) reduces lock-in and supports real-world hybrid pricing complexity.
Before We Start: Is Your Product Ready for Usage Based Pricing?
Not every product should move to usage-based pricing. Before you commit engineering hours and customer communication to this transition, answer these honestly.
1. Does your product's value scale with usage?
If a customer who uses your product 10x more gets roughly 10x more value, UBP is a natural fit.
This is almost always true for AI products; more API calls means more work done. More queries means more insights. It's less true for collaboration tools where value comes from network effects, not volume.
2. Can you actually measure what matters?
You need a metric that's trackable in real time, understandable to your customer, and tied to the value they receive. "API calls" works for developer tools.
"Tokens processed" works for LLM products. "Documents generated" works for productivity tools. If you can't define a clear metric yet, you're not ready.
3. Are your costs variable?
If serving one customer 100x more costs you meaningfully more, LLM inference, compute, storage, bandwidth then flat pricing is quietly killing your margins on power users. UBP aligns revenue with your cost structure.
4. Is your current pricing creating friction?
The signs: customers asking for custom pricing. Prospects balking at your highest tier. Power users are churning because lighter users on the same plan are getting a better deal. Your sales team spends more time negotiating pricing than demoing the product.
Three or more yeses? The migration is worth pursuing and you should keep reading!
Get started with your billing today.
Get started with your billing today.
Phase 1: Strategy and Foundation
Step 1: Identify Your Value Metric
This is the single most important decision in your entire pricing migration, and the hardest to change later.
Your value metric is the unit that best represents how customers get value from your product.
You can use Amazon's one-way door framework here and it's useful. Your value metric is a one-way door.
Once you train customers to think about your product in terms of a specific metric, changing it later is expensive in trust and operational disruption. Everything else, packaging, tiers, price points, even your billing metric is a two-way door you can adjust.
Think in four categories.
Inputs are things like data ingested, user queries, or API calls.
Usage covers sessions, compute hours, or processing time.
Outputs include documents generated, reports created, or workflows completed.
Outcomes are the highest-value. Think about the time saved, revenue increase or the unnecessary costs avoided.
For most AI and SaaS products, the sweet spot is between usage and outputs. Pure input metrics like tokens consumed feel very cosmetic to customers.
Pure outcome metrics like revenue generated are hard to measure reliably. Something like "documents processed" or "conversations resolved" hits the middle feels measurable, visible to the customer, and correlated with value.
The AI-specific trap
Don't charge for what drives your cost if you want to keep your customers. Charge for what drives your customer's value.
Your cost might be GPU tokens, but your customer's value is tasks completed. Charging per token makes customers feel nickel-and-dimed every time they refine a prompt. Charging per completed task aligns your incentive with their outcome.
How to validate: Interview 10-15 customers across segments. Ask: "What unit would you use to describe how much value you get from our product?"
If answers cluster around a specific metric, you've found it. If they're scattered, you need more customer development before migrating.
Step 2: Choose your pricing model architecture
You're not choosing between subscriptions and usage based pricing. You're choosing where on the spectrum to land.
Very few companies go from pure subscription to pure usage based overnight. Most land on a hybrid and the data backs this up.
Companies using hybrid pricing report 21% median growth rates and 19% average revenue growth, outpacing subscription-only peers on both topline and margins.
Four hybrid models that work:
Base plan + overage
Customers pay a flat monthly fee that includes a usage quota, then pay per unit beyond that.
This is the gentlest migration path, it looks familiar to subscription customers while introducing usage economics. Works well when you want a predictable entry price with room to scale.
Block-based capacity
Customers pre-purchase usage blocks rather than paying per unit in real time. This gives buyers predictability ("I'm buying 50,000 credits") while giving you usage alignment. Especially effective for sales-led motions where procurement needs a number to approve.
Minimum commitment + true-up
Customers commit to a minimum spend for a period often quarterly or annually and get discounted rates.
Use less, still pay the minimum. Use more, pay per-unit on top. Common in enterprise deals. Protects your revenue floor while capturing upside.
Prepaid credits with drawdown
Customers buy a pool of credits they draw from as they use features. Credits abstract the complexity of multi-feature pricing; one credit might equal 10 API calls or 1 document processed.
Increasingly popular for AI products because it normalizes multiple capabilities with wildly different cost profiles (image generation vs. text summarization vs. data analysis) into a single currency.
For AI founders specifically, the pricing model deserves serious consideration. When your product spans multiple AI capabilities with different costs, credits let you normalize everything into one unit the customer understands.
Your customer thinks in credits; your backend maps credits to resource consumption. This is the kind of abstraction that tools like Flexprice handle natively pure prepaid credits, subscription-bundled credits, bulk packages, and promotional credits with expiration rules. All managed through a wallet system with automatic deductions and top-up triggers.
Step 3: Model the Revenue Impact
Before you change anything customer-facing, model what happens to your revenue under each pricing scenario.
Run this analysis for every current customer. Take their actual usage data (or estimated patterns if you don't have it yet) and calculate what they'd pay under each model you're considering.
Segment the results into three buckets:
Customers who would pay more,
Who’d pay roughly the same
And the ones who’d pay less.
A healthy migration model typically looks like 60-70% of customers paying within 15% of their current spend, 15-20% paying more (usually power users who were being subsidized), and 10-15% paying less (lighter users who were overpaying).
If more than 30% see a significant increase, your migration plan needs stronger grandfathering provisions.
Model the trajectory, not just the snapshot. Usage-based revenue is more volatile month-to-month, but it typically shows higher net revenue retention because expansion happens automatically as customers use more, no upsell conversation required.
Your CFO needs to understand that quarterly revenue may fluctuate, but annual cohort revenue should grow faster.
Stress-test the downside.
What happens if usage drops 20% across the board during a downturn?
What's your revenue floor?
If a minimum commitment or base fee gives you enough floor to cover operations, you're in good shape.
If pure usage revenue at 80% of current levels puts you underwater, add a base fee component.
Step 4: Design Your Grandfathering and Migration Plan
This is where most guides stop at "communicate clearly with customers." That's necessary but insufficient. You need a concrete, phased plan for transitioning existing customers without spiking churn.
Tier 1
New customers only. For the first 2-3 months, launch new pricing exclusively for new sign-ups.
This validates the model, tests billing infrastructure under real conditions, and collects feedback without risking existing revenue.
Tier 2
Opt-in migration. After validating with new customers, offer existing customers the option to switch. Sweeten it: a discount on the first 3 months, bonus credits, or a guarantee their price won't exceed their current plan for 6 months. Track who opts in and why.
Tier 3
Cohort-based migration. With 3-6 months of data from new customers and opt-in migrants, begin migrating remaining customers in waves. Start with those who clearly benefit customers overpaying on current plans. Give each cohort 60-90 days notice and dedicated support.
Tier 4
Full migration. Grandfather the final holdouts at their current pricing for a fixed period, 12 months is standard after which they move to the new model. Never surprise a customer with a mandatory migration without a significant runway.
What to grandfather and for how long. Price-lock existing customers for a minimum of 12 months. After that, phase in new pricing gradually, cap annual increases at 15-20% for the first two years post-migration. The goal is zero involuntary churn from the pricing change itself.
Step 7: Set up entitlements and feature gating
In a subscription world, entitlements are simple: you're on the Pro plan, you get Pro features. In a usage-based world, they become dynamic.
You've used 80% of your API quota, you get a warning. You hit 100%, you're either throttled, cut off, or billed for overages.
Three types you need to configure:
Boolean entitlements: features that are on or off based on the plan. SSO, priority support, advanced analytics. These don't change with usage.
Metered entitlements: consumption tracked against a quota. API calls, tokens, storage, seats. These count up and trigger actions at thresholds.
Static entitlements: what's included without counting. Which AI models are available, which integrations are supported, what SLA tier applies.
