How to Deliver Value on a Consumption-Based Pricing Model

Consumption pricing is associated with some of the fastest-growing SaaS companies of the past few years, including Snowflake, Datadog, Zscaler, and MongoDB. The consumption-based pricing model is popular because it helps these types of companies manage costs and gives the customer more control and transparency in how much they’re billed.

But if the customer doesn’t directly see the value of your solution, they may stagnate or even fall in their usage. While commitment may be easier to gain on the front end without an upfront price tag, if the goal is to drive usage and growth over time, consumption model companies must constantly be proving their value. We can picture this as two sales cycles - one to close the deal, and one ongoing cycle to close the consumption.

Companies that have been successful in driving sustained growth with a consumption model do so by achieving three critical levels of alignment.

Internal Alignment on Value

If you want customers to consume your product, it’s important that they’re clear on the value they’re getting from it.

That means you need a strong and unified value message across the organization - every customer-facing role should know the core use cases for your product: who cares about it, the problems it solves, and the business outcomes it drives.

To successfully create value, companies must move away from the traditional win-focused mindset and into an outcome mindset. This shift begins with how leaders communicate priorities; rather than prioritizing the initial commitment, leaders must emphasize and enable the achievement of customer outcomes. Don’t just scream at the scoreboard and ask for more usage; outline the process to find the root cause of low usage, how to communicate to the customer’s priorities, and how and when to draw upon internal cross-functional collaborators.

Cross-functional Alignment on Process

Success on a consumption model is all about driving value past the point of the initial sale. To achieve what we call creating lifecycle value, you have to involve more than just the sales team. Account Executives, Solutions Engineers, Customer Success, and Product should create a living ecosystem where key customer desired outcomes, account changes, and value drivers are communicated where it makes sense for your sales rhythm.

Here are a few examples of what that can look like:

• Sales Engineers help to identify key features that will hold the most value for the customer, digging deeper on technical pain and building out a demo that positions the key differentiators as core value drivers based on the desired outcomes uncovered by the AE.
• Sales involves the customer success team and the buyer’s implementation owners during the initial sales process to start building alignment and creating a plan for how the value of the solution will be communicated to its end users in the buyer org.
• Customer Success uses MEDDICC principles to evaluate customer usage and changes during QBRs. They recognize key indicators of falling usage, cancellation or opportunity for upsell and notify the relevant cross-functional resources.

It’s important that leaders communicate key indicators and touchpoints for involving other teams, as well as guidelines for information sharing. Lead by example - ensure that communication and collaboration happens between executive peers to help improve cross-functional execution at other levels.

Alignment to the Buyer Past the Initial Sale

Implementation is always a critical part of following through on the value of a deal, but never more so than in the consumption model.

Make sure your team is generating explicit agreement on the terms of implementation to ensure success. Give your team a cadence for maintaining a pulse on changes and pain points. This will enable them to ensure your solution remains relevant and valuable as the customer’s environment changes.

Consumption models have changed the timeline to value for customers. Rather than value being realized on a multi-year or 12 month contract, value - or indicators of value - must be realized immediately to continue to drive usage and adoption in the short term. To avoid churn, you must be consistently proving your value with a consultative partnership approach to sales and customer success.

More Strategies for Driving Success on a Consumption Sales Model