Design your enforcement strategy. When a customer hits their limit, what happens?
Soft overages let usage continue and bill later: smooth experience, but higher credit risk.
Hard limits block access when the quota runs out: protects margins, but can frustrate customers at critical moments.
Throttling degrades performance gradually: a middle ground.
Prepaid top-ups prompt the customer to buy more credits before continuing: gives them control and transparency.
The right choice depends on your product's criticality. If you're mission-critical infrastructure, soft overages are usually better. You don't want to be the reason a customer's production system goes down. If your product is a tool users engage with directly, prepaid top-ups give them agency over their spend.
Flexprice supports all three entitlement types and configurable enforcement, including automatic wallet top-ups when a customer's balance drops below a threshold you set. You get the seamless experience of soft overages with the financial control of prepaid credits.
Step 8: Build customer facing usage visibility
If customers can't see what they're being charged for, they don't trust the bill. If they don't trust the bill, they churn. This step is non-negotiable.
What every customer needs to see:
A real-time usage dashboard showing current-period consumption against their quota or credit balance. Historical usage trends so they can predict future costs.
Spending alerts at configurable thresholds, 50%, 75%, 90% of quota. And a clear breakdown on every invoice showing exactly which events drove which charges.
Why this matters more than you think. The Unity runtime fee debacle of 2023 is the cautionary tale. Unity introduced usage-based pricing without giving developers any tools to predict or control their costs.
The backlash was severe enough that the CEO resigned. The lesson isn't that usage-based pricing is dangerous, it's that usage-based pricing without cost transparency is dangerous.
Build the dashboard before you launch the pricing. Not after.
Phase 3: Organizational alignment
Step 9: Restructure sales compensation
This is the step that decides if your pricing migration is a success or not.
Your sales team's comp was designed for subscriptions: close the deal, book the ACV, get paid.
In a usage-based model, revenue shows up over time as customers actually use the product. If you don't change the comp plan, your best reps will actively resist the new pricing because it pays them less upfront.
Reward land and expand, not just land: Comp reps on customer growth over time, not initial contract value alone. Create accelerators for accounts that grow past their initial commitment. This aligns sales incentives with what actually drives revenue in a usage model.
Discourage overcommits: In the subscription world, overselling is free money until the customer churns. In usage-based world, inflated commitments lead to refund requests, downsells, and broken trust. Penalize reps whose customers consistently use less than 50% of committed volume.
Incentivize adoption milestones: Pay bonuses when customers hit usage milestones in their first 90 days. This shifts behavior from "close and move on" to "close and make sure they succeed."
Step 10: Retrain Customer Success for Usage-Driven Engagement
In a subscription model, CS is primarily about preventing churn. In a usage-based model, CS becomes a growth engine every increase in usage directly increases revenue.
New CS priorities: Monitor usage telemetry to spot declining accounts (churn risk) and accelerating ones (expansion opportunity). Proactively help customers discover new use cases, every new use case drives more consumption.
Trigger interventions at critical thresholds: When a customer approaches their quota, don't just send an alert help them optimize usage or make the case for upgrading.
The best usage-based companies treat CS as a revenue function, not a support function. That shift in framing changes hiring profiles, KPIs, and how CS teams spend their time.
Step 11: Align finance and revops
Revenue forecasting changes fundamentally. Subscriptions are predictable and multiply active customers by their price. Usage-based revenue requires forecasting based on usage trends, seasonality, and per-cohort growth rates. This means new tooling and new mental models for your finance team.
Revenue recognition under ASC 606. Usage-based revenue is recognized as usage occurs, not when the contract is signed.
This is simpler than subscriptions in some ways with no deferred revenue for unused prepaid periods but more complex in others. You need accurate, auditable usage data for every billing period. Make sure your billing system produces the audit trail finance needs before your first quarterly close, not after.
Build a revenue floor. Use minimum commitments, base fees, or annual prepaid credit packages to create a predictable floor that covers fixed costs. Let usage revenue provide the upside. This lets you tell investors a story of "guaranteed minimum with unlimited upside" rather than "completely variable revenue" and it makes your CFO's life significantly easier.
Phase 4: Customer communication and rollout
Step 12: Craft your migration narrative
The framing matters as much as the pricing change itself. Customers don't resist fair pricing; they resist surprises and perceived unfairness.
Frame around customer benefit, not your economics. "You'll only pay for what you use" lands better than "We're updating pricing to better capture the value we deliver."
The first is about them. The second is about you. Customers can tell the difference instantly.
Be specific about what changes and what doesn't. Vague announcements create anxiety. Instead of "We're updating our pricing,"
say: "Starting [date], new plans include a base fee of $X/month with Y credits included. Additional credits cost $Z each. Here's how your current usage maps to the new model."
Include a calculator or comparison tool that lets each customer see their specific impact.
Provide downside protection. Guarantee that no existing customer pays more than X% above their current spend for the first 12 months.
This removes the fear that drives churn during pricing transitions. You give back some short-term revenue, but you keep the relationships that drive long-term value.
Step 13: Execute a phased rollout
Month 1-2: Shadow billing. Run the new model in parallel with the old. Calculate what every customer would pay under new pricing, but don't charge differently.
Use this to validate revenue models, catch billing edge cases, and flag customers who need special handling.
This is your safety net and the data you collect here will save you from costly surprises later.
Month 3-4: New customer launch. All new sign-ups go on the new model. Existing customers stay on current plans. Monitor closely: are new customers converting at the same or better rate? Are they expanding? Is the billing system handling edge cases?
Month 5-6: Opt-in migration. Invite existing customers to switch voluntarily. Offer incentives, bonus credits, locked-in rates, extended guarantees. Track opt-in rates by segment. If a particular segment isn't moving, dig into why before pushing them.
Month 7-12: Cohort-based migration. Migrate remaining customers in waves, starting with those who benefit most. 60-90 days notice per cohort. Dedicated support during transition. Monitor churn after each wave and adjust your approach if you see spikes.
Step 14: Monitor, iterate, and optimize
Key metrics to watch weekly:
Net revenue retention. Should improve over time as usage-based expansion kicks in, but may dip initially as some customers right-size. Don't panic at an early dip, track the trend over 2-3 months.
Expansion revenue as a percentage of total. In a healthy UBP model, 20-30% of revenue comes from existing customer growth without a single upsell conversation.
Billing support tickets. A spike means customers are confused about charges, which means your transparency tools need work. This is an early warning system — treat it like one.
Usage-to-revenue conversion rate. What percentage of metered usage actually converts to billed revenue? If there's leakage, find it fast.
Pricing review cadence. Review quarterly. Not necessarily to change anything, but to evaluate whether your value metric still holds, your tiers are sized right, and your price points are competitive. Usage-based pricing gives you far richer data to inform these decisions than subscriptions ever did.
The migration checklist (summary)
Phase 1: Strategy and foundation
Identify and validate your core value metric through customer interviews
Choose a hybrid pricing architecture (base + usage, credits, commitments)
Model revenue impact across your entire customer base
Design a grandfathering plan with specific timelines and protections
Get executive alignment. This is a company-wide transformation, not a billing change
Phase 2: Infrastructure and technical readiness
Audit your current billing stack against usage-based requirements
Deploy a metering and pricing layer (Flexprice or equivalent) between your product and payment provider
Instrument your product to emit billing-grade usage events
Configure entitlements: boolean features, metered quotas, static inclusions
Build or configure enforcement rules for quota overages
Set up a credit wallet system if using credit-based pricing
Build customer-facing usage dashboards with real-time data
Configure spending alerts and threshold notifications
Phase 3: Organizational alignment
Redesign sales compensation to reward expansion, not just bookings
Retrain CS on usage-driven engagement and proactive outreach
Update revenue forecasting models for variable revenue
Ensure ASC 606 compliance for usage-based revenue recognition
Establish a revenue floor through base fees or minimum commitments
Phase 4: Communication and rollout
Craft a customer-first migration narrative
Build a pricing calculator or comparison tool for existing customers
Run 1-2 months of shadow billing to validate the model
Launch new pricing for new customers only (2 months)
Open opt-in migration for existing customers with incentives
Execute cohort-based migration for remaining customers
Monitor NRR, expansion revenue, support tickets, and usage-to-revenue conversion weekly
Establish quarterly pricing review cadence
Why open-source billing infrastructure matters for this migration
Most migration guides ignore the infrastructure decision itself and its long-term consequences.
When you migrate pricing models, you're making a bet on billing infrastructure that lasts years. If you choose a closed-source, sales-led platform, you're adding a dependency you can't inspect, can't modify, and can't leave easily. You're trading one kind of rigidity (your subscription model) for another (your vendor's roadmap and pricing).
The Stripe acquisition of Metronome is a useful case study. Metronome was a popular usage-based billing platform. Now it's part of Stripe, and its users are locked into the Stripe ecosystem. If your payment strategy involves flexibility across providers, or if you want the option to switch, that dependency is a real cost.
This is why Flexprice's open-source approach matters. Full visibility into how your billing logic works. The ability to modify it for edge cases specific to your business.
No lock-in to a single payment provider. Flexprice works with Stripe, Chargebee, or any processor. And if your needs evolve beyond what Flexprice offers out of the box, you extend it yourself rather than waiting on a vendor's product team to prioritize your request.
For AI and SaaS founders specifically, Flexprice was built for the complexity that usage-based migration introduces: real-time event metering, credit wallets with auto-top-up and expiration rules, hybrid pricing (subscription + usage + credits), feature entitlements, coupon management, and automated invoice computation. It's not a subscription platform with usage bolted on. It's a pricing engine designed from the ground up for the models AI-native products actually need.
Common migration mistakes (and how to avoid them)
Picking a value metric that tracks your cost, not your customer's value. Charging per token when your customer thinks in documents creates a disconnect that makes every bill feel arbitrary. Map your metric to the outcome they care about.
Going from pure subscription to pure pay-as-you-go overnight. This maximizes customer anxiety and revenue volatility at the same time. Use a hybrid as a bridge. Include a base fee or minimum commitment for predictability on both sides.
Underinvesting in usage visibility. If customers can't predict or control their costs, they'll churn. Not because the pricing is wrong, but because the uncertainty is intolerable. Build the dashboard before you launch the pricing.
Keeping the old sales comp plan. If you don't realign incentives, your sales team will sandbag the new pricing and push customers toward the old model or toward competitors. Fix comp before rollout, not after.
Building billing logic in your application code. Every company that hardcodes pricing into their app regrets it within 18 months. Pricing changes should be a config change, not a code deployment. Use a dedicated pricing layer.
Ignoring revenue recognition. Usage-based revenue has different ASC 606 implications than subscriptions. Loop in finance and auditors before launch, not after your first quarterly close.
Not grandfathering existing customers. Forcing immediate migration on your installed base is the fastest path to a churn spike. Give customers time, options, and guarantees.
Final thought
Migrating from subscription to usage-based pricing is not a billing project. It's a company-wide transformation that touches product, engineering, sales, CS, finance, and your customer relationships.
The companies that get it right treat pricing as a growth lever, aligning revenue with value, reducing friction for new customers, and creating natural expansion for existing ones.
The checklist above gives you a concrete, sequential path from strategy through execution. Lead with your value metric, use hybrids to reduce risk, invest in infrastructure before flipping switches, align your organization, and communicate relentlessly with customers.
If you're starting this migration and want billing infrastructure designed for exactly this transition, open-source, with real-time metering, credit wallets, entitlement management, and hybrid pricing support, check out Flexprice.
Frequently asked questions (FAQ)
1. How long does a typical subscription-to-UBP migration take?
Plan for 6-12 months from strategy to full migration. The first 2-3 months cover strategy and infrastructure. The next 2-3 months are new-customer validation. The final 3-6 months are existing-customer migration in cohorts. Rushing this timeline is how companies end up with billing errors, churn, and internal backlash.
2. Can I migrate without changing my billing system?
Depends on complexity. If you're adding a simple usage overage to an existing subscription, your current system might handle it. If you need credits, multi-metric pricing, real-time metering, or entitlement-based access control, you need a dedicated pricing and billing layer. Flexprice is designed for exactly this. It sits between your product and your existing payment processor, handling all pricing logic without replacing your payment infrastructure.
3. What's the best pricing model for AI products?
Most AI products benefit from a credit-based hybrid: a base subscription that includes a credit allowance, with additional credits available for purchase. Credits abstract the complexity of variable AI costs (different models, tasks, compute requirements) into a single unit customers understand. You get revenue predictability from the base and usage alignment from the credit system.
4. How do I prevent churn during migration?
Three mechanisms: grandfathering (guarantee existing pricing for 12+ months), downside protection (cap increases at 15-20% annually during transition), and transparency (give every customer a tool to see exactly how new pricing affects them before it kicks in). Companies that communicate proactively and offer these protections see minimal migration-related churn.
5. Should I build or buy usage-based billing infrastructure?
For most startups and growth-stage companies, building from scratch is a 3-6 month engineering project with ongoing maintenance. Purpose-built tools like Flexprice get you to production in days, are open-source so you keep control, and solve the hard problems (event deduplication, real-time aggregation, credit management, invoice computation) that you'd otherwise build yourself. Build your product, not your billing system.
6. How does usage-based pricing affect revenue forecasting?
Monthly revenue becomes more variable, but annual revenue gets more predictable as cohorts mature and usage patterns stabilize. Use minimum commitments or base fees to create a floor covering fixed costs, then layer in usage-based upside. Most companies find net revenue retention improves significantly under UBP because expansion happens
Phase 1: Strategy and Foundation
Step 1: Identify Your Value Metric
This is the single most important decision in your entire pricing migration, and the hardest to change later.
Your value metric is the unit that best represents how customers get value from your product.
You can use Amazon's one-way door framework here and it's useful. Your value metric is a one-way door.
Once you train customers to think about your product in terms of a specific metric, changing it later is expensive in trust and operational disruption. Everything else, packaging, tiers, price points, even your billing metric is a two-way door you can adjust.
Think in four categories.
Inputs are things like data ingested, user queries, or API calls.
Usage covers sessions, compute hours, or processing time.
Outputs include documents generated, reports created, or workflows completed.
Outcomes are the highest-value. Think about the time saved, revenue increase or the unnecessary costs avoided.
For most AI and SaaS products, the sweet spot is between usage and outputs. Pure input metrics like tokens consumed feel very cosmetic to customers.
Pure outcome metrics like revenue generated are hard to measure reliably. Something like "documents processed" or "conversations resolved" hits the middle feels measurable, visible to the customer, and correlated with value.
The AI-specific trap
Don't charge for what drives your cost if you want to keep your customers. Charge for what drives your customer's value.
Your cost might be GPU tokens, but your customer's value is tasks completed. Charging per token makes customers feel nickel-and-dimed every time they refine a prompt. Charging per completed task aligns your incentive with their outcome.
How to validate: Interview 10-15 customers across segments. Ask: "What unit would you use to describe how much value you get from our product?"
If answers cluster around a specific metric, you've found it. If they're scattered, you need more customer development before migrating.
Step 2: Choose your pricing model architecture
You're not choosing between subscriptions and usage based pricing. You're choosing where on the spectrum to land.
Very few companies go from pure subscription to pure usage based overnight. Most land on a hybrid and the data backs this up.
Companies using hybrid pricing report 21% median growth rates and 19% average revenue growth, outpacing subscription-only peers on both topline and margins.
Four hybrid models that work:
Base plan + overage
Customers pay a flat monthly fee that includes a usage quota, then pay per unit beyond that.
This is the gentlest migration path, it looks familiar to subscription customers while introducing usage economics. Works well when you want a predictable entry price with room to scale.
Block-based capacity
Customers pre-purchase usage blocks rather than paying per unit in real time. This gives buyers predictability ("I'm buying 50,000 credits") while giving you usage alignment. Especially effective for sales-led motions where procurement needs a number to approve.
Minimum commitment + true-up
Customers commit to a minimum spend for a period often quarterly or annually and get discounted rates.
Use less, still pay the minimum. Use more, pay per-unit on top. Common in enterprise deals. Protects your revenue floor while capturing upside.
Prepaid credits with drawdown
Customers buy a pool of credits they draw from as they use features. Credits abstract the complexity of multi-feature pricing; one credit might equal 10 API calls or 1 document processed.
Increasingly popular for AI products because it normalizes multiple capabilities with wildly different cost profiles (image generation vs. text summarization vs. data analysis) into a single currency.
For AI founders specifically, the pricing model deserves serious consideration. When your product spans multiple AI capabilities with different costs, credits let you normalize everything into one unit the customer understands.
Your customer thinks in credits; your backend maps credits to resource consumption. This is the kind of abstraction that tools like Flexprice handle natively pure prepaid credits, subscription-bundled credits, bulk packages, and promotional credits with expiration rules. All managed through a wallet system with automatic deductions and top-up triggers.
Step 3: Model the Revenue Impact
Before you change anything customer-facing, model what happens to your revenue under each pricing scenario.
Run this analysis for every current customer. Take their actual usage data (or estimated patterns if you don't have it yet) and calculate what they'd pay under each model you're considering.
Segment the results into three buckets:
Customers who would pay more,
Who’d pay roughly the same
And the ones who’d pay less.
A healthy migration model typically looks like 60-70% of customers paying within 15% of their current spend, 15-20% paying more (usually power users who were being subsidized), and 10-15% paying less (lighter users who were overpaying).
If more than 30% see a significant increase, your migration plan needs stronger grandfathering provisions.
Model the trajectory, not just the snapshot. Usage-based revenue is more volatile month-to-month, but it typically shows higher net revenue retention because expansion happens automatically as customers use more, no upsell conversation required.
Your CFO needs to understand that quarterly revenue may fluctuate, but annual cohort revenue should grow faster.
Stress-test the downside.
What happens if usage drops 20% across the board during a downturn?
What's your revenue floor?
If a minimum commitment or base fee gives you enough floor to cover operations, you're in good shape.
If pure usage revenue at 80% of current levels puts you underwater, add a base fee component.
Step 4: Design Your Grandfathering and Migration Plan
This is where most guides stop at "communicate clearly with customers." That's necessary but insufficient. You need a concrete, phased plan for transitioning existing customers without spiking churn.
Tier 1
New customers only. For the first 2-3 months, launch new pricing exclusively for new sign-ups.
This validates the model, tests billing infrastructure under real conditions, and collects feedback without risking existing revenue.
Tier 2
Opt-in migration. After validating with new customers, offer existing customers the option to switch. Sweeten it: a discount on the first 3 months, bonus credits, or a guarantee their price won't exceed their current plan for 6 months. Track who opts in and why.
Tier 3
Cohort-based migration. With 3-6 months of data from new customers and opt-in migrants, begin migrating remaining customers in waves. Start with those who clearly benefit customers overpaying on current plans. Give each cohort 60-90 days notice and dedicated support.
Tier 4
Full migration. Grandfather the final holdouts at their current pricing for a fixed period, 12 months is standard after which they move to the new model. Never surprise a customer with a mandatory migration without a significant runway.
What to grandfather and for how long. Price-lock existing customers for a minimum of 12 months. After that, phase in new pricing gradually, cap annual increases at 15-20% for the first two years post-migration. The goal is zero involuntary churn from the pricing change itself.
Step 7: Set up entitlements and feature gating
In a subscription world, entitlements are simple: you're on the Pro plan, you get Pro features. In a usage-based world, they become dynamic.
You've used 80% of your API quota, you get a warning. You hit 100%, you're either throttled, cut off, or billed for overages.
Three types you need to configure:
Boolean entitlements: features that are on or off based on the plan. SSO, priority support, advanced analytics. These don't change with usage.
Metered entitlements: consumption tracked against a quota. API calls, tokens, storage, seats. These count up and trigger actions at thresholds.
Static entitlements: what's included without counting. Which AI models are available, which integrations are supported, what SLA tier applies.
Design your enforcement strategy. When a customer hits their limit, what happens?
Soft overages let usage continue and bill later: smooth experience, but higher credit risk.
Hard limits block access when the quota runs out: protects margins, but can frustrate customers at critical moments.
Throttling degrades performance gradually: a middle ground.
Prepaid top-ups prompt the customer to buy more credits before continuing: gives them control and transparency.
The right choice depends on your product's criticality. If you're mission-critical infrastructure, soft overages are usually better. You don't want to be the reason a customer's production system goes down. If your product is a tool users engage with directly, prepaid top-ups give them agency over their spend.
Flexprice supports all three entitlement types and configurable enforcement, including automatic wallet top-ups when a customer's balance drops below a threshold you set. You get the seamless experience of soft overages with the financial control of prepaid credits.
Step 8: Build customer facing usage visibility
If customers can't see what they're being charged for, they don't trust the bill. If they don't trust the bill, they churn. This step is non-negotiable.
What every customer needs to see:
A real-time usage dashboard showing current-period consumption against their quota or credit balance. Historical usage trends so they can predict future costs.
Spending alerts at configurable thresholds, 50%, 75%, 90% of quota. And a clear breakdown on every invoice showing exactly which events drove which charges.
Why this matters more than you think. The Unity runtime fee debacle of 2023 is the cautionary tale. Unity introduced usage-based pricing without giving developers any tools to predict or control their costs.
The backlash was severe enough that the CEO resigned. The lesson isn't that usage-based pricing is dangerous, it's that usage-based pricing without cost transparency is dangerous.
Build the dashboard before you launch the pricing. Not after.
Phase 3: Organizational alignment
Step 9: Restructure sales compensation
This is the step that decides if your pricing migration is a success or not.
Your sales team's comp was designed for subscriptions: close the deal, book the ACV, get paid.
In a usage-based model, revenue shows up over time as customers actually use the product. If you don't change the comp plan, your best reps will actively resist the new pricing because it pays them less upfront.
Reward land and expand, not just land: Comp reps on customer growth over time, not initial contract value alone. Create accelerators for accounts that grow past their initial commitment. This aligns sales incentives with what actually drives revenue in a usage model.
Discourage overcommits: In the subscription world, overselling is free money until the customer churns. In usage-based world, inflated commitments lead to refund requests, downsells, and broken trust. Penalize reps whose customers consistently use less than 50% of committed volume.
Incentivize adoption milestones: Pay bonuses when customers hit usage milestones in their first 90 days. This shifts behavior from "close and move on" to "close and make sure they succeed."
Step 10: Retrain Customer Success for Usage-Driven Engagement
In a subscription model, CS is primarily about preventing churn. In a usage-based model, CS becomes a growth engine every increase in usage directly increases revenue.
New CS priorities: Monitor usage telemetry to spot declining accounts (churn risk) and accelerating ones (expansion opportunity). Proactively help customers discover new use cases, every new use case drives more consumption.
Trigger interventions at critical thresholds: When a customer approaches their quota, don't just send an alert help them optimize usage or make the case for upgrading.
The best usage-based companies treat CS as a revenue function, not a support function. That shift in framing changes hiring profiles, KPIs, and how CS teams spend their time.
Step 11: Align finance and revops
Revenue forecasting changes fundamentally. Subscriptions are predictable and multiply active customers by their price. Usage-based revenue requires forecasting based on usage trends, seasonality, and per-cohort growth rates. This means new tooling and new mental models for your finance team.
Revenue recognition under ASC 606. Usage-based revenue is recognized as usage occurs, not when the contract is signed.
This is simpler than subscriptions in some ways with no deferred revenue for unused prepaid periods but more complex in others. You need accurate, auditable usage data for every billing period. Make sure your billing system produces the audit trail finance needs before your first quarterly close, not after.
Build a revenue floor. Use minimum commitments, base fees, or annual prepaid credit packages to create a predictable floor that covers fixed costs. Let usage revenue provide the upside. This lets you tell investors a story of "guaranteed minimum with unlimited upside" rather than "completely variable revenue" and it makes your CFO's life significantly easier.
Phase 4: Customer communication and rollout
Step 12: Craft your migration narrative
The framing matters as much as the pricing change itself. Customers don't resist fair pricing; they resist surprises and perceived unfairness.
Frame around customer benefit, not your economics. "You'll only pay for what you use" lands better than "We're updating pricing to better capture the value we deliver."
The first is about them. The second is about you. Customers can tell the difference instantly.
Be specific about what changes and what doesn't. Vague announcements create anxiety. Instead of "We're updating our pricing,"
say: "Starting [date], new plans include a base fee of $X/month with Y credits included. Additional credits cost $Z each. Here's how your current usage maps to the new model."
Include a calculator or comparison tool that lets each customer see their specific impact.
Provide downside protection. Guarantee that no existing customer pays more than X% above their current spend for the first 12 months.
This removes the fear that drives churn during pricing transitions. You give back some short-term revenue, but you keep the relationships that drive long-term value.
Step 13: Execute a phased rollout
Month 1-2: Shadow billing. Run the new model in parallel with the old. Calculate what every customer would pay under new pricing, but don't charge differently.
Use this to validate revenue models, catch billing edge cases, and flag customers who need special handling.
This is your safety net and the data you collect here will save you from costly surprises later.
Month 3-4: New customer launch. All new sign-ups go on the new model. Existing customers stay on current plans. Monitor closely: are new customers converting at the same or better rate? Are they expanding? Is the billing system handling edge cases?
Month 5-6: Opt-in migration. Invite existing customers to switch voluntarily. Offer incentives, bonus credits, locked-in rates, extended guarantees. Track opt-in rates by segment. If a particular segment isn't moving, dig into why before pushing them.
Month 7-12: Cohort-based migration. Migrate remaining customers in waves, starting with those who benefit most. 60-90 days notice per cohort. Dedicated support during transition. Monitor churn after each wave and adjust your approach if you see spikes.
Step 14: Monitor, iterate, and optimize
Key metrics to watch weekly:
Net revenue retention. Should improve over time as usage-based expansion kicks in, but may dip initially as some customers right-size. Don't panic at an early dip, track the trend over 2-3 months.
Expansion revenue as a percentage of total. In a healthy UBP model, 20-30% of revenue comes from existing customer growth without a single upsell conversation.
Billing support tickets. A spike means customers are confused about charges, which means your transparency tools need work. This is an early warning system — treat it like one.
Usage-to-revenue conversion rate. What percentage of metered usage actually converts to billed revenue? If there's leakage, find it fast.
Pricing review cadence. Review quarterly. Not necessarily to change anything, but to evaluate whether your value metric still holds, your tiers are sized right, and your price points are competitive. Usage-based pricing gives you far richer data to inform these decisions than subscriptions ever did.
The migration checklist (summary)
Phase 1: Strategy and foundation
Identify and validate your core value metric through customer interviews
Choose a hybrid pricing architecture (base + usage, credits, commitments)
Model revenue impact across your entire customer base
Design a grandfathering plan with specific timelines and protections
Get executive alignment. This is a company-wide transformation, not a billing change
Phase 2: Infrastructure and technical readiness
Audit your current billing stack against usage-based requirements
Deploy a metering and pricing layer (Flexprice or equivalent) between your product and payment provider
Instrument your product to emit billing-grade usage events
Configure entitlements: boolean features, metered quotas, static inclusions
Build or configure enforcement rules for quota overages
Set up a credit wallet system if using credit-based pricing
Build customer-facing usage dashboards with real-time data
Configure spending alerts and threshold notifications
Phase 3: Organizational alignment
Redesign sales compensation to reward expansion, not just bookings
Retrain CS on usage-driven engagement and proactive outreach
Update revenue forecasting models for variable revenue
Ensure ASC 606 compliance for usage-based revenue recognition
Establish a revenue floor through base fees or minimum commitments
Phase 4: Communication and rollout
Craft a customer-first migration narrative
Build a pricing calculator or comparison tool for existing customers
Run 1-2 months of shadow billing to validate the model
Launch new pricing for new customers only (2 months)
Open opt-in migration for existing customers with incentives
Execute cohort-based migration for remaining customers
Monitor NRR, expansion revenue, support tickets, and usage-to-revenue conversion weekly
Establish quarterly pricing review cadence
Why open-source billing infrastructure matters for this migration
Most migration guides ignore the infrastructure decision itself and its long-term consequences.
When you migrate pricing models, you're making a bet on billing infrastructure that lasts years. If you choose a closed-source, sales-led platform, you're adding a dependency you can't inspect, can't modify, and can't leave easily. You're trading one kind of rigidity (your subscription model) for another (your vendor's roadmap and pricing).
The Stripe acquisition of Metronome is a useful case study. Metronome was a popular usage-based billing platform. Now it's part of Stripe, and its users are locked into the Stripe ecosystem. If your payment strategy involves flexibility across providers, or if you want the option to switch, that dependency is a real cost.
This is why Flexprice's open-source approach matters. Full visibility into how your billing logic works. The ability to modify it for edge cases specific to your business.
No lock-in to a single payment provider. Flexprice works with Stripe, Chargebee, or any processor. And if your needs evolve beyond what Flexprice offers out of the box, you extend it yourself rather than waiting on a vendor's product team to prioritize your request.
For AI and SaaS founders specifically, Flexprice was built for the complexity that usage-based migration introduces: real-time event metering, credit wallets with auto-top-up and expiration rules, hybrid pricing (subscription + usage + credits), feature entitlements, coupon management, and automated invoice computation. It's not a subscription platform with usage bolted on. It's a pricing engine designed from the ground up for the models AI-native products actually need.
Common migration mistakes (and how to avoid them)
Picking a value metric that tracks your cost, not your customer's value. Charging per token when your customer thinks in documents creates a disconnect that makes every bill feel arbitrary. Map your metric to the outcome they care about.
Going from pure subscription to pure pay-as-you-go overnight. This maximizes customer anxiety and revenue volatility at the same time. Use a hybrid as a bridge. Include a base fee or minimum commitment for predictability on both sides.
Underinvesting in usage visibility. If customers can't predict or control their costs, they'll churn. Not because the pricing is wrong, but because the uncertainty is intolerable. Build the dashboard before you launch the pricing.
Keeping the old sales comp plan. If you don't realign incentives, your sales team will sandbag the new pricing and push customers toward the old model or toward competitors. Fix comp before rollout, not after.
Building billing logic in your application code. Every company that hardcodes pricing into their app regrets it within 18 months. Pricing changes should be a config change, not a code deployment. Use a dedicated pricing layer.
Ignoring revenue recognition. Usage-based revenue has different ASC 606 implications than subscriptions. Loop in finance and auditors before launch, not after your first quarterly close.
Not grandfathering existing customers. Forcing immediate migration on your installed base is the fastest path to a churn spike. Give customers time, options, and guarantees.
Final thought
Migrating from subscription to usage-based pricing is not a billing project. It's a company-wide transformation that touches product, engineering, sales, CS, finance, and your customer relationships.
The companies that get it right treat pricing as a growth lever, aligning revenue with value, reducing friction for new customers, and creating natural expansion for existing ones.
The checklist above gives you a concrete, sequential path from strategy through execution. Lead with your value metric, use hybrids to reduce risk, invest in infrastructure before flipping switches, align your organization, and communicate relentlessly with customers.
If you're starting this migration and want billing infrastructure designed for exactly this transition, open-source, with real-time metering, credit wallets, entitlement management, and hybrid pricing support, check out Flexprice.
Frequently asked questions (FAQ)
1. How long does a typical subscription-to-UBP migration take?
Plan for 6-12 months from strategy to full migration. The first 2-3 months cover strategy and infrastructure. The next 2-3 months are new-customer validation. The final 3-6 months are existing-customer migration in cohorts. Rushing this timeline is how companies end up with billing errors, churn, and internal backlash.
2. Can I migrate without changing my billing system?
Depends on complexity. If you're adding a simple usage overage to an existing subscription, your current system might handle it. If you need credits, multi-metric pricing, real-time metering, or entitlement-based access control, you need a dedicated pricing and billing layer. Flexprice is designed for exactly this. It sits between your product and your existing payment processor, handling all pricing logic without replacing your payment infrastructure.
3. What's the best pricing model for AI products?
Most AI products benefit from a credit-based hybrid: a base subscription that includes a credit allowance, with additional credits available for purchase. Credits abstract the complexity of variable AI costs (different models, tasks, compute requirements) into a single unit customers understand. You get revenue predictability from the base and usage alignment from the credit system.
4. How do I prevent churn during migration?
Three mechanisms: grandfathering (guarantee existing pricing for 12+ months), downside protection (cap increases at 15-20% annually during transition), and transparency (give every customer a tool to see exactly how new pricing affects them before it kicks in). Companies that communicate proactively and offer these protections see minimal migration-related churn.
5. Should I build or buy usage-based billing infrastructure?
For most startups and growth-stage companies, building from scratch is a 3-6 month engineering project with ongoing maintenance. Purpose-built tools like Flexprice get you to production in days, are open-source so you keep control, and solve the hard problems (event deduplication, real-time aggregation, credit management, invoice computation) that you'd otherwise build yourself. Build your product, not your billing system.
6. How does usage-based pricing affect revenue forecasting?
Monthly revenue becomes more variable, but annual revenue gets more predictable as cohorts mature and usage patterns stabilize. Use minimum commitments or base fees to create a floor covering fixed costs, then layer in usage-based upside. Most companies find net revenue retention improves significantly under UBP because expansion happens
Phase 1: Strategy and Foundation
Step 1: Identify Your Value Metric
This is the single most important decision in your entire pricing migration, and the hardest to change later.
Your value metric is the unit that best represents how customers get value from your product.
You can use Amazon's one-way door framework here and it's useful. Your value metric is a one-way door.
Once you train customers to think about your product in terms of a specific metric, changing it later is expensive in trust and operational disruption. Everything else, packaging, tiers, price points, even your billing metric is a two-way door you can adjust.
Think in four categories.
Inputs are things like data ingested, user queries, or API calls.
Usage covers sessions, compute hours, or processing time.
Outputs include documents generated, reports created, or workflows completed.
Outcomes are the highest-value. Think about the time saved, revenue increase or the unnecessary costs avoided.
For most AI and SaaS products, the sweet spot is between usage and outputs. Pure input metrics like tokens consumed feel very cosmetic to customers.
Pure outcome metrics like revenue generated are hard to measure reliably. Something like "documents processed" or "conversations resolved" hits the middle feels measurable, visible to the customer, and correlated with value.
The AI-specific trap
Don't charge for what drives your cost if you want to keep your customers. Charge for what drives your customer's value.
Your cost might be GPU tokens, but your customer's value is tasks completed. Charging per token makes customers feel nickel-and-dimed every time they refine a prompt. Charging per completed task aligns your incentive with their outcome.
How to validate: Interview 10-15 customers across segments. Ask: "What unit would you use to describe how much value you get from our product?"
If answers cluster around a specific metric, you've found it. If they're scattered, you need more customer development before migrating.
Step 2: Choose your pricing model architecture
You're not choosing between subscriptions and usage based pricing. You're choosing where on the spectrum to land.
Very few companies go from pure subscription to pure usage based overnight. Most land on a hybrid and the data backs this up.
Companies using hybrid pricing report 21% median growth rates and 19% average revenue growth, outpacing subscription-only peers on both topline and margins.
Four hybrid models that work:
Base plan + overage
Customers pay a flat monthly fee that includes a usage quota, then pay per unit beyond that.
This is the gentlest migration path, it looks familiar to subscription customers while introducing usage economics. Works well when you want a predictable entry price with room to scale.
Block-based capacity
Customers pre-purchase usage blocks rather than paying per unit in real time. This gives buyers predictability ("I'm buying 50,000 credits") while giving you usage alignment. Especially effective for sales-led motions where procurement needs a number to approve.
Minimum commitment + true-up
Customers commit to a minimum spend for a period often quarterly or annually and get discounted rates.
Use less, still pay the minimum. Use more, pay per-unit on top. Common in enterprise deals. Protects your revenue floor while capturing upside.
Prepaid credits with drawdown
Customers buy a pool of credits they draw from as they use features. Credits abstract the complexity of multi-feature pricing; one credit might equal 10 API calls or 1 document processed.
Increasingly popular for AI products because it normalizes multiple capabilities with wildly different cost profiles (image generation vs. text summarization vs. data analysis) into a single currency.
For AI founders specifically, the pricing model deserves serious consideration. When your product spans multiple AI capabilities with different costs, credits let you normalize everything into one unit the customer understands.
Your customer thinks in credits; your backend maps credits to resource consumption. This is the kind of abstraction that tools like Flexprice handle natively pure prepaid credits, subscription-bundled credits, bulk packages, and promotional credits with expiration rules. All managed through a wallet system with automatic deductions and top-up triggers.
Step 3: Model the Revenue Impact
Before you change anything customer-facing, model what happens to your revenue under each pricing scenario.
Run this analysis for every current customer. Take their actual usage data (or estimated patterns if you don't have it yet) and calculate what they'd pay under each model you're considering.
Segment the results into three buckets:
Customers who would pay more,
Who’d pay roughly the same
And the ones who’d pay less.
A healthy migration model typically looks like 60-70% of customers paying within 15% of their current spend, 15-20% paying more (usually power users who were being subsidized), and 10-15% paying less (lighter users who were overpaying).
If more than 30% see a significant increase, your migration plan needs stronger grandfathering provisions.
Model the trajectory, not just the snapshot. Usage-based revenue is more volatile month-to-month, but it typically shows higher net revenue retention because expansion happens automatically as customers use more, no upsell conversation required.
Your CFO needs to understand that quarterly revenue may fluctuate, but annual cohort revenue should grow faster.
Stress-test the downside.
What happens if usage drops 20% across the board during a downturn?
What's your revenue floor?
If a minimum commitment or base fee gives you enough floor to cover operations, you're in good shape.
If pure usage revenue at 80% of current levels puts you underwater, add a base fee component.
Step 4: Design Your Grandfathering and Migration Plan
This is where most guides stop at "communicate clearly with customers." That's necessary but insufficient. You need a concrete, phased plan for transitioning existing customers without spiking churn.
Tier 1
New customers only. For the first 2-3 months, launch new pricing exclusively for new sign-ups.
This validates the model, tests billing infrastructure under real conditions, and collects feedback without risking existing revenue.
Tier 2
Opt-in migration. After validating with new customers, offer existing customers the option to switch. Sweeten it: a discount on the first 3 months, bonus credits, or a guarantee their price won't exceed their current plan for 6 months. Track who opts in and why.
Tier 3
Cohort-based migration. With 3-6 months of data from new customers and opt-in migrants, begin migrating remaining customers in waves. Start with those who clearly benefit customers overpaying on current plans. Give each cohort 60-90 days notice and dedicated support.
Tier 4
Full migration. Grandfather the final holdouts at their current pricing for a fixed period, 12 months is standard after which they move to the new model. Never surprise a customer with a mandatory migration without a significant runway.
What to grandfather and for how long. Price-lock existing customers for a minimum of 12 months. After that, phase in new pricing gradually, cap annual increases at 15-20% for the first two years post-migration. The goal is zero involuntary churn from the pricing change itself.
Step 7: Set up entitlements and feature gating
In a subscription world, entitlements are simple: you're on the Pro plan, you get Pro features. In a usage-based world, they become dynamic.
You've used 80% of your API quota, you get a warning. You hit 100%, you're either throttled, cut off, or billed for overages.
Three types you need to configure:
Boolean entitlements: features that are on or off based on the plan. SSO, priority support, advanced analytics. These don't change with usage.
Metered entitlements: consumption tracked against a quota. API calls, tokens, storage, seats. These count up and trigger actions at thresholds.
Static entitlements: what's included without counting. Which AI models are available, which integrations are supported, what SLA tier applies.
Design your enforcement strategy. When a customer hits their limit, what happens?
Soft overages let usage continue and bill later: smooth experience, but higher credit risk.
Hard limits block access when the quota runs out: protects margins, but can frustrate customers at critical moments.
Throttling degrades performance gradually: a middle ground.
Prepaid top-ups prompt the customer to buy more credits before continuing: gives them control and transparency.
The right choice depends on your product's criticality. If you're mission-critical infrastructure, soft overages are usually better. You don't want to be the reason a customer's production system goes down. If your product is a tool users engage with directly, prepaid top-ups give them agency over their spend.
Flexprice supports all three entitlement types and configurable enforcement, including automatic wallet top-ups when a customer's balance drops below a threshold you set. You get the seamless experience of soft overages with the financial control of prepaid credits.
Step 8: Build customer facing usage visibility
If customers can't see what they're being charged for, they don't trust the bill. If they don't trust the bill, they churn. This step is non-negotiable.
What every customer needs to see:
A real-time usage dashboard showing current-period consumption against their quota or credit balance. Historical usage trends so they can predict future costs.
Spending alerts at configurable thresholds, 50%, 75%, 90% of quota. And a clear breakdown on every invoice showing exactly which events drove which charges.
Why this matters more than you think. The Unity runtime fee debacle of 2023 is the cautionary tale. Unity introduced usage-based pricing without giving developers any tools to predict or control their costs.
The backlash was severe enough that the CEO resigned. The lesson isn't that usage-based pricing is dangerous, it's that usage-based pricing without cost transparency is dangerous.
Build the dashboard before you launch the pricing. Not after.
Phase 3: Organizational alignment
Step 9: Restructure sales compensation
This is the step that decides if your pricing migration is a success or not.
Your sales team's comp was designed for subscriptions: close the deal, book the ACV, get paid.
In a usage-based model, revenue shows up over time as customers actually use the product. If you don't change the comp plan, your best reps will actively resist the new pricing because it pays them less upfront.
Reward land and expand, not just land: Comp reps on customer growth over time, not initial contract value alone. Create accelerators for accounts that grow past their initial commitment. This aligns sales incentives with what actually drives revenue in a usage model.
Discourage overcommits: In the subscription world, overselling is free money until the customer churns. In usage-based world, inflated commitments lead to refund requests, downsells, and broken trust. Penalize reps whose customers consistently use less than 50% of committed volume.
Incentivize adoption milestones: Pay bonuses when customers hit usage milestones in their first 90 days. This shifts behavior from "close and move on" to "close and make sure they succeed."
Step 10: Retrain Customer Success for Usage-Driven Engagement
In a subscription model, CS is primarily about preventing churn. In a usage-based model, CS becomes a growth engine every increase in usage directly increases revenue.
New CS priorities: Monitor usage telemetry to spot declining accounts (churn risk) and accelerating ones (expansion opportunity). Proactively help customers discover new use cases, every new use case drives more consumption.
Trigger interventions at critical thresholds: When a customer approaches their quota, don't just send an alert help them optimize usage or make the case for upgrading.
The best usage-based companies treat CS as a revenue function, not a support function. That shift in framing changes hiring profiles, KPIs, and how CS teams spend their time.
Step 11: Align finance and revops
Revenue forecasting changes fundamentally. Subscriptions are predictable and multiply active customers by their price. Usage-based revenue requires forecasting based on usage trends, seasonality, and per-cohort growth rates. This means new tooling and new mental models for your finance team.
Revenue recognition under ASC 606. Usage-based revenue is recognized as usage occurs, not when the contract is signed.
This is simpler than subscriptions in some ways with no deferred revenue for unused prepaid periods but more complex in others. You need accurate, auditable usage data for every billing period. Make sure your billing system produces the audit trail finance needs before your first quarterly close, not after.
Build a revenue floor. Use minimum commitments, base fees, or annual prepaid credit packages to create a predictable floor that covers fixed costs. Let usage revenue provide the upside. This lets you tell investors a story of "guaranteed minimum with unlimited upside" rather than "completely variable revenue" and it makes your CFO's life significantly easier.
Phase 4: Customer communication and rollout
Step 12: Craft your migration narrative
The framing matters as much as the pricing change itself. Customers don't resist fair pricing; they resist surprises and perceived unfairness.
Frame around customer benefit, not your economics. "You'll only pay for what you use" lands better than "We're updating pricing to better capture the value we deliver."
The first is about them. The second is about you. Customers can tell the difference instantly.
Be specific about what changes and what doesn't. Vague announcements create anxiety. Instead of "We're updating our pricing,"
say: "Starting [date], new plans include a base fee of $X/month with Y credits included. Additional credits cost $Z each. Here's how your current usage maps to the new model."
Include a calculator or comparison tool that lets each customer see their specific impact.
Provide downside protection. Guarantee that no existing customer pays more than X% above their current spend for the first 12 months.
This removes the fear that drives churn during pricing transitions. You give back some short-term revenue, but you keep the relationships that drive long-term value.
Step 13: Execute a phased rollout
Month 1-2: Shadow billing. Run the new model in parallel with the old. Calculate what every customer would pay under new pricing, but don't charge differently.
Use this to validate revenue models, catch billing edge cases, and flag customers who need special handling.
This is your safety net and the data you collect here will save you from costly surprises later.
Month 3-4: New customer launch. All new sign-ups go on the new model. Existing customers stay on current plans. Monitor closely: are new customers converting at the same or better rate? Are they expanding? Is the billing system handling edge cases?
Month 5-6: Opt-in migration. Invite existing customers to switch voluntarily. Offer incentives, bonus credits, locked-in rates, extended guarantees. Track opt-in rates by segment. If a particular segment isn't moving, dig into why before pushing them.
Month 7-12: Cohort-based migration. Migrate remaining customers in waves, starting with those who benefit most. 60-90 days notice per cohort. Dedicated support during transition. Monitor churn after each wave and adjust your approach if you see spikes.
Step 14: Monitor, iterate, and optimize
Key metrics to watch weekly:
Net revenue retention. Should improve over time as usage-based expansion kicks in, but may dip initially as some customers right-size. Don't panic at an early dip, track the trend over 2-3 months.
Expansion revenue as a percentage of total. In a healthy UBP model, 20-30% of revenue comes from existing customer growth without a single upsell conversation.
Billing support tickets. A spike means customers are confused about charges, which means your transparency tools need work. This is an early warning system — treat it like one.
Usage-to-revenue conversion rate. What percentage of metered usage actually converts to billed revenue? If there's leakage, find it fast.
Pricing review cadence. Review quarterly. Not necessarily to change anything, but to evaluate whether your value metric still holds, your tiers are sized right, and your price points are competitive. Usage-based pricing gives you far richer data to inform these decisions than subscriptions ever did.
The migration checklist (summary)
Phase 1: Strategy and foundation
Identify and validate your core value metric through customer interviews
Choose a hybrid pricing architecture (base + usage, credits, commitments)
Model revenue impact across your entire customer base
Design a grandfathering plan with specific timelines and protections
Get executive alignment. This is a company-wide transformation, not a billing change
Phase 2: Infrastructure and technical readiness
Audit your current billing stack against usage-based requirements
Deploy a metering and pricing layer (Flexprice or equivalent) between your product and payment provider
Instrument your product to emit billing-grade usage events
Configure entitlements: boolean features, metered quotas, static inclusions
Build or configure enforcement rules for quota overages
Set up a credit wallet system if using credit-based pricing
Build customer-facing usage dashboards with real-time data
Configure spending alerts and threshold notifications
Phase 3: Organizational alignment
Redesign sales compensation to reward expansion, not just bookings
Retrain CS on usage-driven engagement and proactive outreach
Update revenue forecasting models for variable revenue
Ensure ASC 606 compliance for usage-based revenue recognition
Establish a revenue floor through base fees or minimum commitments
Phase 4: Communication and rollout
Craft a customer-first migration narrative
Build a pricing calculator or comparison tool for existing customers
Run 1-2 months of shadow billing to validate the model
Launch new pricing for new customers only (2 months)
Open opt-in migration for existing customers with incentives
Execute cohort-based migration for remaining customers
Monitor NRR, expansion revenue, support tickets, and usage-to-revenue conversion weekly
Establish quarterly pricing review cadence
Why open-source billing infrastructure matters for this migration
Most migration guides ignore the infrastructure decision itself and its long-term consequences.
When you migrate pricing models, you're making a bet on billing infrastructure that lasts years. If you choose a closed-source, sales-led platform, you're adding a dependency you can't inspect, can't modify, and can't leave easily. You're trading one kind of rigidity (your subscription model) for another (your vendor's roadmap and pricing).
The Stripe acquisition of Metronome is a useful case study. Metronome was a popular usage-based billing platform. Now it's part of Stripe, and its users are locked into the Stripe ecosystem. If your payment strategy involves flexibility across providers, or if you want the option to switch, that dependency is a real cost.
This is why Flexprice's open-source approach matters. Full visibility into how your billing logic works. The ability to modify it for edge cases specific to your business.
No lock-in to a single payment provider. Flexprice works with Stripe, Chargebee, or any processor. And if your needs evolve beyond what Flexprice offers out of the box, you extend it yourself rather than waiting on a vendor's product team to prioritize your request.
For AI and SaaS founders specifically, Flexprice was built for the complexity that usage-based migration introduces: real-time event metering, credit wallets with auto-top-up and expiration rules, hybrid pricing (subscription + usage + credits), feature entitlements, coupon management, and automated invoice computation. It's not a subscription platform with usage bolted on. It's a pricing engine designed from the ground up for the models AI-native products actually need.
Common migration mistakes (and how to avoid them)
Picking a value metric that tracks your cost, not your customer's value. Charging per token when your customer thinks in documents creates a disconnect that makes every bill feel arbitrary. Map your metric to the outcome they care about.
Going from pure subscription to pure pay-as-you-go overnight. This maximizes customer anxiety and revenue volatility at the same time. Use a hybrid as a bridge. Include a base fee or minimum commitment for predictability on both sides.
Underinvesting in usage visibility. If customers can't predict or control their costs, they'll churn. Not because the pricing is wrong, but because the uncertainty is intolerable. Build the dashboard before you launch the pricing.
Keeping the old sales comp plan. If you don't realign incentives, your sales team will sandbag the new pricing and push customers toward the old model or toward competitors. Fix comp before rollout, not after.
Building billing logic in your application code. Every company that hardcodes pricing into their app regrets it within 18 months. Pricing changes should be a config change, not a code deployment. Use a dedicated pricing layer.
Ignoring revenue recognition. Usage-based revenue has different ASC 606 implications than subscriptions. Loop in finance and auditors before launch, not after your first quarterly close.
Not grandfathering existing customers. Forcing immediate migration on your installed base is the fastest path to a churn spike. Give customers time, options, and guarantees.
Final thought
Migrating from subscription to usage-based pricing is not a billing project. It's a company-wide transformation that touches product, engineering, sales, CS, finance, and your customer relationships.
The companies that get it right treat pricing as a growth lever, aligning revenue with value, reducing friction for new customers, and creating natural expansion for existing ones.
The checklist above gives you a concrete, sequential path from strategy through execution. Lead with your value metric, use hybrids to reduce risk, invest in infrastructure before flipping switches, align your organization, and communicate relentlessly with customers.
If you're starting this migration and want billing infrastructure designed for exactly this transition, open-source, with real-time metering, credit wallets, entitlement management, and hybrid pricing support, check out Flexprice.
Frequently asked questions (FAQ)
1. How long does a typical subscription-to-UBP migration take?
Plan for 6-12 months from strategy to full migration. The first 2-3 months cover strategy and infrastructure. The next 2-3 months are new-customer validation. The final 3-6 months are existing-customer migration in cohorts. Rushing this timeline is how companies end up with billing errors, churn, and internal backlash.
2. Can I migrate without changing my billing system?
Depends on complexity. If you're adding a simple usage overage to an existing subscription, your current system might handle it. If you need credits, multi-metric pricing, real-time metering, or entitlement-based access control, you need a dedicated pricing and billing layer. Flexprice is designed for exactly this. It sits between your product and your existing payment processor, handling all pricing logic without replacing your payment infrastructure.
3. What's the best pricing model for AI products?
Most AI products benefit from a credit-based hybrid: a base subscription that includes a credit allowance, with additional credits available for purchase. Credits abstract the complexity of variable AI costs (different models, tasks, compute requirements) into a single unit customers understand. You get revenue predictability from the base and usage alignment from the credit system.
4. How do I prevent churn during migration?
Three mechanisms: grandfathering (guarantee existing pricing for 12+ months), downside protection (cap increases at 15-20% annually during transition), and transparency (give every customer a tool to see exactly how new pricing affects them before it kicks in). Companies that communicate proactively and offer these protections see minimal migration-related churn.
5. Should I build or buy usage-based billing infrastructure?
For most startups and growth-stage companies, building from scratch is a 3-6 month engineering project with ongoing maintenance. Purpose-built tools like Flexprice get you to production in days, are open-source so you keep control, and solve the hard problems (event deduplication, real-time aggregation, credit management, invoice computation) that you'd otherwise build yourself. Build your product, not your billing system.
6. How does usage-based pricing affect revenue forecasting?
Monthly revenue becomes more variable, but annual revenue gets more predictable as cohorts mature and usage patterns stabilize. Use minimum commitments or base fees to create a floor covering fixed costs, then layer in usage-based upside. Most companies find net revenue retention improves significantly under UBP because expansion happens
Aanchal Parmar
Aanchal Parmar
Aanchal Parmar
Aanchal Parmar heads content marketing at Flexprice.io. She’s been in the content for seven years across SaaS, Web3, and now AI infra. When she’s not writing about monetization, she’s either signing up for a new dance class or testing a recipe that’s definitely too ambitious for a weeknight.
Aanchal Parmar heads content marketing at Flexprice.io. She’s been in the content for seven years across SaaS, Web3, and now AI infra. When she’s not writing about monetization, she’s either signing up for a new dance class or testing a recipe that’s definitely too ambitious for a weeknight.
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